Global coworking company WeWork, renegotiating its leases to cut costs, is facing legal challenges in a sign that some landlords are growing impatient with the flexible office provider.
An affiliate of MetLife Investment Management is the latest landlord to sue the New York-based operator for failing to pay its rent, this time for a 45,000-square-foot office in Denver that WeWork closed in early 2021. WeWork issued warnings in August that its lease obligations, representing about two-thirds of its operating expenses, are the company's biggest turnaround obstacle.
The New York-based company last month said it plans to exit underperforming locations as it renegotiates nearly all its leases, which remain “too high” and are “dramatically out of step with current market conditions,” Interim Chief Executive David Tolley recently wrote in a public letter.
In its lawsuit, MetLife alleges that WeWork “breached the lease by, among other things, failing to make timely payment of all fixed annual rent and additional rent due,” for its former location in Denver's The Hub building at 3601 Walnut St. in the River North neighborhood. WeWork signed the 45,000-square-foot deal for the fifth-floor space in September 2018, according to the lawsuit and CoStar data, shortly before the building's completion the following year.
In addition to breaching the terms of its lease agreement, MetLife argues, WeWork also failed to adhere to the “Guaranty of Lease” commitment that promises to fulfill all rent payment obligations and any other amounts due under the terms of the lease, including any legal fees the landlord may incur in enforcing the terms of that obligation.
WeWork officially surrendered the location to MetLife at the end of July, according to the lawsuit. The New York-based landlord is asking to recoup all payments it alleges WeWork owes as well as interest and legal fees. The lawsuit did not specify the value of the missed rent payments.
A WeWork spokesperson said the company “worked hard to find a solution here prior" to the lawsuit, but declined to comment further.
The Hub location was among several others that WeWork closed in response to the pandemic's outbreak in early 2020.
At its 2019 peak, WeWork was the largest coworking operator in Denver with a real estate footprint that included roughly 668,155 square feet spread across 10 locations. Its portfolio now is less than 359,330 square feet for its remaining Denver and Boulder locations, according to CoStar data.
In a separate lawsuit filed last month, San Francisco development firm DivcoWest sued WeWork for allegedly defaulting on its rent payment, breaching a lease contract and vacating a New York office property near Times Square without written consent. The landlord is looking for $30 million in damages involving the coworking location at 311 W. 43rd St., where it leased about 72,000 square feet.
While WeWork officially closed the location in December 2022, DivcoWest said in the lawsuit that the lease terms prohibited the company from “early surrender” or “abandonment” without the landlord's written consent.
WeWork is also being sued by landlord Alter Group for allegedly terminating a deal for one of its Chicago locations roughly a decade before the term expired. The Wilmette, Illinois-based landlord said in a lawsuit filed in late September that WeWork failed to pay the appropriate lease termination fee, the amount for which was not publicly disclosed.