Nowhere is office distress more evident than with WeWork, which, despite its name, isn’t working at all.
Indeed, the coworking firm could be renamed “ReWork” after its staggering losses have forced it to renegotiate nearly all of its leases.
Landlords that count WeWork as a top five tenant owe about $2.6 billion in CMBS debt, an analysis of Trepp data shows. About half of those loans come due within 12 months and nearly 80 percent are either watchlisted, delinquent or in default.
Kushner Companies and Aby Rosen’s RFR are already weathering the fallout of a WeWork departure. The landlords failed to refinance their Dumbo office complex and landed in maturity default last month. WeWork had ditched a majority leasehold in one of the portfolio’s four buildings.
CIM Group, caught in a perfect storm of remote work, rising interest rates and WeWork exposure, is handing the keys to 1440 Broadway back to its lender.
The Los Angeles–based landlord, which picked up the large office property with Australian pension fund QSuper in 2017, saw the $399 million loan backed by the Midtown building go to special servicing this month, according to Trepp.
“The special servicer comments are not encouraging,” a Trepp email alert reads, noting that WeWork, which had been the building’s top lessee, has vanished from the tenant list. A WeWork spokesperson said the firm is still a tenant at 1440 Broadway and a change in building ownership would not affect that.
The CMBS loan had gone to a special servicer because “there is no single lender to negotiate with and the loan must first be transferred to special servicing in order to enter into any negotiations,” CIM said in a statement.
But the firm did not deny that it would turn over the property.
In San Francisco, appraisers have cut the value of the 32,000-square-foot building at 340 Bryant Street by 84 percent, to $8.2 million, or 131 per square foot, according to Trepp. The property was previously valued at $52 million, or more than $830 a square foot.
Pollock Financial declared it could not pay off $30.7 million across two commercial mortgage-backed securities loans last year, according to Trepp and Morningstar, which both cited servicer commentary provided to CMBS investors. UBS originated the two CMBS loans in 2017.
At the heart of the building’s financial issues? WeWork, which signed a 10-year lease in 2019, but stopped paying rent in December 2020.
Of course, not every issue facing office buildings is due to WeWork.
In Chicago, a year after landlord Manulife listed 200 South Wacker Drive for sale, the property’s lender has decided to foreclose on the downtown tower.
The lender, Bank of China’s Chicago branch, issued a $163 million loan when Toronto-based Manulife refinanced the 40-story property in 2019.
When the 762,000-square-foot tower was first listed late last year, the potential sale price was thought to be as little as $170 million, which would have covered the loan but marked a huge loss for Manulife, which purchased it for $215 million in 2013.