WeWork, in Ch. 11, Hangs onto 71 Fifth Ave Office Space with Reduced Rent Deal
WeWork struck a deal with Madison Capital, the owner of the 11-story building on 71 Fifth Avenue, that would reduce rent for reduced space.
WeWork, the office space retailer that filed for bankruptcy in November 2023, has spent the last three months scrambling to negotiate more favorable leases on their remaining sites after abandoning more than 40 of the less profitable ones across New York City. For a company with a paltry $45 million cash on hand (down from $47 billion in 2019), successful renegotiations across the board is all but a prerequisite to stay afloat.
On Monday, WeWork struck a deal with Madison Capital to save its site on 71 Fifth Avenue near Union Square, conceding some space in return for reduced rent. A separate deal between WeWork and landlords Boston Properties and Rudin Development will allow WeWork to continue operating in Dock 72 in Navy Yard, Brooklyn, with reduced rent and a shorter lease term. Both agreements await approval from bankruptcy court.
The 11-floor building on 71 Fifth Avenue, containing 173,000 square feet of office and retail space, was built in 1907 and acquired by Madison in 2016 for $85 million. In June 2018, WeWork signed a lease to use 45,000 square feet across four floors, which later expanded to 73,000 square feet. WeWork did not confirm how much of the space will be trimmed off in the renegotiated deal.
“Union Square remains a sought-after location for growing companies, and we’ve received positive feedback from members about the building throughout our tenancy,” said WeWork real estate management director Melissa Visoky in a statement. “New York City remains one of WeWork’s key markets.”
These developments are the latest in a string of narrow escapes for the company. In December, WeWork avoided default by reaching a bankruptcy agreement with 18 landlords who had been demanding the repayment of debts. One week later, WeWork retained 300,000 square feet of office space on 1440 Broadway on a shortened term and with reduced rent. A WeWork spokesperson told the outlet CoStar that the company realized $1.5 billion total savings in the course of their lease renegotiation efforts so far.
But WeWork is still very much in a struggle for survival, and using an array of tactics to maximize its chances. The company failed to pay $33 million in January rent obligations to landlords across six buildings, which lawyers representing the creditors committee claimed in a court filing was “an effort to strong-harm negotiations with certain landlords.” One of those landlords, developer RXR Realty, has been leasing out 75 Rockefeller Plaza to WeWork; on February 1, WeWork decided to reject the unexpired lease there along with those at eight other unprofitable locations.
When it comes to landlords they still want to do business with, WeWork has been more openhanded. According to court documents, they agreed to pay Madison Capital $600,000 in unpaid rent. For the moment, that appears to be enough for 71 Fifth Avenue.