New hope or last gasp for WeWork? (Or all CoWorking)

David Goldsmith

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Staff member
WeWork may abandon WeLive
Co-working giant launched co-living unit in 2016, but never met lofty expectations

WeWork is considering ditching its co-living business.
The Sandeep Mathrani-led firm is working with an adviser on options to hand over operations of its two communal living locations in New York City and outside Washington, D.C., Bloomberg reported.

The talks are in the early stages regarding WeLive, which WeWork launched in 2016. The company at one point had planned to open 36 of the furnished apartments, but never expanded beyond its locations at Rudin Management’s 110 Wall Street and one in Crystal City, Maryland.
WeWork expanded into the residential space under co-founder and former CEO Adam Neumann, along with other lines like the WeGrow daycare and the Rise by We fitness center. But Neumann was ousted after the company’s failed IPO last year, and since then Mathrani has been retooling the business. On Friday, WeWork co-founder Miguel McKelvey announced he was leaving the company.
WeWork ditched plans to open a WeWork/WeLive location in Seattle in October.

David Goldsmith

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By the numbers: Breaking down WeWork’s financial woes
The beleaguered co-working company — now valued at under $3B — is still chasing profitability

WeWork’s critics have long argued that the co-working giant would end up in bankruptcy in an economic downturn the way flex-office provider Regus did in 2003. The 10-year-old company, largely inflated by more than $9 billion from SoftBank, has seen its valuation plummet in the past year. Now, as former General Growth Properties CEO Sandeep Mathrani tries to make WeWork profitable during the pandemic and economic uncertainty, here’s a look at some of the big numbers.
$2.9 billion
WeWork’s valuation as of late May. The company had been valued as high as $47 billion before its botched IPO last year.

$47.2 billion
WeWork’s lease obligations as of last June. The company has hired brokers at JLL and Newmark Knight Frank to renegotiate some of its leases, reportedly looking for reductions of up to 30 percent.
The number of WeWork locations around the world, as of March. Until last year, WeWork was growing at breakneck speed, guaranteeing leases to landlords to secure an ever-growing portfolio of office space.
1 out of 5
The number of leases WeWork may reportedly exit or rethink as it looks to cut costs. In a call with Citigroup analysts last month, Mathrani detailed the steps WeWork is taking to review its global portfolio, according to the Financial Times.
$1.3 billion
The amount of long-term debt WeWork held when it issued its 2019 prospectus, including credit agreements with JPMorgan and $669 million in corporate bonds. Those bonds were trading for as low as 28 cents on the dollar in May.
The number of employees WeWork has laid off since November. At its peak late last year, the company employed about 14,500 people.
The number of original co-founders still at the company. Miguel Mckelvey announced plans to leave in June, and Adam Neumann and his wife Rebekah left in September. Former co-CEOS Artie Minson and Sebastian Gunningham, as well as U.S. head of real estate Aaron Ellison have also left in recent months.

John Walkup

Talking Manhattan on
Funny, it looks so obvious in hindsight, but if you came out with a business plan now to bulk lease at today's discount and then re-lease over the next 10 years, I think investors would line up for that 'special situation' investment.

John Walkup

Talking Manhattan on
PS - and look at co-living models and think of all the empty college dorm rooms. There's gold in them hills!

David Goldsmith

All Powerful Moderator
Staff member
They seem to be winding down:
WeWork abandons big Manhattan office lease

The flexible-office provider has sought to renegotiate leases across its real estate portfolio

WeWork is scrapping plans to move into a major Manhattan office it agreed to lease nearly two years ago.
The struggling co-working firm was set to move into a 115,000-square-foot spread at Columbia Property Trust’s 149 Madison Avenue in Midtown South this year. Terminating the deal may now cost WeWork millions, Business Insider reported. WeWork had planned to retrofit the office, for which the landlord set aside $15.9 million.In May, IBM announced it was leaving a 70,000-square-foot space it leases from WeWork at 88 University Place, although the technology company said the move was unrelated to the coronavirus. The IBM deal had marked a milestone for WeWork, as it sought to appeal to mid- to large-sized companies, not just freelancers.
In 2019, the Onni Group secured the co-working giant as an anchor tenant following its $628 million acquisition of the Wilshire Courtyard office complex in Los Angeles — but WeWork had not paid rent on its 335,000-square-foot lease as expected in May. The lease ultimately sent Onni into default on the property’s loan this month.
Earlier on during the coronavirus outbreak, WeWork faced a backlash from its renters, who called the company’s continued charging of fees during the pandemic “unlawful.” The company said it must keep offices open for those of its users considered essential.
Last month, WeWork’s valuation fell to $2.9 billion, a far cry from $47 billion a year ago.

