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Why WeWork is SUING ITS LANDLORD for $12M

WeWork likes to refer to itself as “the office of tomorrow”. But when the company makes improvements to the spaces it rents and landlords fail to reimburse WeWork for those costs, the company is very traditional in its response: it brings suit. That is why WeWork is currently suing two landlords, one in Boston and one in Washington, D.C., for millions in improvement costs WeWork says it was promised as part of its lease. Both leases were signed just prior to the company’s ill-fated public offering last year, and WeWork says the owners of the buildings benefited from the renovations as part of larger strategic plans.

“We have initiated litigation to enforce our right to be paid money that is unambiguously owed to use,” a statement from WeWork read. “WeWork has spent significant sums to improve the buildings, but the landlords have refused to pay the allowance sums they owe us.”

At least one building is part of another lawsuit over nonpayment. The D.C. building, owned by a company called The Meridian Group, faces a lawsuit filed in May by a subcontractor claiming it was owed $1.6 million for parts and labor. However, last month, that lawsuit was resolved amicably and dismissed. The WeWork building in question has since been repositioned and is being marketed under a new name, and Meridian also formed a partnership with WeWork to acquire another office building. WeWork claims Meridian agreed to a construction allowance of about $9 million to help the company build out its space and four months of base rent valued at about $1.1 million.

In addition to the two new lawsuits, WeWork appears to be facing financial uncertainty as co-working has, naturally, been less popular during the pandemic. The company has faced massive criticism for keeping its offices open as “essential services” whenever possible and for charging members during lockdown periods when the facilities were unusable. The company is facing multiple lawsuits from customers who want refunds of their membership fees for April and May 2020; many of those costs climbed into the thousands when WeWork refused to freeze rents when facilities were inaccessible. With many WeWork locations reporting COVID-19 cases and facing accusations of minimal protections for members during and after reported cases, things seem set to spiral into class action status if the disputes are not resolved. WeWork responded to the suit by requesting the names of the members involved in the suit, but lawyers said they do not want to provide this information without a promise of non-retaliation.

WeWork has struggled in the wake of a disastrous near-IPO that received an initial valuation of $47 billion but appeared to have been far off the mark. The company’s founder was ousted as the IPO fell apart, with many blaming his “hard-partying lifestyle and eccentric management” for the IPO’s failure. Six months ago, Kimberly Ross was promoted to CFO for the company, and she recently announced she will depart at the end of October.

Do you think WeWork can survive COVID?

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Sources:

Wall Street Journal

WeWork

BisNow

Slate

BizJournals

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