WeWork asks landlords to slash rent bill by up to 30%

London

WEWORK is in discussions with its biggest landlords globally as the co-working giant aims to slash as much as 30 per cent from its copious load of rent liabilities.

WeWork chief executive officer Sandeep Mathrani has been contacting the largest owners of buildings in which the New York-based company is a tenant, and pitching solutions, including revenue-sharing agreements.

This is according to people with knowledge of the talks, who asked not to be identified as the talks are private.

The SoftBank Group-backed company is selling landlords on the chance to share in its future upside if they agree to convert existing leases to deals that would hand them more of the revenue generated by each property. Early indications are that landlords are reluctant.

The company has previously said it is pursuing migrating to asset-light strategies, such as joint ventures and management agreements.

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As of June 30 last year, WeWork was on the hook for at least US$47 billion in lease liabilities accrued during its years of venture-backed breakneck expansion, going by information in public filings.

Now, it faces a potential cash crunch as the outbreak of Covid-19 puts pressure on the company to close some locations. WeWork is also offering some tenants discounts to minimise cancellations.

The majority of WeWork's leases are held by special-purpose vehicles that would enable the company to renege on paying rents at individual locations without risk to the parent company.

So far, the company has avoided such drastic action, as it could hinder its ability to lease new space.

As of June 30 last year, WeWork had provided credit support in respect of leases in the form of corporate guarantees of US$4.5 billion. The company had about US$4.4 billion in cash as of Dec 31. BLOOMBERG

READ MORE: SoftBank Group said it has terminated a US$3b tender offer for additional WeWork shares