David Goldsmith

All Powerful Moderator
Staff member
Where it all started: WeWork to shutter first-ever location
Neumann and McKelvey opened the Soho co-working space on Grand Street a decade ago
No one could accuse WeWork of being overly sentimental.

The decade-old co-working company is shutting down its first-ever location as the firm overhauls its massive real estate portfolio, sources told The Real Deal.

The coworking space at 154 Grand Street was the first WeWork location co-founders Adam Neumann and Miguel McKelvey opened ten years ago on their way to launching the fast-growing company, which at its height was valued at $47 billion.

The two opened the 3,000-square-foot location in a space at the corner of Lafayette Street with creaky wood floors and exposed brick that they power washed clean – part of the early charm that drew many customers to WeWork.

But Neumann and McKelvey have left the company, and new CEO Sandeep Mathrani has been picking through the portfolio, trying to renegotiate leases with some landlords or get out of locations that don’t work.

The lease on the Grand Street space is expiring this year, and WeWork notified members it will be closing the space at the end of July.

“I am writing to let you know that after ten years our lease at the WeWork location at 154 Grand Street in Soho will soon expire,” a representative for the company wrote in a letter to members. “We have reflected on the past 10 years and the indelible mark this building has left on us, our community, and the company as a whole.”

The building’s owner, the Eretz Company, did not respond to a request for comment.

Being the first WeWork location, the Grand Street spot was built to early standards that no longer match the WeWork brand, a person familiar with the location told TRD. It’s also much smaller than the scale at which WeWork operates now, and the company has other locations in Soho to serve the market.

A spokesperson for WeWork confirmed the closure.

“In streamlining our portfolio towards profitable growth, we have decided to move on from 154 Grand,” the spokesperson wrote in an email.

The Grand Street closure is the latest move by WeWork to overhaul its real estate footprint following its botched IPO attempt last fall.

The company recently scrapped plans to move into a 115,000-square-foot Midtown South location where it signed a lease two years ago.

Earlier this year, WeWork hired brokers to try to negotiate concessions from landlords on locations that didn’t work economically. Some believe that if the effort isn’t successful, WeWork could end up filing for bankruptcy.

A new podcast series by Bloomberg Technology tells the story of WeWork, relying in part on recordings of private company meetings that show Neumann candidly. The first two episodes look at his time on a kibbutz in Israel and the early days of WeWork’s growth.

David Goldsmith

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What would a WeWork bankruptcy look like?
Several scenarios could play out for co-working company that recently had close to $50B in lease obligations
In April, a Manhattan landlord who leases a large space to WeWork received an email from a broker who was working on behalf of the struggling co-working company to renegotiate its office leases.

“I told him politely it’s not happening, so don’t waste your time,” the landlord said, noting that because his lease with WeWork is below market-rent, he’s comfortable taking the space back. “I’m going to play hardball.”

Brokers at Newmark Knight Frank and JLL have spent the last several weeks reaching out to WeWork’s landlords — trying to negotiate concessions on billions of dollars of leases that threaten the company’s cash flows.

WeWork had $47.2 billion worth of lease obligations on its books as of late last year, and is reportedly looking to reduce those rent liabilities by 30 percent.

Now as Covid-19 puts further pressure on the co-working company’s bottom line, critics are raising questions about whether its business model of packing a rotating cast of strangers into tight spaces can survive in a world of social distancing and contact tracing.

That raises the stakes for WeWork’s lease negotiations, according to those who believe this could be a make-or-break scenario for the Softbank-backed company once valued at as much as $47 billion before its failed IPO last year. WeWork was recently valued at just under $3 billion, Bloomberg reported in May.

WeWork’s critics have long speculated that the company could be forced to file for bankruptcy in a downturn. If that happened, WeWork would have several scenarios laid out in front of it, experts told The Real Deal.

