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

David Goldsmith

All Powerful Moderator
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

All Powerful Moderator
Staff member
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.
800+
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.
2,650
The number of employees WeWork has laid off since November. At its peak late last year, the company employed about 14,500 people.
0
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 UrbanDigs.com
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 UrbanDigs.com
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

All Powerful Moderator
Staff member
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.”

ReWork
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

All Powerful Moderator
Staff member
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.
 
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