WeWork has filed for Chapter 11 bankruptcy protection, marking a stunning fall for the office-sharing company once seen as a Wall Street darling that promised to upend the way people went to work around the world.
In a late Monday announcement, WeWork said it entered into a restructuring support agreement with the majority of its stakeholders to “drastically reduce” the company’s debt while further evaluating WeWork’s commercial office lease portfolio.
This agreement is expected to erase about $3 billion US of WeWork’s debt, CEO David Tolley told The Associated Press.
WeWork is also requesting the ability to reject the leases for some of its locations, which the company says are largely non-operational, as part of the filing. More than 70 leases will be rejected right at the beginning of the process, according to Monday’s filing. WeWork says all affected members have received advanced notice.
How many WeWork locations will remain operational going forward is not known. Tolley said Tuesday he expects WeWork to exit additional locations as talks continue with landlords, but hopes to leave as few as possible.
Lease liabilities, which currently account for about two-thirds of WeWork’s operating costs, “continues to be the company’s primary challenge,” Tolley said, pointing to the need of establishing “a more efficient footprint.”
Filings show the company is looking to get out of two leases in Toronto, two in Vancouver, and one in Burnaby, B.C., as part of its efforts to improve its balance sheet.
The five Canadian locations make up a small portion of the 69 total leases it sought permission to leave early, with most in New York.
The spectre of bankruptcy has hovered over WeWork for some time. In August, the New York company sounded the alarm over its ability to remain in business. But cracks had begun to emerge several years ago, not long after the company was valued as high as $47 billion US.
Rocked by rising interest rates, remote work
WeWork is paying the price for aggressive expansion in its early years. The company went public in October 2021 after its first attempt to do so two years earlier collapsed spectacularly. The debacle led to the ouster of founder and CEO Adam Neumann, whose erratic behaviour and exorbitant spending spooked early investors.
Japan’s SoftBank stepped in to keep WeWork afloat, acquiring majority control over the company. WeWork shareholders are largely wiped out though SoftBank, which owns nearly 80 per cent of the equity distributed in the company and is likely still in negotiations after losing billions of dollars.
A man enters a WeWork co-working space in New York City on Jan. 8, 2019. (Brendan McDermid/Reuters)
In a prepared statement Monday ahead of WeWork’s official announcement, Neumann called the bankruptcy filing disappointing and said it’s been challenging for him “to watch from the sidelines since 2019 as WeWork has failed to take advantage of a product that is more relevant today than ever before.”
He believes a strong reorganization could allow WeWork to emerge successfully.
Despite efforts to turn the company around since Neumann’s departure — including significant cuts to operating costs and rising revenue — WeWork has struggled in a commercial real estate market rocked by the rising cost of borrowing money, as well as a shifting dynamic for millions of workers now checking into their offices remotely.
In September, when WeWork announced plans to renegotiate nearly all of its leases, Tolley noted the company’s lease liabilities accounted for more than two-thirds of its operating expenses for the second quarter of this year — remaining “too high” and “dramatically out of step with current market conditions.”
At the time, WeWork also said it could exit more underperforming locations. As of June 30, the latest date with property numbers disclosed in securities filings, WeWork had 777 locations in 39 countries.
Beyond real estate costs, WeWork has pointed to increased member churn and other financial losses. In August, the company said its ability to stay in operation was contingent upon improving its liquidity and profitability overall in the next year.
Locations in U.S., Canada impacted
WeWork’s bankruptcy filing arrives at a time when leasing demand for office space is weak overall. The COVID-19 pandemic notably led to rising vacancies in office space as working from home became increasingly popular — and major U.S. markets, from New York to San Francisco, are still struggling to recover.
In the U.S., experts noted that WeWork’s 18 million square feet is a small fraction of total office inventory in the country but, on a building-by-building level, landlords with exposure to WeWork could take significant hits if their leases are terminated.
The millennial lifestyle subsidy: tech companies like Uber, WeWork and DoorDash lose millions of dollars per year | The Gig is Up
Featured VideoDerek Thompson, staff writer at The Atlantic, wonders how long these companies will be able to charge less than the service costs in order to subsidize the habits of urban, upper middle class millennials.
While the full impact of this week’s bankruptcy filing on WeWork’s real estate footprint is still uncertain, the company sounded an optimistic note Monday night.
“Our spaces are open and there will be no change to the way we operate,” a WeWork spokesperson said in a statement to The Associated Press. “We plan to stay in the vast majority of markets as we move into the future and remain committed to delivering an exceptional experience and innovative flexible workspace solutions for our members.”
