WeWork’s revenue dips 8% to $811 million in Q2 FY21 – ET RealEstate

NEW YORK: WeWork Companies LLC’s revenue declined in the third quarter but its cash burn slowed, a company memo showed on Thursday, with management confident the shared-workplace provider can weather the hit to the office sector from COVID-19.

Quarterly revenue slid 8% from the second quarter to $811 million, while the company posted cash burn of $517 million, less than $671 million a quarter ago, WeWork said in a memo to employees seen by Reuters.

WeWork also said it successfully exited 66 locations that were open or were to be opened and that it amended 150 lease arrangements that resulted in an estimated reduction of $1.5 billion in long-term liabilities.

WeWork said member retention improved and renewal rates stabilized with the loss of desks in September at its lowest level since March when COVID-19 shut down businesses around the world and left offices vacant.

The pandemic has accelerated a “seismic shift” in the office sector that has put flexibility – an industry byword for the short-term leases the company embraces – and WeWork at the forefront, the memo signed by Chief Executive Sandeep Mathrani and Chief Financial Officer Ben Dunham said.

“This is our moment, and I know that together, we will continue to define the future of work,” they said.

WeWork said the results, which were reported earlier to holders of its junk bond, showed signs of key metrics stabilizing. Companies with more than 500 employees represented 54% of all members, an increase of “enterprise” clients from 48% in the prior quarter, though overall memberships fell 11%.

The company increased its global footprint to 859 locations and WeWork reported about $3.6 billion of cash and unfunded cash commitments at the end of the third quarter.

The firm dropped “The We Company” name in October, reverting to its WeWork brand to focus on its core office-sharing business, the most significant move since Japanese tech giant SoftBank, its majority owner, installed new management after a disastrous effort to go public in 2019.

The memo said the company was on track to achieve its goals, but did not say whether it would reach profitability in 2021 as it has stated before.

While COVID-19 has hit WeWork’s cash flow, longer-term changes in office usage are seen potentially supporting its business model.

Zach Aarons, co-founder of property-focused venture capital firm MetaProp, said WeWork may be able to withstand the economic downturn better than other office space providers.

The coronavirus pandemic has fueled corporate demand for shorter leases as employees increasingly work from home, which should help WeWork, Aarons said.

Fitch Ratings in October cut WeWork’s bond and credit rating deeper into junk territory on concerns about an industry shift to hybrid workplace models that lead to permanently lower workspace demand.

Fitch sees WeWork attaining modestly positive free cash flow in 2022 after its burn rate slows to about $900 million next year but it may need additional funding beyond a $3.3 billion financing commitment from SoftBank.



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Standard Chartered moves to permanent flexible working – ET RealEstate

LONDON: Standard Chartered will make permanent the flexible working arrangements for most employees that were put in place during the coronavirus pandemic, it said on Thursday.

The Asia, Africa and Middle East-focused bank said it aims for around 50% of its markets, comprising around 70% or 60,000 of its employees, to be able to adopt hybrid working patterns by the end of 2021.

That would mean those staff can choose to work entirely at home, entirely in offices or a mix of both.

The bank said it aims for 90% of its staff to be offered flexible working by 2023, albeit some will have to work full-time in offices given the nature of their roles.

The move by StanChart to formalise flexible working habits is one of the most concrete signs yet from a major bank of how lenders are moving swiftly to adopt new ways of working forced on them by the pandemic.

With technology platforms making working from home more effective than many lenders had anticipated, they are taking advantage of the opportunity to cut costs on expensive city real estate and support staff who prefer such arrangements.



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Deloitte to shut four UK offices, to retain all staff on work-from-home contracts – ET RealEstate

BENGALURU: Global accounting and consulting firm Deloitte will close four of its 50 British offices as it reviews its real estate portfolio in the coronavirus pandemic, but will retain the staff on work-from-home contracts, it said on Saturday.

COVID-19 has changed working life for millions of people around the world, many of whom have switched from offices to working from home – reducing demand for office space and prompting companies to opt out of renewing leases.

Deloitte said it would shut its offices in Gatwick, Liverpool, Nottingham and Southampton, where about 500 people work.

“COVID-19 has fast-tracked our future of work programme, leading us to review our real estate portfolio,” Stephen Griggs, Deloitte’s UK managing partner, said in an emailed statement.

He said all staff based at the four locations slated for closure would continue to be employed by Deloitte under permanent work-from-home contracts.

“Any proposed change is to our ‘bricks and mortar‘, not our presence in these regions”, he said.

The Financial Times newspaper first reported on the closures.

In April, Deloitte said it would be cutting pay for partners at its British businesses by 20% to protect jobs during the coronavirus crisis.