“Landlords aren’t always willing to make concessions outside of bankruptcy,” said Timothy Duggan, an attorney at the Stark & Stark in New Jersey who represented office equipment provider Transamerica as a creditor when Regus — another large flex-office company — filed for bankruptcy in 2003.
But that dynamic often changes once under Chapter 11.

“If I’m a landlord and I know a bunch of other landlords are making concessions and I have a shot of coming out of bankruptcy, I might be more willing to make a deal,” Duggan noted.
Still, under the protection of bankruptcy the company’s core challenge would be the same: It still has to convince its creditors that it has a viable plan to turn things around.

“Even in bankruptcy, they still have to get people to believe they can come out of this,” Duggan added. “It’s all still one big negotiation.”

WeWork had $1.3 billion of long-term debt when it issued its prospectus last year, including credit agreements with JPMorgan and $669 million in corporate bonds. Those bonds were trading for as low as 28 cents on the dollar in May.
The task of convincing creditors that the company can turn itself around would fall largely on the management team headed by Sandeep Mathrani — the veteran retail executive who led mall landlord General Growth Properties through bankruptcy in 2010.

Mathrani joined WeWork earlier this year to help right the ship after its co-founder Adam Neumann was ousted following the IPO debacle.
“He is a proven leader with turnaround expertise in the real estate industry,” SoftBank’s Raul Marcelo Claure, the former interim chairman of WeWork, said about Mathrani in a February statement.

To be clear, WeWork has made no public plans to file for bankruptcy, and that option is by no means an inevitability.

A spokesperson for the company told TRD that WeWork has a strong financial position with $3.9 billion in cash and commitments that “provides us the liquidity to weather this current climate while also executing on our five-year plan and investing in our future.”

“We continue to rightsize our portfolio by exiting locations that are unprofitable, growing in markets where we see enterprise demand,” the spokesperson added, noting WeWork is planning to open more than 60 new locations through early 2021 and is investing $100 million in WeWork India.
But the company’s critics have long speculated that WeWork could end up in bankruptcy, particularly during an economic downturn.

The company has laid off thousands of employees since November. Softbank backed out of a financial bailout and IBM is reportedly ready to walk from its WeWork space at 88 University Place — one of the first locations in the co-working company’s pivot to an enterprise model.

Softbank last month took another writedown on its WeWork investment, saying it expects to take a $6.6 billion loss for the year on the portion of the firm’s stake held outside of its $100 billion Vision Fund.

“Every writedown takes Wework’s carrying value closer to reality,” Redex Holdings analyst Kirk Boodry opined in Reuters. “Clearly the value is zero.”
Softbank CEO Masayoshi Son said in April that he expects a significant portion of the 88 companies backed by more than $80 billion in venture capital from the first Vision Fund to end up in bankruptcy.

“I would say 15 of them will go bankrupt,” Son predicted, adding that he expects another 15 of the fund’s bets to prosper.

David Goldsmith

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WeDone: South Beach landlord seeks to evict WeWork for unpaid rent
Embattled co-working giant allegedly owes $660K at South of Fifth location

The landlord of a WeWork location in South Beach is looking to evict the embattled co-working giant for what it says is more than $650,000 in unpaid rent.
A photo obtained by The Real Deal shows the three-day notice tacked onto the door of the 43,500-square-foot building at 429 Lenox Avenue, which is fully occupied by WeWork.

WeWork did not pay rent in April, May or June, according to the notice. WeWork began operating at the South of Fifth location in early 2016, and its triple-net lease runs until 2031. Two years ago, Goddard Investment Group, which owns the building, secured a $23 million floating-rate loan through Granite Point Mortgage Trust Inc., a publicly-traded mortgage real estate investment trust.

WeWork has three business days from the date the notice was posted, on Thursday, to pay up, according to the notice, or it must leave the property.
In New York, the co-working company is shutting down its first-ever location as it overhauls its massive real estate portfolio following its failed IPO attempt last year.

Earlier this year, WeWork hired brokers at Newmark Knight Frank and JLL to negotiate concessions from landlords at struggling locations. If unsuccessful, some have speculated that WeWork could end up filing for bankruptcy. At its height, the company was valued at $47 billion.

In Miami-Dade, WeWork’s other locations include spots in Miami Beach at 350 Lincoln Road, downtown Miami, Brickell and Coral Gables.

