WeWork has kicked off the process of renegotiating “almost all of its leases” globally, according to its chief executive officer David Tolley.
In a letter, Tolley said the flexible workspace company intended to remain in the “majority of our buildings and markets” and had commenced “global engagement” to renegotiate leases.
“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,” said Tolley. “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.”
Tolley said the company’s current lease liabilities accounted for more than two-thirds of WeWork’s total operating expenses in the second quarter and “still remain too high and are dramatically out of step with current market conditions”.
He added: “We are taking immediate action to permanently fix our inflexible and high-cost lease portfolio to achieve the sustainable operating model that we need to serve our members for many years to come. By addressing this reality now, we will be able to continue investing in and innovating our business on behalf of our members.
“Let me finish by making one thing clear: WeWork is here to stay. We will remain a global flex space leader and trusted real estate partner to our members. As companies of all sizes seek flexibility in where and how their employees come to work, this initiative best enables us to continue to invest in our products, services, and member experiences to meet evolving workplace needs far into the future.”
Last month, Fitch Ratings downgraded WeWork’s credit rating to ‘CC’ from ‘CCC-’ following “worse than expected Q2 financial results, a public warning that the company’s ability to continue as a going concern over the next 12 months will be contingent on improving its liquidity, resignations of key executives and board members, and the replacement of board members with restructuring experts”.
