WeWork has been attempting to renegotiate leases and skip rent payments in an effort to alleviate financial burden, which is causing the price of bonds backed by payments from the firm to crash.
As several WeWork members have also requested rent relief or the cancelation of their contracts, the commercial mortgage-backed securities (CMBS) that rely on rent from WeWork have been hurting. For instance, a $240 million loan backed by a San Francisco WeWork location is trading at 73 cents on the dollar, falling 100 cents from March.
Nearly $5.5 billion worth of CMBS deals include properties that count WeWork as a tenant, including the firm’s flagship locations in New York and San Francisco.
The risk of WeWork’s short-term lease model has been the subject of scrutiny for a while now, with many experts claiming it would be hard for the company to weather an economic downturn such as this. With many WeWork tenants complaining about the company’s handling of rent relief and canceling leases, it is unlikely they will come back.
“I can’t support a business that turns its back on entrepreneurs and small businesses,” said Michelle Orman, a WeWork tenant in Brooklyn.