David Goldsmith

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‘WeWorking while Black’: Ex-employees allege racial discrimination
Former staffers, including head of diversity, accuse company of equal pay violation

WeWork’s former head of diversity and inclusion has accused the co-working company of underpaying minority employees and keeping them out of leadership roles.
In a lawsuit filed this week, Christopher Clermont, who is Black, said his image was regularly used in the company’s promotional materials, but in reality he was given “little in the way of responsibility,” and relegated to menial tasks such as moving furniture. He accused the company of retaliating against him after he complained about a white manager, leading to his eventual dismissal.

The suit is one of two discrimination actions filed this week by former WeWork employees, and comes at a time when a growing number of people are speaking out about diversity and discrimination issues in the real estate industry. The WeWork lawsuits were first reported by Crain’s.

The second claim was filed by WeWork’s former stock plan administrator, Diane Allen, who is also Black. She accuses the company of sexual harassment, race and gender discrimination, equal pay violations and retaliation.
According to court records, Allen was hired by WeWork in 2017, and in the first six months of her job she alleged she was “repeatedly sexually harassed by a male co-worker” at a WeWork conference.

Allen said in the suit that she reported the incident to management but no action was taken.
She also claimed that after she reported concerns about the company’s practices regarding its stock options, she was excluded from meetings and denied salary increases, while “other similarly situated male or non-Black employees received several.”

Allen, who has 20 years of experience and an MBA, alleged that the company hired a white man for the same role as her and paid him 12 percent more. The man was then promoted above her, despite having less experience, the lawsuit said. When Allen complained about pay inequity, her manager allegedly responded in anger, telling her he was “not a racist.” Allen later quit.

Clermont, who is represented by the same lawyer, alleged that pay inequity and discrimination was so rampant at the company that Black employees and members had come up with the expression, “WeWorking while Black.”
Reached for comment, a spokesperson for WeWork said the company had investigated the complaints and “found them to be wholly without merit.”

David Goldsmith

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Staff member
Crossbow-wielding manager sexually harassed WeWork staffer, latest discrimination suit claims
Plaintiff says she was fired after making complaints about her boss

A new federal lawsuit accuses WeWork of bungling its response to a complaint that a mid-level manager regularly wielded weapons at the office, bragged of ties to the mafia, and had a reputation for making unwanted advances on female staff as well as WeWork clients.
Rather than rectify the situation, the lawsuit claims that WeWork used the excuse of economic harm caused by Covid-19 to terminate the plaintiff, Alexandria Fitzgerald.
“WeWork cynically used the pretext of a pandemic to fire our client for speaking out about workplace sexual harassment and the mental anguish she suffered as a result of WeWork’s hostile work environment,” Fitzgerald’s attorneys said in a statement.

WeWork says it investigated Fitzgerald’s claims and found them without merit.
After WeWork hired Fitzgerald in March 2019, David Stiles, a project executive, became her manager. The lawsuit alleges that Stiles regularly brought weapons to work, including knives and a crossbow, and featured his weapons in the background of company Zoom calls following the onset of the pandemic.

Fitzgerald alleges that during a 2019 business trip together to Kansas City, the married Stiles texted her late at night to “cuddle” with him in his hotel room after requesting the hotel give them adjoining rooms, despite her protestations, and initiating unwanted physical contact.

She claims Stiles also advised her during the trip, without solicitation, to “have a bunch of one-night stands” before settling down herself.
Also in 2019, another female project manager at WeWork allegedly told Fitzgerald, “you missed it, [Stiles] sexually harassed me, he touched my breasts.” Stiles also joked on a 2020 Zoom call that Spasevski should be a stripper or pole dancer, the lawsuit alleges.

The Kansas City trip and its alleged aftermath resulted in Fitzgerald seeking psychotherapy for what the complaint describes as “debilitating mental anguish” as the result of “a hostile work environment.”
After describing the Kansas City trip to her supervisor, and saying she wasn’t yet ready to file a complaint with HR, Fitzgerald says she received an email from HR acknowledging her complaint and that this violated her privacy.

Fitzgerald’s lawsuit alleges that WeWork initially said she would not have to work with Stiles on future projects, but continued to be assigned to his team. She was ultimately able to avoid collaborating with the person she considered her harasser, but was told she should be more “appreciative” when she expressed not feeling supported by the company.

WeWork declined to answer specific questions about the case, including whether Stiles was still employed by the company, but insisted that it had taken remedial action despite also saying that “Ms. Fitzgerald’s legal claims have no merit.”

