WeWork has bailed on April rent on some of its locations as the beleaguered coworking space company goes into a financial spiral amid the novel coronavirus pandemic, according to a report from Bloomberg.
Citing sources at the company, Bloomberg wrote that it has reached out to some landlords to open discussions on “rent abatements, revenue-sharing agreements and other lease amendments,” though it is paying others as scheduled. WeWork has a staggering $US47 ($75) billion in rent commitments and was previously reported to be seeking to reduce that amount by up to 30 per cent (about $US14.1 ($23) billion); at the same time, it is offering discounts to tenants whose workforces have been urged or ordered to work from home to avoid spreading the virus. According to the Real Deal, WeWork has tapped real estate advisory firms JLL and Newmark Knight Frank to help it cut deals with landlords.
Even before the coronavirus spread globally, WeWork was in dire shape following a disastrously failed attempt at an initial public offering. Its backers at Japanese investment titan SoftBank valued the company at a ludicrous $US47 ($75) billion on the thesis that it was not a traditional real estate company with major liabilities that could hobble it during a downturn, but a revolutionary tech company that was disrupting the whole industry. That didn’t go so well, and the aftermath included the departure of its founder and wannabe “president of the world” Adam Neumann and a plummet in that valuation to just $US8 ($13) billion.
SoftBank more or less conceded it screwed the pooch hard on that one, and late last year WeWork began running low on cash. It commenced layoffs and began reviewing leases around the same time as reports the Securities and Exchange Commission had opened a probe into the failed IPO.
The relationship between WeWork and SoftBank has not fared so well either. On Wednesday, WeWork sued the investment firm for bailing on a $US3 ($5) billion share buyout that was part of the bailout package. SoftBank told reporters in a statement that the buyout had come with stringent conditions and the suit was a “desperate and misguided attempt” to rewrite the contract, whereas WeWork’s special board alleged in the lawsuit that SoftBank was reneging on the deal because it was in an “increasingly dire” financial situation. (Neumann especially lost out, as the agreement would have had SoftBank buy up to $US975 ($1,566) million in shares from him.)
WeWork bonds have plunged in value, per the Wall Street Journal, and traded at 37 cents ($0.59) on the dollar as of Wednesday.
“WeWork believes in the long-term prospects of our locations and our relationships with landlords across the world,” a WeWork spokeswoman told the paper in a statement. “Rather than implementing a companywide policy on rent payments, we are individually reaching out to our more than 600 global landlord partners to work in good faith towards finding asset-specific solutions that benefit all parties involved.”