Getting a grip on WeWork exposure
admin | October 4, 2019
This document is intended for institutional investors and is not subject to all of the independence and disclosure standards applicable to debt research reports prepared for retail investors.
As WeWork regroups and strives to move past the drama of their withdrawn IPO, investors are still trying to get a grip on how much exposure the market has to the leader in coworking space. CMBS investors face a combined $3.8 billion of underlying loan exposure to WeWork across 56 securities. WeWork’s footprint in the securitized market covers 3.3 million square feet. The indirect and non-securitized exposure to WeWork that confronts the commercial real estate market more broadly is quite a bit larger, as the combined amount that the company has leased, subleased or owns totals 21.5 million square feet.
Tallying the WeWork exposure in CMBS (Exhibit 1) requires a bit of sleuthing, but the current totals are $3.8 billion of exposure across 39 loans that are held in 56 securities. The estimated square footage leased or owned by WeWork in CMBS totals 3.3 million square feet.
Exhibit 1: CMBS exposure to WeWork
Note: The lease is frequently under the name of a WeWork subsidiary; for example the 379 West Broadway building has 81% of the building leased to WeWork under the subsidiary WW 379 W Broadway LLC. The 261 Madison Avenue property has WeWork listed as a new lease in the loan documentation but WeWork does not appear listed as a tenant on Bloomberg. Kroll Bond Rating Agency (KBRA) includes WeWork exposure in their analysis of the two securities, COMM 2012-CR2 and COMM 2012-CR3, that own pieces of the loan. KBRA also lists the square footage at the 261 Madison Ave property occupied by WeWork as 106,985 square feet, though this could not be verified so the amount shown is what appears in the original documentation. All data as of 9/30/2019. Some very recent deals do not have documents or square footage information available yet. Properties where WeWork subleases the space, such as at 300 Park Ave building, are not included. Source: Bloomberg, KBRA, Amherst Pierpont Securities.
Broader market footprint
WeWork’s footprint in the CMBS market is a fraction of its overall presence (Exhibit 2) in the office sector of commercial real estate. The company leases, owns or subleases 21.5 million square feet of office space across the country, only 15% of which has entered the securitized market. Much of that space is concentrated in the strongest CRE markets in the country, including the greater metropolitan areas of New York, Los Angeles, San Francisco, Seattle, Boston, Chicago and Atlanta.
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