Fitzgerald’s attorney Parisis Filippatos said he would “not be surprised” to find during discovery that WeWork’s system for dealing with discrimination claims was deficient, given the company’s culture of “competition and strife.”

After bungling its IPO and replacing most of its executive team, WeWork has suffered a number of other setbacks, including closing its first-ever location and reneging on plans to expand in Manhattan.
It’s the third discrimination lawsuit this week filed against the co-working company. On Thursday, Christopher Clermont, from the former head of diversity of inclusion, alleged that the company underpaid minority employees and blocked them from advancing into leadership positions. Another former employee, Diane Allen, accused the company of sexual harassment, race and gender discrimination, equal pay violations and retaliation.

David Goldsmith

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WeWork on track for profitability by end of 2021, says chairman
Marcelo Claure says pandemic has sent demand for private spaces “through the roof”

WeWork’s business model may have been called into question by the coronavirus pandemic, but its executive chairman says the company is now near profitability.
The flexible-office startup, founded in 2010, is now on track for positive cash flows by the end of 2021, Marcelo Claure told the Financial Times. In fact, Claure said the pandemic has sent the firm’s demand for private spaces “through the roof.”

Mastercard, TikTok-owner ByteDance, Microsoft and Citigroup have recently signed new lease agreements with WeWork.
“Maybe the buildings are not going to be as dense as they were before for the community side of the business,” Claure said. “But the demand for high-quality workspaces that are sanitized, that [make] people feel comfortable will be at an all-time high.”

Claure — who also oversees operations at WeWork’s biggest backer, SoftBank — first announced in February that the company’s goal was to achieve profitability within two years.
During the first three months of 2020, the company burned through $482 million in cash, marking a 60 percent drop from its previous quarter’s spend of $1.4 billion, according to the FT.

Last year, WeWork’s $47 billion valuation plummeted to $8 billion after a botched public offering attempt, raising broader questions about inflated valuations of tech companies. Now, the company’s valuation is estimated to be $2.9 billion.

Prior to the onset of the pandemic, the beleaguered co-working company took drastic measures to reduce spending including laying off 60 percent of its workforce, which now stands at 5,600 people, down from a high of 14,000 last year, according to the FT.

The company began renegotiating building leases last year, and has continued through the pandemic.

David Goldsmith

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WeWork now has a glut of NYC availability
About 2M sf or more than 20% of co-working firm’s Big Apple portfolio still available

WeWork’s availability rate in New York City is more than 20 percent — or nearly double Manhattan’s overall rate, adding to the beleaguered co-working giant’s problems.
The firm has some 1.9 million square feet of space in New York that’s either available or will become so in the coming months, according to Business Insider, which obtained leaked marketing materials. That’s more than 20 percent of WeWork’s portfolio in the city, and far exceeds the availability rate in Manhattan of 12.1 percent in June.

A WeWork spokesperson declined to comment to Business Insider. But observers said the large portfolio of available space is a result of WeWork’s rapid expansion in recent years and slow demand during the coronavirus shutdown.

“If people are already working from home, why would you spend the money on a WeWork location right now,” Baker Hostetler real estate attorney Dennis Russo said. “Why spend it? It makes no sense.”
Large availabilities include more than 210,000 square feet at 620 Sixth Avenue and nearly 170,000 square feet at WeWork’s global headquarters at 115 West 18th Street, both available in January.

The news comes about a week after WeWork chairman Marcelo Claure said the company plans to turn a profit by 2021.

David Goldsmith

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WeWork offers pay-as-you-go workspaces
WeWork on Demand is being piloted at 12 locations in NYC

With the office market in limbo, WeWork has launched a pay-as-you-go offering that allows users to drop in for as little as an hour (and $10).
A source familiar with WeWork’s new “On Demand” program said it’s being piloted for the next 60 days in New York City. As companies reopen for business, it reflects a growing demand for a “third place” to work — in other words, a flexible space that is neither home nor office.

In an email obtained by The Real Deal, WeWork said On Demand is available at 12 locations in Manhattan and Brooklyn. Users can book a workspace for $29 per day or a meeting room for $10 per hour. Membership is not required.
It’s not the first time WeWork has tried its hand at hourly workspaces — a model associated with Breather, a VC-backed on-demand workplace startup that ran into financial trouble last year.

