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WeWork Moves To Reject More Leases, Including New York Location Once Housing Amazon

More Landlords Call Out Firm for Not Paying January Rents and Other Amounts Owed

WeWork is seeking to reject nine more leases, including the one at 75 Rockefeller Plaza in Manhattan. (Getty Images)
WeWork is seeking to reject nine more leases, including the one at 75 Rockefeller Plaza in Manhattan. (Getty Images)

WeWork is seeking to reject nine more unexpired leases in an attempt to reduce its rent burden, a cost the flexible workspace provider has said is its biggest obstacle to turning profitable.

The latest rejection list, filed with a New Jersey bankruptcy court Wednesday, includes developer RXR Realty’s 75 Rockefeller Plaza in New York where WeWork last year inked a 90,000-square-foot corporate membership deal with e-commerce giant Amazon. WeWork’s list came a day after RXR, and other landlords, called out WeWork in a court filing for failing to pay January rents totaling nearly $796,000.

An RXR spokesperson declined to comment to CoStar News. The New York-based company’s CEO, Scott Rechler, previously told CoStar News it renegotiated a deal with WeWork ahead of the coworking provider's Chapter 11 bankruptcy protection filing that would give RXR the right to take back the property. WeWork returned its space at RXR’s 620 Avenue of the Americas, with two large WeWork customers signing direct deals with RXR.

An Amazon spokesperson didn’t immediately respond to a CoStar News request seeking a comment. A WeWork spokesperson said it doesn’t comment on its members but added the space is not operational and none of its members are still there, adding WeWork often works with its members to relocate them when making a decision to close a location.

The majority of the buildings on its most recent rejection list “are no longer operational,” WeWork said in an emailed statement to CoStar, adding the company has previously notified all affected members and, where possible, relocated members to nearby WeWork offices. “We have made substantial progress in our lease renegotiation efforts, having realized over $1.5 billion in total savings, and continue to work towards solutions that support more profitable operations for WeWork while retaining as many buildings as possible.”

In addition to the nine leases, WeWork is also seeking to reject six other management agreements and other contracts. The New York-based company has so far sought to reject a total of 92 leases while assuming seven others even as it has restructured over 60 agreements globally that translate to over $1.5 billion in total rent savings, the WeWork spokesperson told CoStar.

No Pattern Detected

There doesn’t look to be a precise pattern to the locations being rejected or kept, and they often depend on whether landlords are willing to restructure terms. For instance, WeWork, in the most recent filing, wants to reject 115 W. 18th St. in Manhattan after WeWork said in a filing last month that the landlord has failed to lower a security deposit as part of a restructured agreement the two parties signed months before its Chapter 11 filing.

Leases being rejected reflect situations where WeWork hasn’t been able to come to terms with landlords that would allow it to sustainably operate for the long term, the WeWork spokesperson said.

WeWork’s bankruptcy case and its ability to reject or assume leases only apply to locations and contracts in the United States and Canada even as it’s been talking with landlords worldwide.

The lease rejections came as WeWork’s official committee of unsecured creditors said the company has failed to pay January rent obligations totaling about $33 million on certain leases. The committee and other individual landlords have said in filings that WeWork has enough money to pay its January rent, according to initial budgeting laid out as part of the bankruptcy process.

After previously announcing two leases it seeks to assume, WeWork this week sought to assume five leases, including the ship-shaped Dock 72 in Brooklyn, after the lease was amended to shorten WeWork’s lease term, reduce rent and eliminate lease security, according to a court filing.

WeWork previously told CoStar its move to withhold January rent payment is intended to selectively advance its landlord negotiations. But the dispute between WeWork and some landlords signals some owners may have been slow or unwilling to come to the negotiating table or agree to the terms that WeWork would have liked, bankruptcy attorneys have said.

Besides 75 Rockefeller and 115 W. 18th, seven other leases WeWork seeks to reject on the most recent list include 200 Berkeley St. in Boston; 1019 E. Fourth Place in Los Angeles; 1725 Hughes Landing Blvd. in The Woodlands, Texas; 101 E. Washington St. in Phoenix; 920 SW Sixth Ave. in Portland, Oregon; 1557 W. Innovation Way in Lehi, Utah; and 214 W. 29th St. in New York.

In addition to Dock 72, four other leases on WeWork’s to-keep list this week include 71 Fifth Ave. in New York; 800 N. High St. in Columbus, Ohio; 901 N. Glebe Road in Arlington, Virginia; and 410 N. Scottsdale Road in Tempe, Arizona. All the leases were restructured to have lower rent while some others also include a reduced footprint in the lease terms, according to the court filing.