WeWork Property Investors teamed up with Nuveen to purchase Devonshire Square in London in the spring of 2018. The 637,000 square foot building was intended to showcase a new model for the company, but the coworking firm and institutional investors are now being forced to restructure the lease.
During this time, WeWork took up around 20,000 square feet on the campus. The partnership was intended to be the first of many deals where WeWork teamed up with institutions to purchase buildings.
The coworking firm agreed to a revenue-sharing agreement with its partners and would be paid a 10% management fee based on gross revenue, with the remaining revenue split among landlords and WeWork as a tenant.
However, everything changed once the pandemic hit and the performance of the firm came to a screeching halt. Demand shriveled up as millions of employees migrated to remote working positions. In any other occasion, WeWork would have eagerly searched for a replacement for its spaces that had been abandoned.
Now, WeWork is walking away from 15,000 square feet of the space it occupied at Devonshire Square.
“We believe this is largely due to increased vacancy on the estate and reduced income levels from WeWork,” according to S&P. “Given the current uncertainties in the market and the deteriorating occupancy levels of the estate as a whole, we have revised our long-term operating and cash flow assumptions.”