WeWork, the leading global flexible space provider that has filed for bankruptcy in North America, says its SA operations will not be affected.
The company, backed by major shareholder Japan’s Softbank, was once valued at nearly $50bn.
It is now labouring under debt of $2.9bn with leases accounting for more than 70% of its total debt.
The group has entered into a restructuring support agreement with holders who represent about 92% of its secured notes to reduce its existing funded debt by about $3bn and expedite the restructuring process.
Its spaces will remain open and operational and global operations will continue as usual. The reorganisation process does not affect its franchisees and joint venture partnerships in SA, China, Latin America, India and Israel.
“WeWork SA is 100% independently owned by SiSebenza, and operates independently from WeWork in the US and Canada,” said Andrew Robinson and Stefano Migliore, the owners of WeWork SA.
The reorganisation process will not affect its members, vendors, employees and real estate partners, they said.
“The WeWork SA business is strong and committed to investing in its future growth and remains fully focused on delivering exceptional and innovative flexible workspace solutions for its members,” said SiSebenza.
On March 1, WeWork entered into a franchise partnership with SiSebenza, a pan-African real estate investor to expand its international business.
The deal concluded at an undisclosed amount gave SiSebenza exclusive rights to expand the SA franchise and operate the WeWork franchise in Ghana, Kenya, Mauritius and Nigeria.
WeWork said franchise partnerships is an asset-light growth strategy that enables the group to meet growing demand for flexible space solutions in other markets, and further strengthen its underlying business.
SiSebenza partners with global companies entering African markets. The company clinched the deal in which WeWork opened its first office, The Link in Rosebank, Johannesburg, in 2019. With two other offices, 80 Strand in Cape Town and 155 West Street in Sandton, WeWork plans to expand in existing localities and open new offices in major cities in SA.
“WeWork SA is here to stay, and we continue to experience high demand from small to big businesses looking for serviced and flexible workspaces,” Robinson told Business Day.
Data from Jones Lang LaSalle (JLL), a global commercial real estate services company, shows flexible offices, shared, serviced and co-working spaces will account for 30% of all offices globally by 2030.
Robinson said in SA 1% of commercial real estate is serviced, and given rising demand, they expect it to grow to 4%-6% by 2030. Within the African continent, this figure is less than 1% and could rise up to 2% as there is huge growth potential.
He said local demand exceeds supply and they are looking at opportunities in Cape Town, Johannesburg, the Eastern Cape and KwaZulu-Natal.
Robinson said the pandemic accelerated the move to hybrid working — working from the office and remotely, hence demand for serviced and flexible spaces spiked.
The return to the office has also contributed to rising demand. Many occupiers continue to reduce space but need facilities such as meeting and boardrooms, hence they choose WeWork spaces.
WeWork also offers a subscription membership that provides access to localities worldwide, a pay-as-you go access to work spaces and meeting rooms, as well as a space-as-a-service offering for cost-conscious occupiers moving away from long-term leases.
Founded in 2010, the New York Stock Exchange-listed company has 777 offices in 39 countries with workstation capacity of about 906,000. It offers dedicated desks, private offices, office suite and office buildings that cater for 1-100 people.
WeWork and certain of its entities filed for protection under Chapter 11 of the US Bankruptcy Code and intend to file recognition proceedings in Canada under Part IV of the Companies’ Creditors Arrangement Act.
Chapter 11 is a court-supervised process in the US where companies can restructure their balance sheet while operations continue in the ordinary course of business.
To become operationally and financially stronger, WeWork will move away from inflexible lease commitments and renegotiate costly long-term leases it signed in good times.
“Now is the time for us to pull the future forward by aggressively addressing our legacy leases and dramatically improving our balance sheet,” said WeWork CEO David Tolley.
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