This article is from the Australian Property Journal archive
JAPANESE tech giant SoftBank has fast tracked a US$1.5 billion (A$2.17 billion approx) payment to WeWork which is reportedly weeks away from running out of money.
The early payment comes after Softbank agreed to a US$8 billion rescue package last month, and follows reports that the company was running out of cash due to its rental obligations including at least £863 million in new leases in the UK alone in the past 12 months.
As part of the restructure, the co-working company has already began laying off 25% of the workforce at subsidiary Meetup, an app it acquired two years ago for US$200 million.
Furthermore, SoftBank is reportedly looking to layoff 4,000 people or 30% of WeWork’s workforce.
Early last year, documents obtained by the Financial Times and Bloomberg showed WeWork occupied more than 1.3 million sqm of office space globally, and owed $18 billion in rent – although WeWork has the option of closing the offices if it cannot meet its rental obligations. Some US$47 billion in future rent payments is due, and WeWork is already planning to shed 2,000 employees from its 12,000-strong workforce.
The latest revelations have raised concerns amongst local commercial real estate agents.
Industry sources told Australian Property Journal that if WeWork wound back and closed some offices locally, it will have an impact on the office market, particularly in Sydney where the company has a big footprint.
“Over the last three years landlords have been jostling, throwing everything but the kitchen sink to bring WeWork to their buildings, outlaying capital on upgrades etc.
“WeWork brought a cool factor to an office building, helping landlords attract other tenants. We don’t know the terms each landlord agreed to, but if WeWork has the option of walking away if it cannot its rental obligations, what will happen to those buildings?,” the agents said.
The co-working company is about to open its 15th co-working office in Australia. WeWork’s expansion saw it sign a 12-year deal for 11,000 sqm at 320 Pitt St in the Sydney CBD on a 12-year deal.
Last year, its 10-year lease commitment spurred Sydney developer Philip George to undertake a $50 million upgrade of the 7,300 sqm heritage-listed 66 King St office building.
WeWork’s other Sydney locations include 4,100 sqm of Sumner Capital’s 50 Miller St, and the entirety of the 10,000 sqm office component of the timber Daramu House building in Barangaroo South.
Its first Perth location of 7,900 sqm will open in September. It recently signed another 12-year lease over 4,600 sqm at 260 Queen St in Brisbane from global real estate firm Hines.
