WeWork Secures Final Approval To Emerge From Bankruptcy

Break out the on-tap kombucha; WeWork is getting out of bankruptcy. 

The beleaguered coworking giant's new era as a privately owned, debt-free company can begin after a Thursday morning hearing in a federal courthouse in New Jersey, during which a judge confirmed WeWork’s plan to emerge from bankruptcy.

With the restructuring plan approved unanimously by the company's creditors, the company will have $10B in rent obligations going forward — down $12B from when it entered bankruptcy in November — and has eliminated more than $4B of its pre-petition debt.

“In one of the largest and most complex restructurings, we have achieved extraordinary outcomes,” WeWork CEO David Tolley said in a statement.

Procedurally, WeWork must make a few more filings, but it is expected to officially emerge from Chapter 11 in mid-June. 

Following fees, WeWork also expects to be able to pay unsecured creditors some amount, though the exact numbers are not yet finalized. The projected recovery for general unsecured claims, which includes some of its landlords, is about 1%, lawyers said during the hearing.

“I was just worried that it was all going to get gobbled up by fees and there'd be very little,” New Jersey Bankruptcy Judge John Sherwood said. “But it sounds like there's some recovery for the unsecured notes and then something for the general unsecured, which I think we all agree is better than nothing.”

Founded in 2010 by Adam Neumann and Miguel McKelvey, WeWork rapidly expanded throughout the past decade, signing pricey leases and claiming the title of largest private sector office tenant in both New York and London. By 2019, WeWork was valued at $47B.

A failed attempt at an IPO that year precipitated a hasty downfall. The company lost billions for its largest shareholder, SoftBank, and its turnaround was impaired by the pandemic. It lost $1.1B in the first quarter of 2022, and despite shrinking its losses by more than $400M a year later, it was never able to achieve profitability before filing for bankruptcy in November.

Its go-forward business plan projects it to generate a $101M profit in 2025 after a $15M loss for the rest of 2024. When the company re-emerges, it will have an equity value of approximately $760M, according to Sherwood.

Over the past seven months, WeWork has purged its portfolio, though it’s often tried to make deals with landlords who have become more desperate since companies shifted to working from home. Most of the nearly 200 deals it's reached with U.S. and Canada landlords included some form of concession, like reduced rent, a shortened lease term and a smaller footprint.

The company announced that its global portfolio will now consist of 600 locations across 45M SF, down from the 850 locations it operated at its 2019 peak.

Those 600 locations include franchises, joint ventures and wholly owned locations. A previously filed plan said it planned to exit Chapter 11 proceedings with 337 locations, which Sherwood confirmed during the hearing. 

The bankruptcy has also led WeWork to cut some of its most vital locations. Among those is their massive Midtown Manhattan headquarters, which was home to 2,800 members. Bisnow first reported the closure, and that the company is relocating its corporate HQ to 18 W. 18th St. in Union Square.

Its portfolio supports 550,000 members worldwide, according to WeWork. However, shuttering locations has meant that members have been “moved painstakingly” to offices that the company has kept, lawyers for WeWork admitted Thursday. In April, a Bisnow investigation examined how WeWork’s transformation is testing member loyalty.

Its portfolio is expected to continue shifting as negotiated lease changes come to fruition. At Summit II at 10885 NE Fourth St., Bellevue, Washington, a location that WeWork assumed in May, stacking plan and availability data obtained by Bisnow show that the space that WeWork currently occupies will be available in June 2025. WeWork signed the Bellevue lease in 2019.

At a location at 881 Peachtree in Atlanta, WeWork assumed a 44K SF lease, but reduced the term to just one year with renewal options, Bisnow previously reported.

Moving forward, WeWork will operate as a private company, thanks to an infusion of $400M of new equity capital. It also has a new majority owner: property management software provider Yardi Systems, which chipped in roughly $337M of that equity. SoftBank and other creditors will own minority stakes in the business.

Neumann, who was ousted from the company, attempted to take back WeWork. Through Flow Group, the founder offered $650M to the company and bashed its plan for future survival.

That plan projects WeWork's overall occupancy to grow from 76% in 2024 to 85% in 2028 while its total number of locations shrinks. 

Sherwood killed all hope Neumann’s camp had by rejecting Flow’s ask to force WeWork to entertain Neumann’s proposal for the company. Neumann formally withdrew his attempted offer on Tuesday. 

Meanwhile, Yardi had been quietly working behind the scenes. An entity known as Cupar Grimmond had long been involved in the case, but little was publicly known about the mysterious group. In April, Cupar Grimmond was unmasked as Yardi. 

Yardi's bid to revive the company is predicated on more marketing to small businesses and on-demand booking technology to take advantage of expected growth in flexible workspaces as office landlords grapple with shifting demand, Yardi founder Anant Yardi said in an interview Thursday with the Financial Times.

“WeWork is such a popular and well-known brand, it didn’t seem right to let it go down,” Yardi told FT. “I realize financial decisions are not made on right and wrong. But there’s also a tremendous opportunity in terms of turning around WeWork.”