WeWork previously offered a flexible option at WeWork Now, a retail location at 902 Broadway in the Flatiron district. The location closed in May as WeWork divested non-core businesses.
WeWork announced its new On Demand program to former members of WeWork Now on Monday. A source familiar with the offering said On Demand is focused outside of WeWork’s existing members.

In general, flex-office providers say they are poised to help companies bring employees back to the office by offering ancillary locations for some of their employees. Serendipity Labs, for example, which operates in suburban markets, offered an interchangeable subscription during the month of May.

Even as WeWork grapples with the loss of some tenants, including VC-backed startups that are struggling with fallout from coronavirus, the company is courting big corporations, CEO Sandeep Mathrani told the Wall Street Journal in an interview. In June, large companies accounted for 65 percent of new customers. “If you want to continue to grow faster, the additional demand comes from enterprise businesses,” Mathrani said.

The embattled co-working company slashed 8,000 jobs and is looking to terminate a chunk of its leases. After a series of painful cuts, the company is on track to be profitable by the end of 2021, executive chairman Marcelo Claure told the Financial Times in July. Covid sent demand for private spaces “through the roof,” he said.

David Goldsmith

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Co-working firms are ditching office space after years of expansion
1 in 5 U.S. locations — 25M sf — will close or change hands, JLL predicts

The coronavirus pandemic put an abrupt end to the co-working industry’s years of rapid expansion, and one in five co-working locations in the U.S. could soon be up for grabs.
While closures impacted just 1.5 percent of co-working space in the top 20 U.S. markets so far this year, according to a CBRE estimate, things are expected to get much worse.

Of the 4,500 or so co-working locations in the U.S., JLL estimates that a fifth — or about 25 million square feet — will close or change hands, according to the Wall Street Journal. JLL head of office research Scott Homa attributed the slow pace of closures thus far to rent relief provided by landlords, as well as the fact that closures take time.

Remote work and social distancing have reduced the appeal of densely packed collaborative office space, and economic disruption has also weakened overall demand for office space.

Abandoning leases can be difficult and costly for co-working firms due to corporate guarantees and letters of credit covering lease obligations. When WeWork scrapped plans to move into 149 Madison Avenue in Manhattan in June, for example, landlord Columbia Property Trust got a $6.4 million payout.

Knotel is facing lawsuits from landlords for over $1.6 million in unpaid rent, and flex-space provider IWG (formerly Regus) has sought to exit lease obligations through bankruptcy of its single-purpose entities.
JLL estimates line up with public statements from WeWork and Knotel, both of which have expressed intentions to close — or at least rethink — one in five of their leases.

In the longer term, however, some industry observers think a post-pandemic shift to remote and flexible work could actually end up benefiting co-working firms — or the ones that survive, at least.
“Everybody’s pretty bullish on the concept of shared workspace when we come out of this,” Bond Collective CEO Shlomo Silber said. “But getting out of this is the struggle.”

David Goldsmith

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SoftBank shovels another $1.1B into WeWork
Office giant’s membership took a hit; infusion brings cash on hand to $4.1B

SoftBank is pouring $1.1 billion more into WeWork as the flexible-office giant sees membership fall.
In a memo to employees, chief financial officer Kimberly Ross called the infusion “another sign of SoftBank’s continued support for our business,” according to Bloomberg. The funding will come in the form of senior secured notes, and will bring the company’s cash on hand to $4.1 billion.

WeWork’s membership fell 12 percent from the first quarter to 612,000, and the company recorded $882 million in second-quarter revenue — down from $1.1 billion during the first three months of the year. It also burned through $671 million in cash, including $116 million in non-recurring expenses such as severance pay due to layoffs.

“Covid-19 has had an impact on our business,” Ross wrote in her memo. Last month, WeWork tapped JLL and CBRE to help lease millions of square feet of vacant office space in New York City and Los Angeles. In New York, its availability rate is more than 20 percent, nearly double Manhattan’s overall rate. It also recently shuttered its first location ever, at 154 Grand Street.

Following WeWork’s botched IPO last fall, controversy has swirled over SoftBank’s continued commitment to the company, now totalling $10 billion in total support.
Cost-cutting measures have helped reduce cash burn that peaked at $1.3 in the last quarter of 2019.

