Another landlord is chasing after WeWork for millions of dollars in rent it said went unpaid, this time for one of the coworking giant's largest locations in the United States.
A joint venture between Southern California investment firm Kennedy Wilson and Takenaka Corp., a Japanese construction firm, filed a lawsuit alleging the New York-based operator owes the building owners more than $250 million in unpaid rent, future rent and other fees for space at 430 California St. in downtown San Francisco. New York-based WeWork disagreed with the allegations, adding it's negotiating.
The complaint, filed Monday in San Francisco Superior Court, is the latest lawsuit the flexible office provider is facing after it issued warnings of its future viability. WeWork, in the process of renegotiating nearly all its leases try to to cut costs, released details about its financial concerns in August and said its lease obligations, representing about two-thirds of its operating expenses, are the company's biggest turnaround obstacle.
While WeWork informed Kennedy Wilson and Takenaka of its plans to terminate the more than 250,000-square-foot California Street lease, the landlords argue that WeWork is still on the hook for the total value of any unpaid and future rent payments, according to the lawsuit.
WeWork's lease at 430 California St., covering the entire downtown property, was originally set to expire in 2036.
“We strongly disagree with the allegations in this lawsuit," a WeWork spokesperson told CoStar News. "We continue to be in active negotiations with the landlord about WeWork’s future at this location.”
Kennedy Wilson didn't immediately respond to a request to comment from CoStar News.
WeWork plans to exit underperforming locations as its leases remain “too high” and are “dramatically out of step with current market conditions,” CEO David Tolley recently wrote in a public letter. That's led to some resistance among landlords, with some taking to the courts to ensure the flexible workspace provider fulfills its financial obligations. In the past several weeks, property owners including MetLife Investment Management, DivcoWest and Alter Group filed lawsuits over allegations of defaulting on rent payments, breaching a lease contract, vacating space without written consent, and failing to pay termination fees.
At its 2019 peak, WeWork was one of the nation's largest coworking operators with 25 Bay Area locations and more than 700 around the world. That portfolio made it the largest private tenant in Manhattan and one of the biggest in San Francisco.
The company, which signed a flurry of long-term office leases and rented out desks by the month to startups and corporate giants, signed its 19-floor lease at 430 California St. in early 2018. At the time, the deal marked one of WeWork's largest locations to date and was one of San Francisco's biggest office leases for the year.
WeWork then leased a majority of that to cryptocurrency firm Coinbase, before that business adopted a decentralized workplace in 2021 and permanently shut down the space that had been serving as its San Francisco headquarters.
However, the pandemic prompted the coworking space operator to quickly shrink its footprint. It closed a slew of locations across the country beginning in 2020, including multiple outposts in cities such as San Francisco, Denver, Phoenix, New York and Washington, D.C.