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Landlords in US are getting squeezed between tenants and lenders – ET RealEstate

NEW YORK: When it comes to sympathetic figures, landlords aren’t exactly at the top of the list. But they, too, have fallen on hard times, demonstrating how the coronavirus outbreak spares almost no one.

Take Shad Elia, who owns 24 single-family apartment units in the Boston area. He says government stimulus benefits allowed his hard-hit tenants to continue to pay the rent. But now that the aid has expired, with Congress unlikely to pass a new package before Election Day, they are falling behind.

Heading into a New England winter, Elia is worried about such expenses as heat and snowplowing in addition to the regular year-round costs, like fixing appliances and leaky faucets.

Elia wonders how much longer his lenders will cut him slack.

“We still have a mortgage. We still have expenses on these properties,” he said. “But there comes a point where we will exhaust whatever reserves we have. At some point, we will fall behind on our payments. They can’t expect landlords to provide subsidized housing.”

The stakes are particularly high for small landlords, whether they own commercial properties, such as storefronts, or residential properties such as apartments. Many are borrowing money from relatives or dipping into their personal savings to meet their mortgage payments.

The big residential and commercial landlords have more options. For instance, the nation’s biggest mall owner, Simon Property Group, is in talks to buy J.C. Penney, a move that would prevent the department store chain from going under and causing Simon to lose one of its biggest tenants. At the same time, Simon is suing the Gap for $107 million in back rent.

Michael Hamilton, a Los Angeles-based real estate partner at the law firm O’Melveny & Myers, said he expects to see more retail and other commercial landlords going to court to collect back rent as they get squeezed between lenders and tenants.

Residential landlords are also fighting back against a Trump administration eviction moratorium that protects certain tenants through the end of 2020. At least 26 lawsuits have been filed by property owners around the country in places such as Tennessee, Georgia and Ohio, many of them claiming the moratorium unfairly strains landlords’ finances and violates their rights.

Apartment dwellers and other residential tenants in the U.S. owe roughly $25 billion in back rent, and that will reach nearly $70 billion by year’s end, according to an estimate in August by Moody’s Analytics.

An estimated 30 million to 40 million people in the U.S. could be at risk of eviction in the next several months, according to an August report by the Aspen Institute, a nonprofit organization.

Jessica Elizabeth Michelle, 37, a single mother with a 7-month-old baby, represents a growing number of renters who are afraid of being homeless once the moratorium on evictions ends.

The San Francisco resident saw her income of $6,000 a month as an event planner evaporate when COVID-19 hit. Supplemental aid from the federal government and the city helped her pay her monthly rent of $2,400 through September. But all that has dried up, except for the unemployment checks that total less than $2,000 a month.

For her October rent, she handed $1,000 to her landlord. She said her landlord has been supportive but has made it clear he has bills to pay, too.

“I never had an issue of paying rent up until now. I cry all night long. It’s terrifying,” Michelle said. “I don’t know what to do. My career was ripped out from under me. It’s gotten to the point of where it’s like, ‘Am I going to be homeless?’ I have no idea.'”

Some landlords are trying to work with their commercial or residential tenants, giving them a break on the rent or more flexible lease terms. But the crisis is costing them.

Analytics firm Trepp, which tracks a type of real estate loan taken out by owners of commercial properties such as offices, apartments, hotels and shopping centers, found that hotels have a nearly 23% rate of delinquency, or 30 days overdue, on their loans, while the retail industry has a 14.9% delinquency rate as of August.

The apartment rental market has so far navigated the crisis well, with a delinquency rate of 3%, according to Trepp. That’s in part because of the eviction moratorium, along with extra unemployment benefits from Washington that have since expired.

“There are bad actors, but the majority of landlords are struggling and are trying to work with a bad situation,” said Andreanecia M. Morris, executive director of HousingNOLA, a public-private partnership that pushes for more affordable housing in the New Orleans area.

Morris, who works with both landlords and tenants, said that government money wasn’t adequate to help tenants pay their rent, particularly in expensive cities. She is calling for comprehensive rental assistance.

She fears that residential landlords will see their properties foreclosed on next year, and the holdings will be bought by big corporations, which are not as invested in the neighborhoods.

Gary Zaremba, who owns and and manages 350 apartment units spread out over 100 buildings in Dayton, Ohio, said he has been working with struggling tenants – many of them hourly workers in restaurants and stores – and directs them to social service agencies for additional help.

But he is nervous about what’s next, especially with winter approaching and the prospect of restaurants shutting down and putting his tenants out of work. He has a small mortgage on the buildings he owns but still has to pay property taxes and fix things like broken windows or leaky plumbing.

“As a landlord, I have to navigate a global pandemic on my own,” Zaremba said, “and it’s confusing.”



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