WeWork to Abandon Leases at 40 Locations in New York City
After filing for Chapter 11 bankruptcy Monday night, WeWork (WE) is out with a list of 40 leases it hopes to abandon at what the coworking company describes as “underperforming locations” in New York, plus 29 others across the United States and Canada.
Pending the court’s approval, WeWork will relinquish its space and leave the landlords on the hook to file claims for damages, with little hope of recouping millions in unpaid rent.
WeWork was once the largest private office tenant in Manhattan, and its list of rejected leases includes space at 44 Wall Street, 500 Fifth Avenue, 505 Park Avenue and 54 West 40th Street.
In court documents filed Tuesday morning, WeWork described the list as a “meticulous, well-considered lease rejection plan” that is the result of a “comprehensive cost-benefit analysis.”
And it will likely seek to bail on even more leases in the weeks ahead, said Adam Stein-Sapir, a bankruptcy analyst and portfolio manager at Pioneer Funding Group.
“The U.S. bankruptcy code is very debtor-friendly, and dealing with leases is squarely within a debtor’s rights,” Stein-Sapir said. “These leases are contracts, and the debtor has a choice of what to do with them.”
Since going public two years ago, WeWork has amended 590 leases at locations around the world, and taken other cost-cutting measures that have reduced its rent obligations by more than $12 billion, WeWork CEO David Tolley wrote in a statement filed in bankruptcy court Tuesday. Tolley was appointed to the job last month.
In recent months, WeWork hired Illinois-based Hilco Real Estate to take the reins in renegotiating its vast portfolio of office leases. Hilco is in active negotiations with more than 400 landlords, WeWork stated in court filings.
WeWork plans to transfer members at the rejected locations to “nearby higher-performing locations,” and may also allow some of them to negotiate their own deals directly with their current landlords.
Abigail Nehring can be reached at email@example.com.