WeWork

WeWork initially hired Hilco Real Estate (HRE) to initiate a comprehensive global engagement process with its landlords. This strategic move aimed to align lease terms with current real estate market conditions and the company’s business planning (providing greater potential of profitability where revenues allowed) and mitigate unprofitable locations.

The engagement included approximately more than 500 leases across 24 countries around the world. To coordinate this effort, HRE and WeWork completed in depth site level and market diligence in North America, across Europe, in the Middle East, Southeast Asia and Australia. Of critical importance was to not only understand the operational objectives of the client, but also learn how the individual office markets and sub-markets were performing, where landlord sensitivities would exist and the applicable law in each unique jurisdiction.

Shortly after landlord engagement began, WeWork’s decision-makers filed for Chapter 11 bankruptcy protection in the U.S. and Canada and shortly thereafter initiated a process of Conciliation in France, but any such formal restructuring was withheld in all other countries, in an effort to restructure leasehold commitments in those regions consensually with landlords.

Hilco Real Estate collaborated with WeWork’s internal teams and a large group of debtor’s advisors to reposition WeWork’s real estate portfolio both internationally and domestically. The goal was to better match the supply of real estate with the demand from WeWork members, renegotiating sizes of spaces to meet member demand, securing rents that were more in line with market rates, affixing committed term lengths in-line with certain estimated profit levels, and terminating international non-performing locations, which were outside the Chapter 11 process.

Additionally, as part of landlord negotiations and as new terms were discussed, HRE coordinated with WeWork’s sales teams to understand sub-market dynamics and member transferability. Further, HRE repeatedly coordinated with landlords’ lenders as the restructured obligations often required their approvals. In some cases, lenders took spaces back from landlords and HRE negotiated directly with receivers and special servicers to effectuate WeWork’s desired outcome as it was vital that the renegotiated lease terms for the new portfolio of go-forward locations were perfectly aligned with the forward-looking, post-reorganized WeWork business plan; particularly concerning operations, marketing, and management.

HRE, in conjunction with the WeWork teams, was tasked with crafting a strategy to optimize rent, size, term and overall structure of approximately 500 leases across 24 countries.

• Negotiations were conducted with landlords and lenders in the US, Canada, Australia, the UK (in collaboration with Hilco Valuation Services UK), various countries in Europe, throughout Southeast Asia, and in Mexico (in collaboration with the Hilco Mexico team).
• The pre-bankruptcy portfolio included nearly 35 million square feet of leased space, with $2 billion in annual gross rent obligations and over $20 billion in total future liabilities.
• The reorganized portfolio resulted in modified landlord/tenant agreements on the majority of the 500 sites, including but not limited to restructuring go-forward leases in the North American portfolio as well as terminating nearly 50 international leases.
• In total, HRE’s efforts resulted in nearly $10B in lease mitigation savings and enhanced annual profitability of approximately $800M.
• HRE also coordinated with the Hilco Global Mexico team for WeWork’s joint venture locations in that region, which resulted in nearly all target restructured leases being successfully renegotiated.

HRE can be a critical partner/advisor in mitigating real estate liabilities, working with a company’s ownership/management team to determine the optimal strategy for lease repositioning / restructuring and disposition, and other alternatives.

Successfully positioning the real estate holdings within a company’s portfolio, to minimize risk and sustain ongoing business operations, is a material component of establishing and maintaining a strong financial foundation for long-term success. At HRE they advise and execute strategies to assist clients seeking to optimize their real estate assets. They help clients traverse complex transactions and transitions, coordinating with internal and external constituents, to navigate ever-challenging landlord/tenant and market/investment environments.

They have secured billions in lease savings for hundreds of clients over 20+ years. They are deeply experienced in the legal, financial, and real estate components of this process, all of which are vital to a successful outcome. HRE can help identify the most viable options and direction for the Company and its real estate portfolio.