WeWork said on Tuesday it aimed to emerge from Chapter 11 bankruptcy within the U.S. and Canada by May 31 and had negotiated greater than $8 billion, or over 40%, reduction in rent commitments from landlords.
The shared office space provider, once privately valued at $47 billion, filed for bankruptcy in November because it racked up losses on its long-term leases after demand for office space plunged through the pandemic and from a shift to hybrid working.
The SoftBank-backed company’s post-bankruptcy marketing strategy is premised on a big reduction in future rent costs from its landlords.
The corporate said on Tuesday it had agreed to amend about 150 leases with higher economic terms, reminiscent of reduced rent payments, and it’s within the strategy of exiting one other 150 leases. The corporate will maintain 150 leases without change, and it continues to be negotiating with landlords for about 50 additional locations.
WeWork filed for bankruptcy in November after demand for office space plunged through the pandemic. REUTERS
WeWork’s lease negotiations will allow the corporate to exit from bankruptcy as a leaner business, ready to supply workspaces that can profit each employers and landlords during a period of uncertainty in industrial real estate markets, in keeping with WeWork’s global head of real estate, Peter Greenspan.
“The necessity for a lot of these services and spaces has only increased, so it’s time to undergo this process with the landlords and rethink how we monetize this all this office space that was once crammed with traditional, long-term leases,” Greenspan said in an interview.
WeWork co-founder Adam Neumann has submitted a bid of greater than $500 million to purchase back the corporate. REUTERS
WeWork didn’t exit any geographic markets when it scaled back its leases, as an alternative pulling back in some cities, like Latest York, where the corporate grew too fast or experimented with other products outside of its core coworking space business, Greenspan said.
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WeWork in November reached an agreement with greater than 90% of its bondholders to convert $3 billion of debt into equity. SoftBank, which currently owns about 70% of the corporate, would retain an equity stake under the proposed restructuring.
Meanwhile, WeWork co-founder Adam Neumann has submitted a bid of greater than $500 million to purchase back the corporate, with the financing process currently unclear. WeWork declined to comment on Neumann’s specific bid, saying it receives and reviews “expressions of interest from third parties frequently.”
Under Neumann, WeWork rapidly expanded to turn out to be the most useful U.S. startup. But his pursuit for growth on the expense of profit and revelations about his eccentric behavior led to his ouster and derailed an initial public offering in 2019.
