Despite the consistent swirl of speculation that WeWork’s executives are strongly considering bankruptcy for the financially troubled company, the workspace provider has just announced a plan for the next phase of its comeback, and it doesn’t involve the courts. In a letter posted on WeWork’s website, CEO David Tolley revealed that the company has just commenced a program in which it will engage its landlords worldwide in a bid to renegotiate almost all of its leases. Tolley points to WeWork’s “inflexible and high-cost lease portfolio” as a drag on the company, with lease liabilities having accounted for more than 66 percent of the total operating expenses in the second quarter of 2023.
This new lease-restructuring program will prove a massive undertaking, as WeWork boasted a systemwide real estate portfolio totaling 777 locations across 39 countries as of the close of the second quarter. The company isn’t delusional about not being able to renegotiate some of the leases, as Tolley noted that part of the process will include a retreat from underperforming locations. So, members’ office location options will shrink, but it appears the goal is to keep location closures to a minimum. And Tolley is in never-say-die mode, concluding his letter with, “WeWork is here to stay.” The decision of WeWork’s future, however, really lies with its investors, especially Softbank, which has infused the company with billions over the years. If they see hope in this new plan, then perhaps WeWork will have the opportunity to try to dig itself out of debt. But WeWork will also need the cooperation of landlords, many of whom are struggling to keep their buildings from the hands of special servicers as loan maturities come due. Many landlords will surely want to keep WeWork as a tenant in today’s environment, but this lease restructuring could make it harder for WeWork to lease space in the future.