The wheels are really starting to come off WeWork after it was forced to delay its IPO early this week as the market greeted the offering with a distinct lack of enthusiasm.
Now, deals for two London office buildings that are leased mostly to WeWork are faltering. One Saudi-based investment fund has pulled out of a £90 million ($112 million) deal to buy a stake in the 70 Wilson Street building that is mostly leased to WeWork. Separately, the sale of WeWork Waterloo, which the company describes as the largest co-working facility in the world, has also stalled.
A Singapore-based fund called Bright Ruby Resources had agreed to buy the building and an adjoining property mostly leased to Royal Dutch Shell for about £850 million pounds ($1.06 billion), but is now getting cold feet, according to Bloomberg.
Many suspect that WeWork's aborted IPO prompted the buyers to reconsider the wisdom of betting so heavily on such an unstable tenant.
As one twitter user pointed out, a handful of top executives have left the company over the past month as the pre-IPO valuation drama erupted.
WeWork $WE executive departures in the last month:— Fat Tail Capital (@FatTailCapital) September 18, 2019
- Chief Brand Officer
- Global Head of Real Estate Partnerships
- Global Head of Business & Financial Operations
- Chief Communications Officer
- VP of Communications
And yesterday we reported that some of the company's most senior employees blame CEO Adam Neumann and his "outsized" personality for scuttling the deal.
To make matters worse, the company is facing protests outside of its London offices on Wednesday as workers protest the dismissal of at least four cleaners working WeWork's London sites. The company already has more than 50 London offices. WeWork reportedly uses a company called CCM Facilities to clean its London locations, and more than 500 of the firm's cleaners work at WeWork offices.
Of course, this could signal the beginning of the end for WeWork. The company has predicated its eventual success on being able to grow into a massive global presence. The company is already operating in more than 110 cities, and expanding in London is undoubtedly seen as critical inside WeWork.
Neumann famously said earlier this year that capital is one of two things holding WeWork back. The other is "space."
But if landlords start seeing WeWorks as a bug, not a feature, that could end Neumann's vision of untrammeled expansion. And if these deals ultimately are scuttled, landlords around the world will notice, and many will think twice about renting to WeWork.