WeWork filed for Chapter 11 bankruptcy protection in U.S. District Court in New Jersey, and the company plans to have the bankruptcy formally recognized in Canada, according to Monday’s announcement.
WeWork locations outside of the U.S. and Canada will not be affected by the proceedings, the company said, as well as franchisees worldwide.
TORONTO – Roots Corp. may have built its brand on all things comfy and cosy, but its CEO says activewear is now “really becoming a core part” of the brand.
The category, which at Roots spans leggings, tracksuits, sports bras and bike shorts, has seen such sustained double-digit growth that Meghan Roach plans to make it a key part of the business’ future.
“It’s an area … you will see us continue to expand upon,” she told analysts on a Friday call.
The Toronto-based retailer’s push into activewear has taken shape over many years and included several turns as the official designer and supplier of Team Canada’s Olympic uniform.
But consumers have had plenty of choice when it comes to workout gear and other apparel suited to their sporting needs. On top of the slew of athletic brands like Nike and Adidas, shoppers have also gravitated toward Lululemon Athletica Inc., Alo and Vuori, ramping up competition in the activewear category.
Roach feels Roots’ toehold in the category stems from the fit, feel and following its merchandise has cultivated.
“Our product really resonates with (shoppers) because you can wear it through multiple different use cases and occasions,” she said.
“We’ve been seeing customers come back again and again for some of these core products in our activewear collection.”
Her remarks came the same day as Roots revealed it lost $5.2 million in its latest quarter compared with a loss of $5.3 million in the same quarter last year.
The company said the second-quarter loss amounted to 13 cents per diluted share for the quarter ended Aug. 3, the same as a year earlier.
In presenting the results, Roach reminded analysts that the first half of the year is usually “seasonally small,” representing just 30 per cent of the company’s annual sales.
Sales for the second quarter totalled $47.7 million, down from $49.4 million in the same quarter last year.
The move lower came as direct-to-consumer sales amounted to $36.4 million, down from $37.1 million a year earlier, as comparable sales edged down 0.2 per cent.
The numbers reflect the fact that Roots continued to grapple with inventory challenges in the company’s Cooper fleece line that first cropped up in its previous quarter.
Roots recently began to use artificial intelligence to assist with daily inventory replenishments and said more tools helping with allocation will go live in the next quarter.
Beyond that time period, the company intends to keep exploring AI and renovate more of its stores.
It will also re-evaluate its design ranks.
Roots announced Friday that chief product officer Karuna Scheinfeld has stepped down.
Rather than fill the role, the company plans to hire senior level design talent with international experience in the outdoor and activewear sectors who will take on tasks previously done by the chief product officer.
This report by The Canadian Press was first published Sept. 13, 2024.
VANCOUVER – Mediated talks between the union representing HandyDART workers in Metro Vancouver and its employer, Transdev, are set to resume today as a strike that has stopped most services drags into a second week.
No timeline has been set for the length of the negotiations, but Joe McCann, president of the Amalgamated Transit Union Local 1724, says they are willing to stay there as long as it takes, even if talks drag on all night.
About 600 employees of the door-to-door transit service for people unable to navigate the conventional transit system have been on strike since last Tuesday, pausing service for all but essential medical trips.
Hundreds of drivers rallied outside TransLink’s head office earlier this week, calling for the transportation provider to intervene in the dispute with Transdev, which was contracted to oversee HandyDART service.
Transdev said earlier this week that it will provide a reply to the union’s latest proposal on Thursday.
A statement from the company said it “strongly believes” that their employees deserve fair wages, and that a fair contract “must balance the needs of their employees, clients and taxpayers.”
This report by The Canadian Press was first published Sept. 12, 2024.
MONTREAL – Travel company Transat AT Inc. reported a loss in its latest quarter compared with a profit a year earlier as its revenue edged lower.
The parent company of Air Transat says it lost $39.9 million or $1.03 per diluted share in its quarter ended July 31.
The result compared with a profit of $57.3 million or $1.49 per diluted share a year earlier.
Revenue in what was the company’s third quarter totalled $736.2 million, down from $746.3 million in the same quarter last year.
On an adjusted basis, Transat says it lost $1.10 per share in its latest quarter compared with an adjusted profit of $1.10 per share a year earlier.
Transat chief executive Annick Guérard says demand for leisure travel remains healthy, as evidenced by higher traffic, but consumers are increasingly price conscious given the current economic uncertainty.
This report by The Canadian Press was first published Sept. 12, 2024.
