WeWork’s New York City landlords owe combined total of $2.6 billion in CMBS (Commercial Mortgage-Backed Securities) debt, according to an analysis published by The Real Deal.
The news comes in the wake of WeWork’s announcement of significant losses, prompting the company to renegotiate “nearly all” of its leases moving forward.
Landlords that heavily invested in WeWork, such as Winter Properties and Walter & Samuels, are now facing dramatic repercussions. According to The Real Deal, WeWork leased 93% of Walter & Samuels’ 315 West 36th Street building, but the coworking company stopped paying rent this year. This led to the landlord defaulting on the building’s $77 million debt. It’s reported that the lender has filed for foreclosure, and the building’s valuation has since been cut by two-thirds.
With over 70 leases spread across NYC, the potential exit of WeWork from many NYC buildings could add further financial strain on landlords already facing high vacancies and declining property valuations.
Following WeWork’s 1-for-40 reverse stock split to maintain a good listing on the New York Stock Exchange, the company recently named its interim chief executive David Tolley as its permanent CEO. Tolley is now tasked with leading the company’s revival efforts, which includes the massive lease negotiations in major metro areas like NYC.
For the workforce, this could show how traditional office spaces are utilized in a major market dealing with higher-than-normal vacancy rates. If WeWork continues to exit leases or renegotiate for lower rents, landlords and tenants might be forced seek out alternative office arrangements.
