WeWork said it is fully committed to its flagship 290,000-square-foot London office after the High Court dismissed one of two legal moves by landlord Almacantar to evict it.
The judge, Deputy Master Francis, at the High Court has thrown out the second of two lease forfeiture claims against WeWork special-purpose vehicle 2 Southbank Tenant Ltd. A separate forfeiture claim is ongoing.
In a statement WeWork said: “As we expected, the court has thrown out the entirety of this claim against us. We will continue to vigorously defend ourselves in court, and fully expect to continue to prevail. It remains business as usual for our members at this flagship WeWork location in the Capital and we look forward to continuing to deliver our signature WeWork experience.”
Almacantar has declined to comment.
Landlord Almacantar filed its claims at the end of 2023 in a move that has been keenly followed by WeWork's other landlords.
The High Court battle focuses on US coworking group WeWork's largest London office, 10 York Road, which it occupies on a lease with 14 years left to run and is its most profitable London operation. It is understood to be the group's largest global office.
Almacantar has sought a ruling which amounts to whether United States or United Kingdom law takes precedent on lease forfeitures in the United Kingdom when a company files for bankruptcy protection in the United States.
WeWork said in September 2023 it was attempting to renegotiate most of its leases globally. It typically leases buildings on long-term leases and then agrees deals with tenants for the space with a package of services agreed at much shorter terms.
In November 2023 it filed for Chapter 11 bankruptcy protection in a move that it said only affected its business in the United States and Canada.
Almacantar lodged its first forfeiture claim on 18 December 2023, which relates to the Chapter 11 bankruptcy protection, and its second, which relates to WeWork's ability to pay, on 28 December 2023.
WeWork announced in June 2024 that it had completed its lease negotiations in the UK and Ireland as part of a strategic restructuring of its remaining operations in London, Cambridge, Edinburgh, Birmingham, Manchester and Dublin. It also exited Chapter 11 bankruptcy protection in June.
It has been shedding its massive portfolio of British and Irish offices for several years, a process that accelerated in 2023. WeWork has always said it is committed to staying at 10 York Road and has paid all of its rent on time with no debt accrued.
Almacantar's claim to take back the space was sparked by WeWork's United States bankruptcy filing. It argues that the guarantor for the lease entered into administration as part of the Chapter 11, therefore under United Kingdom law the lease can now become forfeit. Almacantar first issued a Section 146 notice, which applies when a tenant breaks a lease covenant, threatening forfeiture.
WeWork's leases are held in separate special purpose vehicles in the United Kingdom. WeWork argues that the guarantor didn't enter into Chapter 11, following a division of the company.
In its counterclaim, WeWork argued that its landlord wants to relet the premises to a third party, "most likely a direct competitor" who would operate the premises in the same or similar manner while taking advantage of a £50 million fit-out it carried out with a substantial contribution from Almacantar. WeWork says that would amount to "substantial prejudice" as 10 York Road is its largest and most profitable office in the United Kingdom, and would "generate a substantial windfall" to the claimant.
The first judgment relates to the second claim by Almacantar for forfeiture of the lease. WeWork sought for this to be struck out because it says service of this claim was premature because a reasonable time had not elapsed for it to respond to the section 146 notice served a few days before.
The Judge agreed with WeWork on the summary judgement: "I have concluded that, as a matter of its proper construction, the breach of condition relied upon by the claimant in its second section 146 notice required the Resulting Company's inability to pay its debts on a cash-flow or balance sheet basis to have been proved to the satisfaction of the court prior to service of the notice. That constituted the event which would have triggered the right of forfeiture. As there has been no prior determination by the court of such inability, the right had not been triggered. On that basis alone, I accede to the defendant's application and shall grant summary judgment dismissing the claim."
WeWork agreed a deal to take 290,000 square feet at Almacantar's development, called Southbank Place, in 2017. The lease was granted for a term of 20 years at a passing rent of just under £20 million a year in 2019. The building sits on a 5.5-acre site on the edge of the River Thames, opposite Whitehall and the Houses of Parliament and adjacent to London’s Waterloo station. WeWork shares the development with the headquarters of Shell.
Ashurst is representing Almacantar while Stephenson Harwood is representing WeWork.
WeWork is a tenant in a Virginia building CoStar Group acquired last year. CoStar also competes with WeWork's majority owner Yardi in providing real estate data.
(Updated on 10 January to correct date of first claim in paragraph 10).