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London deals for WeWork buildings falter amid IPO market fallout

London

DEALS for two major London buildings leased mostly to WeWork are on the ropes.

Saudi-based Sidra Capital has pulled out of a £90 million (S$155 million) deal to buy 70 Wilson Street near London's financial district as the flexible-office giant's planned initial public offering got an increasingly rocky reception from investors.

This is according to people familiar with the matter, who asked not to be identified discussing private negotiations.

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Separately, talks have stalled on the sale of WeWork Waterloo, which the company describes as the largest co-working facility in the world. Singapore-based Bright Ruby Resources had agreed last month to buy it and an adjoining property leased to Royal Dutch Shell for about £850 million. It's not clear what impact WeWork's roller-coaster IPO has had on Bright Ruby's appetite for the deal, the people said.

We Co, which owns WeWork, pushed back its IPO this week to buy time to overcome concerns about its governance, slashed valuation and business prospects. The decision sent the company's bonds plunging and added a sour note to a medley of high-profile, but frequently disappointing, IPOs this year.

The delay also comes at a critical time for major backer SoftBank Group Corp, which is trying to raise money for a successor to its Vision Fund. SoftBank's biggest investors, including Saudi Arabia's Public Investment Fund, are reconsidering how much to commit to the new vehicle as the Japanese conglomerate's bet on WeWork sours.

WeWork has lease obligations of US$47 billion and continues to burn cash to fund its rapid expansion, putting pressure on the company to raise new capital. But the company's model of signing long leases, then renting out short-term space to members, as well as its complex relationship with co-founder Adam Neumann, have polarised investors assessing the planned offering.

WeWork Waterloo, originally known as Two Southbank Place, is fully leased to WeWork and boasts a skate ramp, retro arcade games and a library in its cavernous lobby. Negotiations on a sale are ongoing and there is no certainty about their outcome, one of the sources said.

Sidra Capital was in talks to buy 70 Wilson Street in London's Shoreditch district from a venture led by Columbia Threadneedle Investments. BLOOMBERG