WeWork has emerged from Chapter 11 as a more leaner company while maintaining its original business model.
Currently, WeWork operates 586 locations worldwide, including its franchises and joint ventures, as of June 11. This is about a quarter fewer than the 777 locations it had a year ago. The number of company-owned locations will continue to decline slightly, with at least ten more expected to close by the end of June.
Locations closed or sold globally
The Chapter 11 phase did not result solely in the closure of locations in the USA and Canada. WeWork also reduced its presence in other countries or withdrew completely, such as in Norway.
Some regional operations were also divested. In India and Japan, nearly 90 locations have been sold to other companies, with SoftBank, the former main investor, now owning the Japanese sites. These locations are likely to remain part of WeWork as franchises.
Many members lost, yet occupancy seemed to remain stable
Membership numbers have dropped significantly as locations have closed, and now stands at about 550,000 - also down about a quarter from June 2023.
The comparable declines in locations and members do not indicate that the overall occupancy rate remained unchanged. However, it seems reasonable to assume this, along with other numbers.
For example, between December 2023 and April 2024, membership revenue declined by only 4%. Given the difficult circumstances for membership acquisition, this can be seen as a positive sign that the bankruptcy did not result in a loss of members beyond the site closures. As location expenses decreased by more than 8% simultaneously, it even points to a slight increase in efficiency.
What about the finances?
The Chapter 11 process aimed to restructure finances to allow continued operations. This objective has been achieved, as expected, with the exit from bankruptcy.
WeWork eliminated US$4 billion in debt, along with the associated high interest burdens.
Future lease obligations were cut by about half. This sounds larger than it is, as it also results in a loss of revenue. The goal, however, was to make the company more efficient and to adjust for the fact that many office buildings had lost value in the Post-Covid era.
As a result, locations or parts of them were closed, if the current conditions could not be changed. In many remaining locations, rents have been reduced or shorter terms have been negotiated. For some locations, WeWork will share its revenues or profits with landlords in return for reduced rental costs, or they will continue to operate under management contracts. Furthermore, WeWork was able to terminate all service contracts that were no longer required.
Operating losses during the Chapter 11 period were still enormous, averaging about US$100 million each month between December 2023 and April 2024. However, these numbers do not reflect the future, as a significant portion of expenses are eliminated upon emergence from bankruptcy.
By the end of the year, the new WeWork expects a relatively small loss of US$15 million, with operating profitability already achieved.
In 2025, the company anticipates reaching full profitability after interest & taxes for the first time. Subsequently, WeWork plans to achieve steadily increasing profits in the triple-digit million range annually.
