US: WeWork has begun formal negotiations with all its landlords over its lease commitments.
The company held a call for landlords yesterday, and chief executive David Tolley has published a letter confirming it has begun the “next phase” of scaling back its real estate commitments.
Tolley said the company is “kicking off a process of global engagement with our landlords to renegotiate nearly all our leases”. It will seek to negotiate terms that allow the company to maintain its “quality of service and global network, in a financially sustainable manner”. It will seek to exit “unfit and underperforming locations” and reinvest in its strongest assets.
WeWork intends to remain in most of its buildings and markets and when it closes locations it will “promptly inform members and offer alternative arrangements and additional support to” reduce any “disruption or inconvenience” in the process. Tolley added: “Let me finish by making one thing clear: WeWork is here to stay. We will remain a global flex space leader and trusted real estate partner to our members.”
In its Q2 results released last month, WeWork warned “substantial doubt exists” about its ability to continue as a going concern. At the end of last week the company said it had completed a 1-for-40 reverse stock split as it moved to prevent its common stock shares from being delisted from the New York Stock Exchange.
WeWork was trading at a near record low of 13 cents a share in late August and NYSE rules meant it needed to ensure its stock price moves above $1 a share for it to remain on the exchange. By Tuesday it was trading at $3.63 a share, down 17 per cent on the previous day close of $4.40. When WeWork listed it was valued at $9 billion, down from the $47 billion valuation that the company and majority shareholder SoftBank had attached to WeWork at its first failed attempt at listing in 2019.
The company has hired real estate adviser Hilco Global, consultant Alvarez & Marsal and law firm Kirkland & Ellis regarding its restructuring options.
