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As WeWork moves onward with its dramatic restructuring efforts, the company is being accused by some of its landlords for withholding millions in rent payments.
According to a report published by the Commercial Observer, WeWork did not pay $33 million in rent to the owners of six buildings across the U.S. — which was due on January 1.
In a recent court filing, as first reported by BisNow, the withholding of rent payments is being cited as a negotiation tactic used by WeWork to put pressure on landlords during lease negotiations — potentially violating U.S. bankruptcy code, which doesn’t allow companies to ignore rent payments.
According to the court filing, “The Committee understands that notwithstanding nonpayment of January rent, the Debtors have not rejected any of the applicable leases, nor have the Debtors returned possession of any of the applicable locations to their property owners. The Debtors instead appear to be pursuing a strategy where unilaterally, in an effort to strong-arm negotiations with certain landlords, they can receive all the benefits of their leases, including receiving fees from their members, without any payment on account of the administrative rent claims. It is improper for the Debtors to use the bankruptcy process to have it both ways.”
A WeWork spokesperson states that the company’s actions are “temporary” and aimed at expediting negotiations to reach “mutually beneficial agreements,” according to Commercial Observer.
So far, the company has amended 40 leases and is in talks with landlords at hundreds of locations. WeWork’s financial struggles became public with its Chapter 11 Bankruptcy filing in New Jersey last November, revealing a debt of approximately $18.7 billion. This was followed by plans to reject 67 leases at underperforming locations — with an additional 13 added later, all of which received court approval. By rejecting leases and amending others, it’s estimated that WeWork has slashed at least $3.7 billion in lease expenses so far.
