WeWork Out of Bankruptcy, Santora Named CEO, Cuts Costs

Key Takeaway

• WeWork emerges from bankruptcy, reducing annual rent and tenancy expenses by over $800 million and securing $400 million in new equity capital.
• John Santora, former Cushman & Wakefield executive, appointed as CEO to lead WeWork's post-bankruptcy phase.
• WeWork now manages 45 million square feet across 600 locations globally, with post-bankruptcy equity valued at $750 million.

Emergence from Bankruptcy

WeWork, the shared office space company once valued at $47 billion, has emerged from bankruptcy as of Tuesday. The company filed for Chapter 11 bankruptcy protection in November, citing total debts of $18.65 billion against assets of $15.06 billion. The COVID-19 pandemic, which led to a surge in vacancies, coupled with an economic slump and a steep downturn in tech valuations, significantly contributed to WeWork’s financial troubles. The company has since undergone a substantial restructuring process, which included renegotiating more than 190 leases and exiting over 170 unprofitable locations. This downsizing reduced annual rent and tenancy expenses by more than $800 million. Additionally, WeWork secured $400 million in new equity capital to support its future growth.

Leadership Changes

As part of its restructuring, WeWork has appointed John Santora, a veteran from Cushman & Wakefield, as its new CEO. Santora, who previously served as Cushman & Wakefield’s Tri-State chairman, replaces David Tolley, who began his tenure as CEO in October. Santora becomes WeWork’s fourth permanent CEO in five years, following the company’s failed IPO in 2019 and subsequent restructuring efforts. During Tolley’s brief tenure, WeWork entered bankruptcy protection and made significant operational changes. The company also announced a new board, including Anant Yardi, CEO of property management software company Yardi Systems. Santora’s appointment is seen as a strategic move to leverage his extensive experience in the commercial real estate sector to steer WeWork through its post-bankruptcy phase.

Portfolio and Financial Adjustments

WeWork’s restructuring has led to significant changes in its real estate portfolio. The company now manages about 45 million square feet in 600 locations across 37 countries. This is a marked reduction from its previous footprint, aimed at cutting costs and focusing on more profitable locations. The company’s efforts to streamline operations have also included cutting down expenses by more than 30%. Despite these efforts, WeWork’s post-bankruptcy equity is estimated to be worth about $750 million, a stark contrast to its $47 billion valuation in 2019. The company rebuffed a $650 million offer in April from co-founder and former owner Adam Neumann, stating that his proposal did not offer a high enough price to win over lenders.

Competitor Moves

In a related development, WeWork’s former New York headquarters has been taken over by coworking competitor Industrious. Industrious signed a 10-year agreement to manage office space at Tower 49 in midtown Manhattan, where WeWork used to have its headquarters. The move comes after WeWork won court approval to exit bankruptcy, allowing it to shed billions in debt and let go of money-losing leases. Industrious, which operates more than 200 locations globally, focuses on management contracts with landlords instead of striking leases with property owners. This approach helps both the landlord and Industrious split profits and reduce risk. Jamie Hodari, CEO of Industrious, stated, “We’ve probably considered about 70 takeovers of former WeWork space, and this is one of a very small number we’ve moved forward on.”

Management Quotes

• John Santora, CEO of WeWork:

  "The downsizing of WeWork’s real estate portfolio reduced annual rent and tenancy expenses by more than $800 million, and the company also secured $400 million of additional equity capital."

• David Tolley, former CEO of WeWork:

  "We have renegotiated more than 190 leases and exited more than 170 'unprofitable' locations."