WeWork files for bankruptcy due to glut of empty offices

WeWork, the real estate company that provided startups and individuals with a tight shelter to pursue their entrepreneurial dreams, filed for bankruptcy protection in the United States on Monday after years of struggling to find its footing.

The company has filed for Chapter 11 bankruptcy protection in New Jersey as part of what it described as a “comprehensive reorganization” of its operations.

The company said creditors holding 92 percent of secured debt had agreed to a restructuring plan that would include a reduction in its portfolio of office leases.

“As part of today’s filing, WeWork is requesting the ability to decline the leases of certain locations, which are largely non-operational, and all affected members have received advance notice,” the company said in a statement.

In September, WeWork said it would begin renegotiating all of its leases and vacating certain locations. On his websiteit includes 660 locations in 37 countries, up from the 764 locations in 38 countries it had about two years earlier. The company leased nearly 20 million square feet of office space in June, more than any other company in the United States. Monday’s actions will not affect WeWork franchises outside the United States and Canada, the company said.

WeWork’s demise is a blow to landlords who have leased much of their space to the company. Many landlords have accepted lower rents from WeWork in recent years, and some are struggling to pay the debts associated with their buildings. Since the pandemic, fewer workers have been going to the office, creating one of the worst commercial real estate crises in decades.

WeWork has been sending distress signals for months. In March, it reached a deal with a major investor, Japanese tech conglomerate SoftBank, and others to significantly reduce its debt and secure new financing. Still, it said in August there was “substantial doubt” about its ability to stay in business. And last month, WeWork said it would miss interest payments totaling $95 million — a move intended to help negotiate with its lenders in an effort to cut costs with its landlords. After a 30-day grace period, the company reached an agreement with creditors on a seven-day grace period, which expires on Tuesday.

WeWork shares have fallen more than 98 percent since the start of the year, and the company was valued at less than $45 million on Friday. At its peak, in January 2019, the company was worth about $47 billion.

The financial challenges are the budget cuts of a start-up that once wanted to ‘raise the consciousness of the world’. WeWork was founded in 2010 by Adam Neumann and Miguel McKelvey and opened its first location in Lower Manhattan in 2011. It focused on leasing office space instead of buying it, and distributing it to clients, including freelancers, small businesses and larger corporations.

The company expanded at a rapid pace in the 2010s, opening locations in San Francisco, Los Angeles, Seattle, Tel Aviv and London.

The spending was largely financed by SoftBank, which reckoned that spending freely on startups would allow the companies to grow faster than their rivals and gain dominance in their industries. SoftBank invested more than $10 billion in WeWork.

The company became synonymous with co-working, a trend embraced by millennials doing freelance work or immersing themselves in startup culture. Employees typed on their laptops in open-floor workspaces or ducked into glass conference rooms to hold meetings. They were places where people could chat and exchange ideas while enjoying the cold brew and kombucha on tap.

In August 2019, WeWork attempted to go public. It was the largest private tenant in Manhattan and one of the most valuable startups at a time when Silicon Valley investors were pouring fanciful sums into young companies.

But as Wall Street learned more about the company’s governance issues and massive losses, the IPO was suspended the following month. Mr. Neumann stepped down as CEO shortly afterwards. Because it didn’t go public, the company was running out of money and needed a bailout. In October 2019, SoftBank provided a lifeline that valued the company at $7 billion.

Sandeep Mathrani, an executive who had a career working in real estate companies, became CEO of WeWork in February 2020. Then the pandemic hit, causing many professionals to work from home, compounding WeWork’s problems.

Under Mr. Mathrani, WeWork went public in October 2021 through a merger with a special purpose acquisition company. It also started closing locations and renegotiating leases with landlords. Mr. Mathrani this spring oversaw a restructuring that reduced the company’s debt. In May, shortly after the restructuring, Mr. Mathrani left the company after reportedly growing frustrated with SoftBank.

Last month, WeWork announced a new CEO, David Tolley, who had previously filled the role on an interim basis. “WeWork has a strong foundation, a dynamic company and a bright future,” Mr. Tolley said in a statement on Monday.