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WeWork, the commercial real estate firm once thought to represent the future of the industry, officially filed for bankruptcy on Monday after years of struggling to live up to its early hype.
The company filed for Chapter 11 bankruptcy in New Jersey as part of a “comprehensive reorganization” of the office space leasing company, WeWork announced in a filing.
“Now is the time for us to pull the future forward by aggressively addressing our legacy leases and dramatically improving our balance sheet,” WeWork CEO David Tolley said in a statement. “We defined a new category of working, and these steps will enable us to remain the global leader in flexible work.”
The company, which reported debts of more than $18 billion in its filing, said creditors holding 92 percent of its secured debt had agreed on a restructuring plan that would include reducing its portfolio of office leases. It also requested the opportunity to get out of the current leases on some underperforming locations.
“As part of today’s filing, WeWork is requesting the ability to reject the leases of certain locations, which are largely nonoperational, and all affected members have received advanced notice,” the company said in a statement.
WeWork’s bankruptcy is a blow to commercial landlords, who have leased large portions of their available inventory to the company. The conditions harming commercial landlords — a lack of demand for brick-and-mortar office space — are the same ones that led, in part, to WeWork’s demise as it expanded at a pace that did not meet the lowered demand for offices after the coronavirus pandemic.
WeWork’s struggles have been well-documented for the past several years, but intensified in recent months, beginning in August when the company admitted there was “substantial doubt” it could survive much longer. In September, it announced it would attempt to renegotiate all of its leases and exit certain underperforming locations.
The bad news continued when it missed interest payments owed to bondholders, received multiple credit downgradings from Fitch and when CEO Sandeep Mathrani, who was seen as one of the company’s last hopes, suddenly left.
A bankruptcy filing would have once been unthinkable for WeWork, which at its peak in 2019 was valued at $47 billion, making it the most valuable United States startup ever. Four years later, its value has plummeted to just $45 million and its stock price is worth 98 percent less than it was at the beginning of 2023.
The startup, founded in 2010 by Adam Neumann and Miguel McKelvey, once sought to “elevate the world’s consciousness” and popularized the idea of coworking spaces where customers could rent a single desk and enjoy access to coffee, beer and kombucha on tap in WeWork’s modern, open-plan office spaces.
WeWork attracted investment from some of the biggest names on Wall Street, most notably from Japanese bank SoftBank, which invested more than $10 billion in the startup and bailed it out in October 2019 when Neumann’s erratic management style, and WeWork’s enormous losses, were exposed, tanking a planned IPO and leaving the company scrambling for cash.
As the firm poured money into an aggressive expansion, opening offices in San Francisco, Los Angeles, Seattle, Tel Aviv, London and other major cities, their returns never matched their investments, especially once demand for office space began to drop off.
WeWork will close 69 locations immediately. Many will remain open, however, as the company renegotiates its leases.
“WeWork has a strong foundation, a dynamic business and a bright future,” Tolley said on Monday.
