Flexible office space provider WeWork has sought to reject 15 unexpired leases across the United States, but the company said it's hoping to come to terms with landlords in time to keep those locations.
The 15 unexpired leases, including a sublease, are in cities including Washington, D.C., New York, Dallas and Atlanta, the New York-based company said in a court filing. There are also two contracts it’s rejecting, including one management agreement with its acquired Common Desk flexible workplace brand.
However, different from the 94 leases it’s officially rejected as part of its Chapter 11 bankruptcy filing, WeWork actually wants to keep these 15 lease deals, including two at 655 New York Ave. NW in D.C., where it has a direct lease as well as a sublease with sublandlord Google, according to the court document. They are part of the about 50 remaining global locations where WeWork has yet to come to terms with landlords, a company spokesperson told CoStar News.
The company said last week it has settled on the fate of some 90% of its about 500 global locations in a move that will help save more than $8 billion, or 40%, in total future rent commitments. WeWork said then it plans to keep at least 300 of them while rejecting another 150 as it eyes exiting bankruptcy by May 31.
“Our intention is to stay in as many buildings as possible under economic terms that position all parties for a sustainable future,” the WeWork spokesperson said in an emailed statement, adding WeWork still wants to stay in the 15 locations it’s rejecting but has to plan for both scenarios. “In the final stages of our lease restructuring process, it is prudent that we plan for alternative outcomes at buildings where we have not been able to reach new agreements, which may include an exit.”
The company still has up until the scheduled lease expiration dates, either at the end of April or in May, to reach restructured deal agreements with those landlords, the spokesperson said. WeWork has called its lease burden the biggest challenge to becoming profitable, saying in its last public quarterly earnings report that leasing costs take up about three-quarters of its revenue.
Separately, the company said Monday night it’s keeping five more leases at 100 University Ave. in Toronto; Town Square in Las Vegas; 368 Ninth Ave. in New York; and 1001 Woodward Ave. and 19 Clifford St. in Detroit.
WeWork filed for bankruptcy after years of signing expensive leases at the cost of profit under former Chief Executive Adam Neumann, who co-founded the company in 2010. Neumann, through his new real estate company, Flow, and working with other partners, recently indicated they made an offer to buy WeWork for more than $500 million.
A panel representing WeWork's unsecured creditors had recently filed a motion seeking bankruptcy court approval to sue its majority shareholder SoftBank and related parties to help recover hundreds of millions of dollars for landlords and its other unsecured creditors. The bankruptcy filing also led to payment disputes with partners such as brokerage Cushman & Wakefield. WeWork is a tenant in a Virginia building CoStar News publisher CoStar Group acquired earlier this year, making CoStar Group a creditor in the case.
The unexpired lease and sublease deals on WeWork’s latest rejection list, besides the referenced D.C. location, also include the following based on the court document:
- 125 W. 25th St., New York, New York.
- 5215 N. O'Connor Blvd., Irving, Texas.
- 3090 Olive St., Dallas, Texas.
- 2425 E. Camelback Road, Phoenix, Arizona.
- 1840 Gateway Drive, San Mateo, California.
- 6655 Town Square, Alpharetta, Georgia.
- 756 W. Peachtree St. NW, Atlanta, Georgia.
- 6900 Dallas Parkway in Plano, Texas.
- 10885 NE Fourth St., Bellevue, Washington.
- 7700 Windrose Ave., Plano, Texas.
- 609 Greenwich St., New York, New York.
- 1333 New Hampshire Ave. NW, Washington, D.C.
- 150 Fourth Ave. N, Nashville, Tennessee.
This story was updated April 9 to include that it's keeping five more leases.