WeWork Stops Rent Payments At More Properties
Coworking giant WeWork has quit paying rent at several more properties amid speculation it will file for Chapter 11 bankruptcy as early as next week.
WeWork, which is already fending off a pile of lawsuits claiming it sloughed off rent obligations, has stopped rent payments for a combined 200K SF in offices at Dock 72 in Brooklyn, New York, and at Madison Centre in Seattle, Boston Properties disclosed in an earnings call Tuesday. Boston Properties said it expects further losses on the 493K SF it leased to WeWork.
Separately, a New York City landlord, who declined to be identified to discuss sensitive negotiations, told Bisnow that WeWork stopped paying rent at its building for the first time in October, even while it was working to renegotiate its lease.
WeWork announced in August there was substantial doubt about its ability to stay in business, and in early September it said it would restructure its leases or vacate “unfit and underperforming locations” to get a handle on operating expenses. But last week it was forced to negotiate a seven-day extension with creditors to make interest payments it missed at the beginning of October, and it simultaneously missed another loan payment deadline.
WeWork's renegotiation offer included a reduction of space and at a new rental rate that was a “nonstarter,” the NYC landlord told Bisnow.
“It's not just that they're asking to give back space or to rent space in the building at a significantly reduced rate,” the landlord said, adding rent had already been reduced on two previous occasions. “They wanted to cherry-pick which floors they would give back. It was a one-way they-win, we-lose — that makes it unpalatable. There's no sense of fairness in any of this.”
As WeWork has attempted to wriggle out from under its heavy lease burden, lawsuits alleging rent nonpayment have stacked up.
California-based Kennedy Wilson and Japanese firm Takenaka sued WeWork in October for not paying rent on a 250K SF Downtown San Francisco office, claiming losses of $250M after WeWork walked away from the building. A month earlier, DivcoWest sued the company for $30M after WeWork abandoned space and stopped paying rent on 64K SF in Manhattan’s DivcoWest building.
Commerz Real AG also slapped WeWork with a $360K eviction lawsuit in April after WeWork allegedly stopped paying rent at its largest Chicago Loop location, one of 40 underperforming sites across the U.S. to be closed down by the coworking firm in late 2022.
In some cases, WeWork’s nonpayment has forced landlords into default, a scenario that could play out on a far grander scale should the company file for bankruptcy, as many expect it will.
Boston Properties CEO Owen Thomas said it brings in $33M in annualized revenue from WeWork.
“We don't expect WeWork to exit all the assets, nor do we expect them to remain in place in their current footprint,” he said on this week's earnings call.
Boston Properties President Douglas Linde declined to speculate whether its other leases with WeWork are in imminent jeopardy. They include three in San Francisco.
“The decision as to what they are going to do, I think, is going to take some time,” Linde said. “They're going to have to figure it out, and then we're going to have some decisions to make as to whether or not we're comfortable with whatever it is they propose to us and/or taking space back.”
Jay Rickey contributed to this report.
