WeWork share prices shoot as it begins to renegotiate leases globally

WeWork on Wednesday (September 6) announced that it has begun the process of engagement with landlords around the world for renegotiating almost all its leases, which led to its share prices shooting up as much as 9 per cent in morning trade.

The SoftBank-backed company stated that it is aiming to negotiate with its landlords on favourable terms and has been planning to exit the underperforming and unfit locations so as to reinvest in its other assets.

"We intend to remain in the majority of our buildings and markets," the company, in a statement, said. The office space group had earlier warned about “substantial doubt” in its ability to continue functioning as an ongoing concern.

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The drive of the New York-based company to cut down lease costs has been stated as “dramatically out of step with current market conditions” which is threatening the commercial real estate industry, which is already under pressure due to excess capacity after work-from-home culture came in during the pandemic.

Till June, WeWork had offices in 777 locations in 39 countries along with long-term lease obligations worth more than $13 billion, which are due in or after 2028.

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Unfit and underperforming locations to be exited

The plan was announced by WeWork after the landlords were “strongly advised” to participate in a listen-only call on Wednesday morning, during which the important business update was shared.

Chief Executive David Tolley informed the landlords about WeWork expecting to exit some “unfit and underperforming locations”, further stating that it is likely to remain in most of its buildings.

After the call, Tolley in a statement said WeWork was “taking immediate action to permanently fix our inflexible and high-cost lease portfolio” that was described by him as a legacy of a “period of unsustainable hypergrowth”.

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Meanwhile, the landlords are looking to reduce their exposure to a company which has an outsized share of the office market in cities like London and New York and has got on its payroll a series of bankruptcy experts in the last few weeks.

“We’ve been approached by about 70 landlords since 2020 and have ended up taking over eight or nine (WeWork spaces). The approaches are accelerating right now,” stated Jamie Hodari, the chief executive of Industrious, an office space company.

Hodari stated that calls from WeWork customers have “inundated” his company since it started raising concerns in August.

(With inputs from agencies)

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