WeWork Declares Intent to Renegotiate Almost All Leases
A month after saying its continued existence was in doubt, the co-working company says it expects to 'exit unfit and underperforming locations.'
After WeWork warned last month that it might not be in business for much longer, its chief executive said on Wednesday that the co-working company was going to try to renegotiate nearly all of its leases and would probably pull out of underperforming locations.
The actions, detailed in a letter from David Tolley, who took over as chief executive after the sudden resignation of Sandeep Mathrani in May, are intended to reduce how much WeWork spends leasing office space.
WeWork, which has lost $15 billion since the end of 2017, has been negotiating lower rents for over three years — and has had some success doing so at a time when landlords are desperate to fill office towers that have been emptied by the work-from-home shift that started during the height of the pandemic.
“We will seek to negotiate terms with our landlords that allow WeWork to maintain our unmatched quality of service and global network, in a financially sustainable manner,” Mr. Tolley said in the letter. “As part of these negotiations, we expect to exit unfit and underperforming locations and to reinvest in our strongest assets as we continuously improve our product.”
Still, it is not clear whether landlords will want to reduce the costs of the leases further, and that may explain why WeWork said it was prepared to walk away from certain spaces.
WeWork’s empire is still huge. At the end of June, the company said it had 777 locations globally, the same number as a year earlier. And demand for its space appears to be declining. WeWork reported that occupancy and memberships declined in the second quarter from the first quarter.
Under Adam Neumann, a co-founder and former chief executive, WeWork grew exponentially before the pandemic. Mr. Neumann contended that shared work spaces would revolutionize how people worked. But the company’s huge losses prompted it to withdraw an initial public offering in 2019 and receive a bailout from SoftBank, the Japanese conglomerate.
WeWork went public in 2021 by merging with a blank check company, but its stock traded for pennies for months, prompting it to carry out a reverse stock split last week that was aimed at obtaining a share price above $1, a requirement for a New York Stock Exchange listing.
“Substantial doubt exists about the company’s ability to continue as a going concern,” WeWork said last month. And the company is still burning through large amounts of cash. In the first half of this year, WeWork’s operations consumed $530 million, almost as much as in the first half of 2022.
Still, Mr. Tolley said on Wednesday that WeWork was “here to stay.”