Troubled co-working operator WeWork has structured some leases under LLCs that are not guaranteed by its holding company, which will leave those landlords holding the bag for the free rent and TIs they provided to help get the spaces up and running. The landlords will also be left with vacant spaces, which may be backfilled with former WeWork tenants or another co-working operator at a lower price. The We Company, through its partnership, holds all the WeWork assets and is subject to all the liabilities of WeWork Companies Inc.-the old holding company that guaranteed many WeWork leases, which should put SoftBank’s credit up the chain from WeWork Companies. Of office space, respectively, according to data from CBRE Group Inc. and Savills Plc. WeWork established special LLC entities, which structured many leases so it could simply walk away from the properties by collapsing the entity and stiffing landlords, many of which provided WeWork incentives, including free rent and significant tenant improvement allowances based on long-term leases. “The only leases in trouble are those entered under special-purpose entities, which were not guaranteed by WeWork Companies Inc.,” he says, noting that WeWork controlled a lot of office space in certain markets, so there is concern by landlords in these markets, whose only consolation may be they’re not alone in this situation. Trepp LLC estimates that WeWork serves as a major tenant in office buildings backed by more than $3.8 billion in CMBS loans. As a result, Kirsh suggests that other co-working companies that have not overextended themselves, as well as current WeWork tenants, may be able to pick up real estate vacated by WeWork at a good price.
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