WeWork local unit losses $211m as offices remain deserted

Flexible space company WeWork’s woes have deepened in Australia, writing down the value of its city sites as it posted a $211m loss for 2022.

Flexible space company WeWork has deepened its losses in Australia, writing down the value of its city sites by almost $155m as its global parent struggles.

After a tough run during the pandemic, the one-time star company has now racked up close to $500m of losses at its local operation, according to its latest ­accounts.

They reveal that the local unit plunged to a $211m loss in 2022 as its parent company languished, with offices still deserted in many US cities.

WeWork has provided discounts to lure local members back to its sites and revenues have recovered since the depths of the pandemic. But it has slashed the value of its local city holdings.

It took hefty losses in Queensland, Victoria, Western Australia and NSW across 14 sites. Most losses were taken in NSW, with the largest impairment taken on one facility which was cut by almost $33.7m.

The local unit also carries heavy lease liabilities to landlords, from whom it rents space for members to use. WeWork in 2021 closed some local facilities, pulling out of three venues in Sydney, Perth and Melbourne.

The local entity carries total liabilities of $757.9m, the bulk of which are long-term lease liabilities of $583.99m, although this was trimmed back from 2021.

Cash flows from operating activities turned around as receipts from customers hit $119.72m, up from $93m in 2021. But the company has been discounting.

Last year it was renting desks in co-working spaces for less than what it had charged for an unguaranteed place on its communal hot desks before the pandemic.

The accounts show WeWork’s local unit crashed to a loss of almost $211.2m, worse than the previous year’s loss of $120.29m. This was mainly due to property, plant and equipment and right-of-use asset impairment expenses. The balance sheet remains under pressure as WeWork’s local unit has accumulated losses about $489.38m. The accounts show it had net cash inflows from operating activities of $22.87m in 2022.

At the end of December, the local entity had net current liabilities of $72.93m and net liabilities of almost $376m.

The local unit’s directors said they had been assured of continued support from WeWork Companies LLC, the global operating company, and expected the local company would be able to continue as a going concern.

WeWork’s impairments were taken on leases as it applied value-in-use calculations, based on a discounted cash flow analysis over the remaining expected use of its sites.

WeWork has insisted that it is making progress and growth in Australia is matching its global recovery.

Sydney occupancy was 76 per cent at the end of December, up from 46 per cent the previous year, and Melbourne was up from 64 per cent to 85 per cent.

“Whilst extended periods of restrictions in Australia led to a slower than expected office return and subsequent pricing pressure, demand strengthened throughout 2022 resulting in revenue growth and significant increases in occupancy,” a WeWork spokeswoman said.

“As companies continue to recognise the long term value of flex and cement their hybrid workplace strategies with WeWork, we are confident about the trajectory of the Australian business.”

The value of US-listed WeWork has plunged since it floated in 2021. Last month, it was slapped with a noncompliance notice from the New York Stock Exchange after its stock closed below $1 on average over a consecutive 30 trading-day period. It last traded at 42c.

The global WeWork trimmed debt by $US1.5bn and pushed out loan maturities. But its market capitalisation has slumped to $US308.02m, a far cry from boom time valuations of $US47bn in 2019 when it was preparing to list.