Shares in WeWork plunged to an all-time low of 13 US cents (17.5 cents) on Aug 9 (US time) after the co-working company warned that it was at risk of going bankrupt.
According to several media outlets including Bloomberg, WeWork said that there is “substantial doubt” that it may be able to sustain its business due to its financial losses and cancelled memberships to its office spaces.
For the 2QFY2023 ended June 30, WeWork reported a net loss of US$397 million, bringing its total net loss for the 1HFY2023 to US$696 million.
As at June 30, WeWork’s consolidated physical occupancy stood at 72%.
In a Bloomberg article referencing WeWork’s Aug 8 statement, the company said that it will work on lowering its rental costs, negotiating “more favourable leases”, as well as raising revenue and capital.
Bad news for REITs and SGX-listed companies
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The news of WeWork’s potential bankruptcy may come as bad news to some of the Singapore-listed REITs and property groups.
According to a table posted by the Washington Post, WeWork has offices in several of CapitaLand Integrated Commercial Trust’s (CICT) C38U buildings including an entire building at 21 Collyer Quay (the former HSBC building).
WeWork is also a tenant at the REIT’s property at Funan. Other REITs such as Suntec REIT T82U and Mapletree Pan Asia Commercial Trust (MPACT) N2IU are also exposed with WeWork offices present at Suntec City’s Tower 5 and Mapletree Anson at 60 Anson Road.
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Property group, City Developments Limited (CDL) C09 , also has a WeWork office at City House and St. Katharine Docks in London, while United Engineers, which is a part of Yanlord Land Group Z25 , has a WeWork office at UE Square.
“As the largest landlord of commercial space in Singapore’s central business district (CBD), CICT maintains close engagements with an extensive network of prospects and existing tenants to understand their business space requirements and remain attuned to prevailing market trends. Singapore remains a vibrant hub for a diverse range of business sectors, continually attracting leasing interest from various industries," says a spokesperson from the REIT.
"In cases where a tenant defaults on its lease agreement, CICT will follow established procedures to regain possession of the space including retention of the security deposit. Depending on the circumstances, CICT may explore options such as reletting the space or collaborating with other operators to continue operations smoothly," adds the REIT's spokesperson.
Kwek Eik Sheng, group chief operating officer (COO) of CDL notes that the news from WeWork “has to do with its US operations” with the country’s office sector facing a “challenging time” from the current work-from-home (WFH) trend.
Meanwhile, he says that the group’s WeWork offices in City House and St. Katharine Docks have “strong” occupancies and that the local markets are “pretty good”.
He adds: “WeWork has been prompt in paying its rentals so far, but of course with the news, we’ll continue to monitor them closely.”
Sherman Kwek, CDL’s group CEO said that the group will monitor the situation closely but is comfortable with its exposure at both City House and St Katharine Docks for the time being. WeWork is a substantial tenant at City House with its rental income making up about 2% to 3% of its total gross rental income (GRI) in its Singapore office portfolio. Its rental income at St Katharine Docks makes up about 9% of the total revenue of CDL's UK commercial portfolio.
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As for Suntec REIT, WeWork accounts for about 1.9% of Suntec REIT's office GRI as at Dec 31, 2022. "We understand that WeWork’s offices at Suntec have very high utilisation and are performing well. We will continue to watch closely their future developments," says the REIT's spokesperson.
A spokesperson from MPACT said that WeWork at Mapletree Anson does not rank among the REIT's top ten tenants. To be sure, MPACT renewed and relet over 2.4 million square feet of lettable area in its last financial year. "In 1QFY2023/2024, we continued to make good leasing progress by renewing and reletting close to 690,000 square feet of lettable area,” adds the spokesperson.
The Edge Singapore has also reached out to Yanlord Land for comment.
