Troubled co-working giant WeWork has put its business in Spain up for sale, according to a report in Spanish newspaper El Confidencial.
A price for the business has not been disclosed.
According to the report, CBRE has been charged with finding a buyer for the subsidiary, which comprises the management of and revenues from its eight current spaces in Madrid and Barcelona, plus two new offices in Paseo de Gracia 17, Barcelona, and Calle de Francisco Silvela 106 in Madrid, which were supposed to open later this year. WeWork has denied the sales rumour.
News of the potential divestment came as Fitch Ratings downgraded the firm's rating over long-term debt repayment risks, dropping WeWork a notch from CCC+ to CCC. Fitch said: 'While WeWork has made material progress to reduce its cash burn rate, in a scenario where demand is structurally lower, Fitch sees WeWork as potentially requiring additional liquidity sources inclusive of and beyond the full $3.3 bn (€2.8 bn) SoftBank financing commitment.'
Softbank injected another $1.1 bn into the business in August through a preferential debt issue, according to Bloomberg, taking the total commitments WeWork has received from Softbank to more than $10 bn.
WeWork doesn't own any real estate but closes contracts and commercialises third-party spaces through its globally connected network. According to data from JLL, the firm has garnered 16% of the co-working market in Madrid and 18% in Barcelona to date. However, JLL data suggests that shared office bookings have fallen more than 90% in Spain this year, to 2012 levels.
WeWork operates in Spain through Wework Community Workspace SL, controlled by a Dutch company. According to public data, in 2018 the firm recorded a turnover of €8.4 mln, but had lost €7.2 mln by the end of that year.
The Spanish data reflects the company's losses worldwide, which amounted to $1.9 bn globally in 2018 versus revenues of $1.8 bn. A report issued to its creditors showed that its losses continued in 2019, topping $2.6 bn by the third quarter of last year against revenues of $2.4 bn.
Last year the New York-based firm was also forced to cancel plans to raise money via a stock market listing after receiving a lukewarm reaction from investors. Founder Adam Neumann stepped down as CEO in September 2019 and the firm started to lay off thousands of employees in November. Sandeep Mathrani was appointed CEO in February of this year.
Even pre-Covid, analysts deemed WeWork vulnerable to a business model which allows its members to stay for as little as a month, in premises which WeWork has on average secured for 15-year lease terms.
The coronavirus crisis has added to the headwinds faced by the shared-office industry. In a worldwide survey of more than 600 coworking operators and users, Coworking Insights found that 71% suffered a 'significant drop' in users this year.
However, WeWork recently reported a 'boom' in the sale of day passes in some of its leading markets from September, citing work-from-home fatigue as encouraging individuals to seek external office resources. WeWork has also reported that a number of companies, reluctant to commit to long leases in the current environment, have resumed the use of shared office space.
