Cash-strapped WeWork weighs pullback in Hong Kong and London

Japan's SoftBank Group's chief executive Masayoshi Son at a press conference on the company's financial results in Tokyo on Wednesday. Mr Son has staunchly defended SoftBank Group's stake in WeWork.
Japan's SoftBank Group's chief executive Masayoshi Son at a press conference on the company's financial results in Tokyo on Wednesday. Mr Son has staunchly defended SoftBank Group's stake in WeWork.PHOTO: AGENCE FRANCE-PRESSE

It has warned European staff of impending job cuts, ponders ending leases in Hong Kong

LONDON/HONG KONG • WeWork paused its global expansion spree as it weighs pulling back in two of the world's priciest property markets.

The cash-strapped company has warned European staff - most of whom are based in London - that job cuts are looming, just as it ponders exiting some prime Hong Kong real-estate leases.

The setbacks come as billionaire backer Masayoshi Son staunchly defended his SoftBank Group's stake in the co-working firm, which he said made up the bulk of its US$6.5 billion (S$8.8 billion) operating loss for the quarter.

New York-based WeWork is being forced to put the brakes on one of the fastest and most-hyped expansions in real-estate history. After backers, including SoftBank, showered the firm with billions in cash, the company is now scrambling to slash costs following a failed public listing.

Consultations with employees of its parent company We Co in its European, Middle East and Africa (EMEA) operations will begin this week, according to a person familiar with the matter on Wednesday.

The number and timing of potential cuts have not been decided, said the person.

"WeWork is in conversation with employees in EMEA as we make changes to our operating model and workforce in the light of our refocused strategy," a spokesman from WeWork said, without directly addressing potential job cuts.

"Leadership has been diligent in its decision making, and we are committed to treating our colleagues fairly and with respect."

The firm has embarked on a sweeping review of its expansion plans in London, and is reassessing whether to proceed with about 28 potential office deals in its second-largest market, people with knowledge of the process said last week.

 
 
 
 

WeWork is also considering surrendering a portion of a recently signed lease in Wan Chai, near Hong Kong's central business district, according to people familiar with the matter.

The firm leased four floors, or around 60,000 square feet, for nine years in the Hopewell Centre in August, one of the people said, asking not to be identified because the details are private.

Agents are approaching clients on behalf of WeWork to replace it in five other locations across the city, another person said. Those locations are in various stages of renovation but WeWork would consider relinquishing them if it finds companies willing to take over, that person said.

SoftBank's Mr Son said on Wednesday that WeWork would stop adding new buildings for the next two to four years. He said WeWork could generate US$1 billion in annual profit in four to six years.

"New executive leadership is evaluating our operations and assets across all geographies, including Hong Kong," a spokesman for WeWork said in an e-mail. "We are fully committed to improving the business and ensuring our long-term viability to the benefit of our landlords, members and employees."

Hopewell Holdings, the Wan Chai building's landlord, did not respond to a request for comment.

WeWork started its Hong Kong business in 2016. It has now secured 16 locations with nine under operation, the company said.

In Singapore, CapitaLand Commercial Trust said in July it will lease out 21 Collyer Quay, a 21-storey building in the financial district currently occupied by HSBC Holdings, to WeWork.

A CapitaLand Commercial Trust spokesman said on Wednesday that a binding lease agreement for a period of seven years starting from the second quarter of 2021 has not changed.

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A version of this article appeared in the print edition of The Straits Times on November 08, 2019, with the headline 'Cash-strapped WeWork weighs pullback in HK and London'. Print Edition | Subscribe