Ken Riggs

NEW YORK—The WeWork (We) saga is casting a shadow over all corners of the globe, and its problems are landing squarely on the foundations of commercial real estate. Investors, especially landlords and CRE investors, are on their heels as they finally pull back the curtain on We and discover whether a wizard had been at work.

There is a distinct possibility that We could default on some – or all – of its building leases, leaving landlords in the cold without We’s big rent payments and also having to sort out the realities of what to do with occupancy of We’s leased space. According to We’s financials, the company has $47 billion of lease obligations that stretch over the next 15 years. Harvard Business School reports that in 2020, the company’s lease and cash obligations total about $2.3 billion a year. Further, We received over to $450 million in upfront tenant improvements and free rent just in the first half of this year. This has been a costly lesson for landlords and a huge infusion of start-up capital at the expense of property owners.

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