WeWork's Bankruptcy Finally Hits Miami
WeWork's six Miami locations have so far avoided getting cut from the property roster as the coworking firm navigates Chapter 11 bankruptcy. That could be about to change.
WeWork moved to reject its lease at 429 Lenox Ave. in Miami Beach in a Monday court filing.
The coworking company is seeking a bankruptcy judge's approval to exit the property at the end of May, which would mark the firm’s first Miami location to shutter during the restructuring process, which kicked off in November.
WeWork is continuing to negotiate with the landlord to stay in Miami Beach but has placed the property on its rejection list in the event that it is unable to reach a deal, a spokesperson said.
The 80K SF office at 429 Lenox Ave., where WeWork is the sole tenant, sold for $37M in July 2022, deed records indicate. It was purchased by an entity called Lenox 429 Ave Inc. that is registered to a San Antonio address and managed by Jorge and Andres Sevilla Moran and Jorge Luis Sevilla Sanchez, who is also the manager of Eljoan Inc., which a Bloomberg business profile describes as a real estate firm founded in 2010.
Bisnow was unable to reach the landlord to ask for comment on the lease negotiations.
The Miami Beach location was one of two it moved to jettison in the Monday filing. The other is the WeWork at 2211 Michelson Drive in Irvine, California. Both properties are scheduled to be vacated on May 31, coinciding with WeWork’s plan to emerge from bankruptcy by the end of next month.
Previous lease rejection notices generally saw terminations occur on a shorter timeline. WeWork has been leveraging all available tools in its lease negotiations as it looks to lower rent costs in pursuit of profitability. In some cases, the coworking firm has pressured landlords to come to the negotiating table by withholding rent payments.
“Our intention is to stay in as many buildings as possible under economic terms that position all parties for a sustainable future,” a WeWork spokesperson said in an email. “Unfortunately, we have been unable to reach agreements with our landlords at 429 Lenox Avenue and 2211 Michelson Drive, and it is therefore prudent that we plan for other outcomes, which may include exits.”
The 429 Lenox Ave. location is WeWork’s only Miami Beach space, but the firm has five other locations on Miami’s mainland in popular neighborhoods like Brickell, Wynwood and Coral Gables.
If the Miami Beach location closes, the WeWork spokesperson said it would work with members on an individual basis to place them at their preferred new location, provided there was space available.
The coworking market is relatively crowded in Miami, with 141 spaces spanning 3M SF, according to CoworkingCafe, with national competitors like Industrious in the market along with local firms like Quest Workspaces. The $424 per month average price for a dedicated desk at a coworking space in Miami is around 37% higher than the national average of $309.
WeWork said earlier this month it had determined its path forward on 90% of its locations, reaching deals to amend 150 leases and remain in 150 other offices without changes to lease terms. It will also close roughly 150 other spaces. The future of around 50 locations remains in flux as it targets the end of May to exit bankruptcy.
The closures and amended lease terms are expected to save WeWork more than $8B in future rent commitments that amount to more than 40% of its total rent costs. WeWork lost $122M in February, according to financial statements filed in court this month, down around $30M from its losses a month earlier. Its cash on hand had dwindled to $89.6M at the end of February.
Daniel Gielchinksy, a bankruptcy attorney who isn’t involved in the case but has been closely following the restructuring, said WeWork’s announcement that it is targeting the end of May to exit bankruptcy effectively set the clock ticking for holdout landlords where new lease terms hadn't yet been negotiated.
“Putting it into the news that WeWork is looking towards its exit within 60 days sends a message to the landlords that this is the final round of negotiations, so take it or leave it,” Gielchinksy told Bisnow this month.
