WeWork Owes Landlords at Least $98.6M in Unpaid Rent

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Beleaguered coworking company WeWork (WE) owes landlords at least $98.6 million in unpaid rent, lease termination fees and related litigation, according to its bankruptcy petition filed Monday night. 

Details about WeWork’s mountain of debt are coming to light in court documents filed since it initiated Chapter 11 bankruptcy proceedings in New Jersey this week, which showed that the company owns $15.1 billion in assets and owes $18.7 billion in debt. Landlords account for more than a third of the total amount WeWork said it owes to its top creditors, though it may dispute some of their claims in the months ahead.

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And the list of the 30 largest unsecured claims reads like a who’s who of the country’s real estate market.

WeWork said it plans to dispute its largest unpaid rent bill from Michael Alter’s Illinois-based The Alter Group, which is suing WeWork for bowing out early on its 175,000-square-foot deal at 20 West Kinzie Street in Chicago and has claimed $11.9 million in lease termination fees and related litigation costs from its problem tenant.

Also top on the list is Unibail-Rodamco-Westfield, the owner of the Westfield World Trade Center Mall, which is owed $8.2 million in an undisputed claim for unpaid rent.

Aby Rosen’s RFR Realty is also on the hook for $5 million in unpaid rent at 81 Prospect Street and an additional $3.1 million at 77 Sands Street — both Brooklyn properties where WeWork is seeking the court’s permission to terminate leases.

Other unsecured claims by WeWork’s landlords include $7.8 million in unpaid rent and related litigation due to California-based Kennedy Wilson, and $5.1 million in lease termination fees owed to Michigan-based The Platform

New York landlords bear the brunt of the unsecured rent claims, with $4.6 million in unpaid rent and related litigation due to The Sapir Organization, the owner of 261 Madison Avenue in Midtown, and $4.3 million in unpaid rent to William Gottlieb, the owner of 1 Little West 12th Street in the Meatpacking District. WeWork is seeking to terminate its leases at both buildings. 

WeWork also owes $3 million in unpaid rent and lease termination fees to Cohen Brothers Realty for its 115,000-square-foot space at 750 Lexington Avenue.

It’s unclear how much WeWork owes in total to all its landlords, since the bankruptcy documents list only the top 30 unsecured claims. But WeWork ended the second quarter of 2023 with about $13 billion in lease obligations and has been hit with lawsuits around the country for skipping out on rent.

And it’s not just landlords WeWork owes money to. Brokerage Cushman & Wakefield (CWK) has an unsecured claim of $2.5 million for “trade payable.”

A bankruptcy could spell trouble for landlords who went all-in on leasing to WeWork and could make it hard for owners to recoup their money, since U.S. bankruptcy law tends to favor debtors,  said Adam Stein-Sapir, a bankruptcy analyst and portfolio manager at Pioneer Funding Group.

Aside from listing some of the unpaid rent WeWork owes, the bankruptcy court also revealed that WeWork was looking to get out of nearly 70 leases for “underperforming locations” in the United States and Canada, with 40 of them in New York City alone.

That’s on top of thousands of square feet WeWork has already dumped back onto the market since 2020 as it tried to stave off bankruptcy.

WeWork walking away from leases could cause building valuations to drop and vacancies to spike. Owners who count WeWork among their largest tenants owe about $2.6 billion in commercial mortgage-backed securities debts, with 80 percent of those either on a special servicing watch list, delinquent on their loans, or in default, according to Trepp data.

“In the case of landlords, there are going to be a lot of heads that go through the windshield as that business comes to a screeching stop,” Anthony Malkin, CEO of Empire State Realty and longtime critic of WeWork, previously told Commercial Observer.

Abigail Nehring can be reached at anehring@commercialobserver.com.