Lease Rejections and Legal Jousts: Unpacking WeWork's Bankruptcy Battle

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Episode Transcript:

Today, we're diving into the unfolding saga of WeWork's Chapter 11 bankruptcy proceedings, where a select group of landlords is raising objections to the coworking giant's move to reject numerous leases.

WeWork, as you might know, recently filed for Chapter 11 bankruptcy protection, aiming to reject a whopping 69 leases. Tuesday marked the deadline for landlords to voice their objections to this rejection request, and it's already shaping up to be a legal battle with significant implications.

Walter & Samuels, the owner of three Manhattan buildings abandoned by WeWork, is making waves in the courtroom. They're pushing back against WeWork's restructuring advisor, Hilco Real Estate, which notified them of space abandonment just eight days after seeking to reject the lease. Walter & Samuels is urging the judge to hold WeWork liable for rent until the actual surrender of properties, challenging the proposed rejection date.

Meanwhile, Kato International, owner of Tower 49 in Midtown Manhattan, a building with 20 WeWork-occupied floors, is seeking clarity on the Chapter 11 proceedings. Kato is emphasizing the need for an extended notice period for lease rejections, highlighting the current five-day window as "infinitesimally too short." According to experts, the decisions made in these initial stages will set a precedent for WeWork's future lease rejections.

Kato's filing goes beyond objections; it includes a crucial request to ensure landlords have a say in the renegotiation of terms for remaining leases. The attorneys argue that WeWork's attempts to limit the use of letters of credit could send shockwaves through the commercial real estate market. They accuse WeWork of attempting a "Gotcha" game with landlords, forcing them into new leases without legal or consensual agreement.

This legal tussle isn't just about WeWork shedding some of its leases; it's about the broader implications for landlords, CMBS loans tied to properties, and the uncertain fate of Class-B and C properties once anchored by WeWork.

This is Tyler Cauble, Signing off