Bankrupt WeWork struggles to control losses, renegotiate leases

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WeWork’s United States and Canada operations lost $122 million in February alone, according to bankruptcy filings.

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Nearly five months after WeWork filed for chapter 11 bankruptcy, the coworking giant is still burning through its cash reserves and struggling to downsize.

According to filings in its bankruptcy case made this weekend, and first reported on by Bisnow, the commercial real estate firm’s United States and Canada operations lost $122 million in February alone as it worked to renegotiate with its landlords for more favorable leases.

WeWork took in $83.8 million in revenue during February while spending $197.8 million. Its losses in January were greater, at $153.7 million, while its cash reserves dwindled from the end of January to the end of February from $113.3 million to $89.6 million.

The filing also revealed that WeWork has reached deals with four of its landlords to remain in their locations with reduced rents and that it has rejected a lease for a Salt Lake City location, bringing the total to 25 leases assumed and 94 leases rejected in the company’s bankruptcy period.

WeWork had a combined 292 locations in the United States and Canada when it filed for bankruptcy in November. The future of 173 remaining North American locations remains questionable as leases continue to be negotiated, according to the report.

The company is reportedly deciding whether to renegotiate or reject its remaining leases as it entertains a $500 million takeover bid from Adam Neumann, the firm’s founder, who was ousted during an IPO bid that backfired when the company’s massive losses and financial mismanagement were revealed.

Court filings from March 26 show that lawyers from Neumann’s new residential real estate venture, Flow, are trying to enter the court proceedings after their buyout offers have been ignored by the firm, according to the report.

Other recent court filings show that WeWork has been withholding rent from some landlords as it renegotiates lease terms. A spokesperson for WeWork told Bisnow that the company is using every tool at its disposal to secure more favorable leases.

“We are extremely grateful to our landlords for their constructive engagement and remain committed to finding mutually beneficial solutions that are better aligned with today’s market conditions and that will enable us to successfully move forward in our restructuring process,” the unnamed spokesperson said.

Despite its mounting losses, WeWork announced Tuesday that it expects to emerge from Chapter 11 bankruptcy by the end of May through amended leases, new management agreements, or through rejecting leases.

“We are well on our way to building a strong and sustainable WeWork,” WeWork CEO David Tolley said in a statement.  “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.”

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