David Goldsmith

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WeWork shakes up chief finance post
CFO Kimberly Ross is leaving after
WeWork is swapping out its finance chief after just six months.
The shared-office giant’s CFO Kimberly Ross, who took the position in March, will be stepping down at the end of this month, WeWork announced Wednesday.

The company said Ross, a 25-year veteran of the corporate finance world, is leaving “for personal reasons.”

She will be replaced by Benjamin Dunham, who for the past two years has served as the head finance officer for WeWork’s Americas division.
He will report directly to company CEO Sandeep Mathrani.
WeWork recently received a commitment from SoftBank to lend the co-working company $1.1 billion, multiple outlets reported last month. At the time of the news, WeWork had not yet tapped the loan, which gives the company 12 months to draw down on.

WeWork hired Ross soon after Mathrani joined the company in February, tasked with turning the money-losing startup around after its botched IPO last year.

David Goldsmith

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Knotel wants out at 10 Manhattan locations
Lease commitments on the spaces total nearly $200M

Knotel is looking to get out of 10 Manhattan locations with lease commitments of nearly $200 million as the company clashes with landlords over unpaid rent.
The flex-office startup, valued at $1.6 billion in August 2019 but thought to be worth substantially less now, is offering nearly 375,000 square feet of space up for sublease, according to marketing materials reviewed by The Real Deal.

Most of the leases commenced within the last 18 months and carry a term of about 10 years. The annual base rent on the combined spaces totals about $21 million, which would have the total commitment starting at about $191 million – not accounting for rent escalations built into the leases.

Knotel did not immediately respond to a request for comment.
Some of the spaces appear to be up and running, while others are listed as built out yet unfurnished. One of the spaces is unbuilt, with the lease becoming effective in October.

The largest of the locations is at Savanna and Pacific Oak Capital’s 110 William Street in the Financial District, where Knotel is offering two floors covering roughly 80,000 square feet.
The move to sublease comes as Knotel fends off several lawsuits from landlords who claim the company has stopped paying rent. It doesn’t appear, however, that any of the spaces listed for sublease are the subject of a current lawsuit.

Knotel has about 2.5 million square feet in New York and a total of 5 million square feet spread across its 17 markets. Earlier this year, the company was reportedly looking to give back 20 percent of its overall portfolio to landlords. Knotel also went through two significant rounds of layoffs in 2020.

Knotel is also reportedly looking to raise $100 million in new funding at a price that would slash its most recent August 2019 valuation of $1.6 billion in half. The company lost $223 million last year, even before the coronavirus hit.
The flex-office market has been hit hard by pandemic-related stay-at-home orders.

Regus last month put a small number of locations in several U.S. cities into Chapter 11 bankruptcy protection. Other smaller players have either filed for bankruptcy or shut down locations.
And WeWork, which has been working to trim its massive portfolio, has closed and exited locations.

David Goldsmith

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Regus throws 6 NYC locations into bankruptcy
Flex-office company has filed for Chapter 11 on nearly 100 locations across the country

Short-term office company Regus put half a dozen of its New York City workcenters into bankruptcy as the company seeks Chapter 11 protection for upwards of 100 locations across the country.
Regus, which went through a bankruptcy restructuring in 2003 after the dot-com bubble burst, has put roughly 90 locations into Chapter 11 over the past six weeks, filings show.

The company has filed for six workcenters in Manhattan, Brooklyn and Long Island City in the past week.

Four of the locations are in Midtown: Paramount Group’s 1325 Sixth Avenue at 53rd Street, Levin Properties’ 1501 Broadway in Times Square, Brookfield Properties’ 424-434 West 33rd Street in Manhattan West and EQ Office’s 1740 Broadway at 56th Street.

The other centers are at Normandy Real Estate Partners’ 175 Pearl Street in Dumbo and Jamestown Properties’ Falchi Building at 31-00 47th Avenue in Long Island City.
A representative for Regus declined to comment. But in the half-year update from its parent company, Switzerland-based IWG, CEO Mark Dixon said the firm will be accelerating its plan to trim 4 percent of its global portfolio in response to Covid-19.

“Whilst the Covid-19 pandemic continues, we expect our third quarter to be particularly challenging. We therefore remain sharply focused on maximising further cost savings in the coming months,” he wrote in the August report, noting the company is working to build a large cash buffer.

