WeWork, which dropped into bankruptcy last November, has gone through a contentious negotiation process with its landlords that started then and has continued into 2024.
The work appears to have paid off in a big way for the flex office company. In January, WeWork had managed to cut 16% of its long-term lease costs, or $3.7 billion, through lease rejections — which U.S. bankruptcy rules allow — or amendments.
And now, the company says that it has "determined a path forward" at 90% of the spaces it leases through either amended leases, new management agreements, or the bankruptcy lease rejection process. That represents a claimed $8 billion in future rent obligations, or a 40% reduction, an estimate "based on a combination of executed agreements, exits and agreements in principle across wholly-owned portfolio."
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Here are the current details as released by WeWork:
- "Agreements in principle to amend approximately 150 leases, with many contracts complete and others in various stages of execution."
- "Approximately 150 locations where existing lease terms support WeWork's current go-forward business plan, to be assumed as part of the Chapter 11 process or to remain in effect internationally."
- "Approximately 150 lease rejections or negotiated building exits completed or in progress."
- "Agreement with holders representing 92% of its secured notes to eliminate over $3 billion in prepetition secured debt obligations."
- Or roughly three equal categories.
"We are well on our way to building a strong and sustainable WeWork," said David Tolley, chief executive officer in prepared remarks. "The size, scope, and complexity of our real estate restructuring is unprecedented in our industry, and we've made remarkable progress to date optimizing our building footprint. We remain committed to emerging from our global real estate and financial restructuring later this quarter, and expect to do so with little to no debt and as a continuing leader in our industry, operating over 20 million square feet of real estate in over 20 countries around the world."
"In many, many cases, landlords have agreed that keeping us operating in the building on a new structure was going to be value creating to them, as opposed to having us leaving them trying to find long-term, traditional tenants to replace WeWork," Peter Greenspan, the company's global head of real estate, told the Wall Street Journal.
One might note that the level of restructuring was as unprecedented as the degree of strategic and financial error the company had engendered, starting with leadership by founder Adam Neumann, who submitted a $500 million to $600 million bid range to buy the company back. That would seem an extraordinarily low amount given the degree of cost elimination WeWork has apparently achieved.
The company is targeted an exit from Chapter 11 bankruptcy in the U.S. and Canada by May 31st.
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