WeWork, the global coworking giant that has struggled financially, has begun formal negotiations with all its landlords over its lease commitments.
It held a call Wednesday for landlords, and now Chief Executive David Tolley has published a letter confirming it has begun the "next phase" of scaling back its huge amounts of space, which it typically leases on a long-term basis before packaging it for occupiers on shorter terms.
Tolley said the company on Wednesday is "kicking off a process of global engagement with our landlords to renegotiate nearly all our leases" that span multiple countries. It will seek to negotiate terms that allow the company to maintain its "quality of service and global network, in a financially sustainable manner" that Tolley said will lead to it exiting "unfit and underperforming locations" and reinvesting in its strongest assets.
WeWork intends to remain in most of its buildings and markets and when it closes locations it will "promptly inform members and offer alternative arrangements and additional support to" reduce any "disruption or inconvenience" in the process, Tolley added. He concluded: "Let me finish by making one thing clear: WeWork is here to stay. We will remain a global flex space leader and trusted real estate partner to our members."
In its second quarter results released last month, WeWork warned "substantial doubt exists" about its ability to continue as a going concern, putting landlords and tenants at millions of square feet of space on notice that the operator of their space may face an uncertain future. At the end of last week the company said it had completed a 1-for-40 reverse stock split as it moved to prevent its common stock shares from being delisted from the New York Stock Exchange.
WeWork was trading at a near record low of 13 cents a share in late August and NYSE rules meant it needed to ensure its stock price moves above $1 a share for it to remain on the exchange. By Tuesday it was trading at $3.63 a share, down 17% on the prior day close of $4.40. It was trading at $3.54 a share at 4:20 p.m. in London.
When WeWork finally listed it was valued at $9 billion, down from the $47 billion valuation that the company and majority shareholder SoftBank had attached to WeWork at its first failed attempt at listing in 2019.
WeWork said it has hired real estate adviser Hilco Global, consultant Alvarez & Marsal and law firm Kirkland & Ellis regarding its restructuring options.