WeWork paid 80% of its rent and collected 70% from clients, CEO says
WeWork CEO Sandeep Mathrani told CNBC on Tuesday the company has paid its rent in over 80% of its locations in April and May, as the coronavirus outbreak swept the globe.
“The remaining locations, we’re just in discussions with our landlords in a friendly way, and therefore we plan to make whole on our entire obligation,” Mathrani said on “Squawk Box.” “I do believe in the trickle-down economy, if I stop paying my rents, the landlords can’t make their mortgage payments and then it’s a domino effect.”
Mathrani, who became CEO in February, said WeWork has collected over 70% of rent from its tenants in April. “We are working with small, medium businesses in deferrals, freezing of rents and different aspects with them,” he said.
WeWork had 739 locations across 140 cities and more than 662,000 total memberships as of the close of the fourth-quarter of 2019, according to its website.
The ability of tenants to pay rent has been a key focus in recent weeks as the economic consequences of the coronavirus intensified. Government orders prevented some businesses from operating, or sharply reduced their operating capacity, and millions of workers lost their jobs.
Jeff Blau, CEO of Related Companies, one of the nation’s largest real estate developers, told CNBC last month that “the people that can pay need to pay” rent.
“Landlords need to help out those that can’t, and then the banks need to help out those landlords that are hurt by people that couldn’t pay the rent,” Blau said. “That’s how this whole thing I think has to get resolved.”
Mathrani said he talked to Blau about the crisis, and he said Blau told him that “the places you make a lot of money, you should pay your rent.”
The company has spent heavily on its existing office spaces in preparation for the new way of working brought about the coronavirus pandemic, Mathrani said. “We spent the entire month of April spending tens of millions of dollars getting our spaces ready for when people can get back to work.”
WeWork is leaning on its experiences in China, where it has over 100 buildings, to create “best-in-class spaces for professional distancing,” he said, specifically referencing HVAC systems and other sanitation practices. “We’re pretty encouraged with the planning we’ve done to encourage to the employee workforce back to work.”
Mathrani, former CEO of Brookfield Properties’ retail group, also said he’s not focused on WeWork co-founder Adam Neumann’s lawsuit against Japan’s SoftBank Group and its Vision Fund for terminating a $3 billion tender offer to the office-sharing startup’s shareholders.
“SoftBank has provided about $5.5 billion of liquidity to WeWork from the fall of 2019. That gives us enough capacity to operate our business,” Mathrani said, noting the company is “on our path to profitability in 2021.”
“The $3 billion tender offer has to do existing with shareholders. It’s noise in the background as far as I’m concerned. My focus is to right this ship,” he added.
— Reuters contributed to this report.