NEW YORK (AP) — WeWork said it will attempt to renegotiate nearly all of its leases and may exit some properties just weeks after the workspace-sharing company sounded the alarm over its ability to remain in business.
In a Wednesday letter, WeWork Interim CEO David Tolley said the New York City company must reduce its operating costs — notably its current lease liabilities, which “remain too high and are dramatically out of step with current market conditions."
Commercial office space is under significant pressure with so many Americans spending at least part of the week working from home, and the company may have some room to negotiate.
WeWork's lease liabilities accounted for more than two-thirds of its operating expenses for the second quarter of this year, Tolley said. As of June 30, WeWork had a total of 777 locations in 39 countries.
“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,” Tolley wrote— adding that the company expects to exit “unfit and underperforming locations” as part of these negotiations.
Last month, WeWork warned there was “substantial doubt” about the New York-based company’s “ability to continue as a going concern” — which is accounting-speak for having the resources needed to operate and stay in business. WeWork pointed to rising member churn and other financial losses. The company said that its ability to stay in operation is contingent upon improving its liquidity and profitability over the next 12 months.