Regus is the largest flex-office provider in the world, with about 10 times as many locations as WeWork. The company, founded in 1989, is largely seen as a barometer for the short-term office market, which has grown significantly in the past few years with WeWork’s expansion driven largely by SoftBank.

As recently as last fall, Dixon was crowing that Regus was thriving as its younger, upstart rival was experiencing growing pains.
But the coronavirus has had a severe impact on the short-term office market, with a number of smaller players fizzling out. Regus’ bankruptcy filings are the most significant indicator yet that the pandemic pain may start to reach the industry’s highest levels.

The majority of the sites Regus put into bankruptcy are in urban cores including New York, Chicago and San Francisco — areas hard hit by the virus. The number of centers in Chapter 11 represent about 2 percent of the 1,000 locations the company has in the United States and Canada.

The company believes its clients will want to work in suburban offices closer to home, rather than in dense business centers.
Nearly $13 billion worth of commercial-mortgage backed securities loans have exposure to Regus locations, according to a recent report from Kroll Bonds Ratings Agency.

David Goldsmith

All Powerful Moderator
Staff member
IWG looking to close 20% of flex-office NYC portfolio
Company shuttered its flagship Regus work center on Third Ave.

Short-term office provider IWG is looking to close at least a fifth of its work centers in New York City as the parent company prepares to throw its Regus subsidiary into bankruptcy in the U.K.
Regus recently closed what it called its flagship business center in Midtown East at the 39-story office tower 747 Third Avenue, sources familiar with the property told The Real Deal. The company also closed a center in Midtown South at 387 Park Avenue South, sources said. And Regus on Friday filed for bankruptcy protection for a center nearby at 287 Park Avenue South, records from Delaware bankruptcy court show.

A spokesperson for U.K.-based IWG, headed by CEO Mark Dixon, declined to comment on the New York City closings, but sent a statement saying the pandemic “is a black swan event and it has severely impacted our business and presented us with unforeseen challenges.”

Representatives for the owner of 747 Third Avenue, Sage Realty, and 387 Park Avenue South owner TF Cornerstone declined to comment.
In addition to those closures, IWG has also shuttered another Regus and a workspace under its Spaces brand in Manhattan, a source told TRD. Those moves, combined with six New York City work centers that Regus and Spaces put into bankruptcy in September, make a total of 11 Big Apple centers that have either closed or gone into bankruptcy.
That’s roughly one fifth of the 52 centers IWG ran in the city before the coronavirus pandemic took hold, prompting remote working. And it’s not clear if that’s the extent of the locations on the chopping block or if there are more to come.

As of last week, Regus had put 103 work centers across the United States into bankruptcy. And multiple news reports last month said Regus would be filing for bankruptcy in the U.K.
In response to the U.K. bankruptcy filing, the IWG spokesperson said Regus doesn’t operate the company’s work centers, but instead supplies rental guarantees to about 15 percent of IWG’s global network.
“In any restructuring of a guarantor, none of our operations are affected,” the spokesperson wrote in an email. “As the business has expanded in recent years to meet the increased global demand for distributed working, so has the value of the guarantees.”

IWG earlier this year said it plans to close 4 percent of its global portfolio as a result of the pandemic, but didn’t give specifics on how that would impact individual markets. It looks like it’s closing a higher percentage in New York City, where the short-term office market has taken a big hit.
In New York, Regus appears to have closed several centers without filing for bankruptcy. In some of the cases where it has filed, sources said the company is working with landlords to negotiate concessions on leases.

David Goldsmith

All Powerful Moderator
Staff member
We Company changes name back to WeWork
Flex-office provider is recommitted to its core business line, according to internal memo

In a throwback to a more innocent time — before anyone knew Adam Neumann packed a cereal box full of marijuana onto his private jet — the WeCompany is changing its name back to WeWork.
The move is an attempt to return the company to its office-sharing roots, according to an internal memo cited by Reuters.

“We want to be strategic. We want to be innovative. We want to be impactful. We want to be WeWork,” wrote company CEO Sandeep Mathrani, who took over the reins of the money-losing startup after Neumann was ousted following last year’s public offering debacle.
WeWork had changed its name to the We Company to reflect its expansion into other lines of business like co-living and childcare.

But after the company’s failed IPO attempt — and revelations about some of its co-founder’s eccentric habits — the SoftBank-backed shared-office space giant decided to scale back ambitions and refocus on its core business.