DivcoWest Sues WeWork After It Stopped Paying Rent at its Midtown Building

DivcoWest is suing WeWork for $30 million. This legal action comes after WeWork vacated the space it had leased at a DivcoWest building in Manhattan and ceased rent payments in December.

What the plaintiff says: The landlord, based in California, argues that WeWork is liable for the full amount of rent specified in the lease for the property at 311 West 43rd St., which was set to run until 2032. The lawsuit asserts that WeWork neither provided notice of its departure nor removed its belongings from the 64,000 square feet of space.

Latest from the WeWork saga: In early September 2023, the company announced its intention to renegotiate the majority of its leases and to exit from locations deemed "unfit and underperforming." The company's lease-related financial obligations constitute a significant portion of its overall operating costs.

A dire situation: This decision to renegotiate leases followed WeWork's disclosure in its quarterly earnings release in August, where it expressed "substantial doubt" about its ability to sustain operations. The concerns were attributed to losses, anticipated cash requirements, a rise in member turnover, and a sluggish office market.

In the second quarter, WeWork reported a net loss of $397 million, an increase from the $299 million loss in the first quarter. Nevertheless, this represented an improvement from the same period in 2022, when the company reported a net loss of $635 million, as reported by The Real Deal.

What WeWork is doing next: In the meantime, the firm is being advised by a restructuring specialist team comprised by real estate advisor Hilco Global, consultant Alvarez & Marsal, and law firm Kirkland & Ellis. The ultimate goal is, allegedly, to avoid bankruptcy.