In Crisis, WeWork May Impact Vacancy Rates in Brazil; at Least Six FIIs Admit Delays in Rent Payments

Sources consulted by REsource believe that the company will go to the Brazilian courts to file for judicial recovery, similar to what happened with the company in the US
The vacancy rate in corporate offices in São Paulo could rise by up to 1.45 percentage points if WeWork shuts down all its operations in the São Paulo capital

By: SiiLA News

07/12/2024

As reported by REsource on June 28th, WeWork, a company providing coworking spaces, is struggling to meet its rental payment obligations for properties it occupies in São Paulo. At least six real estate investment funds have notified the market about defaults related to June rentals this year.

In late May, WeWork received approval from a U.S. bankruptcy court for its debt restructuring plan under Chapter 11. The agreement, reached in mid-April, would eliminate approximately $4 billion in pre-petition debts and cut more than $12 billion in future rental expenses. Latin American markets where the coworking company operates were not included in this operation.

Data from Market Analytics, a platform by SiiLA, shows that WeWork currently occupies 28 properties in São Paulo. Of these, at least 70% (19 in total) are class A+ or A (high standard).

According to the data, if WeWork were to cease all its operations in São Paulo, the corporate vacancy rate could increase by up to 1.45 percentage points, raising the overall vacancy rate to 23.39%. Currently, the vacancy rate for corporate properties in the city stands at 21.94%, according to SiiLA.

Market rumors suggest that WeWork has not only failed to pay June rents to REITs but also to direct property owners.

Evolution of the occupancy of coworking companies in A+, A, and B offices in São Paulo and WeWork's share of the occupancy

Today, WeWork is responsible for more than half of the market share of coworking companies in the offices monitored by the Market Analytics platform from SiiLA.

Here are the REITs that reported WeWork's missed payments:

Santander Renda de Aluguéis (SARE11): The fund reported in a relevant fact notice that WeWork is in default on the WTorre Morumbi property. The coworking company occupies four floors of tower B. The manager informed the market that if the default continues, the fund might see a negative impact of R$ 0.05 per share on its earnings distribution.

Torre Norte (TRNT11): In June, the Torre Norte REIT also issued a market communication stating that WeWork had not paid the rent for May. The coworking company occupies 6,743m² in the United Nations Business Center (CENU), located in the Berrini area. The negative impact of this default could reach R$ 0.15 per share.

Vinci Offices FII (VINO11): In a relevant fact notice released on Friday, June 28th, Vinci Real Estate Gestora de Recursos Ltda reported that WeWork had not paid the June rent for the 3,594m² it occupies in the OF 585 property, located on Rua Oscar Freire. According to Vinci Offices, the rent due for this lease represents up to 5% of the fund's total revenue and about 4% of its total gross area. Vinci stated that, together with its lawyers, it is taking appropriate actions on behalf of the fund and its shareholders.

Fundo de Investimento Imobiliário Multi Renda Urbana (VVMR11): On Wednesday, July 3rd, BRL Trust Distribuidora de Títulos e Valores Mobiliários S.A., holder of the Multi Renda Urbana Real Estate Investment Fund, disclosed a relevant fact notice stating that WeWork had not yet paid the rent for May 2024. The coworking company occupies rooms on the 1st, 2nd, 3rd, 4th, and 6th floors of the One Eleven Building, located in Vila Olímpia, São Paulo. According to the fund, real estate income for May will be negatively impacted by approximately R$ 0.19 per share.

Rio Bravo Renda Corporativa (RCRB11): On Monday, July 1st, the Rio Bravo Renda Corporativa Real Estate Investment Fund reported, in a market communication, that WeWork had not paid the rent for June for properties 555 Block A, 555 Block B, and 555 Block C, located in the Pinheiros area. According to the fund, the tenant has been notified, and direct negotiations are ongoing to ensure the overdue rent is paid as soon as possible. The negative monthly impact on the fund's real estate income is R$ 0.11 per share.

Valora Renda Imobiliária Fundo de Investimento Imobiliário (VGRI11): In a relevant fact notice, the fund informed the market and its shareholders that WeWork was in default due to the late payment of June rent for the 2,878m² leased in the Brazilian Financial Center (BFC), located on Avenida Paulista. According to Valora, the rent represents approximately 5.8% of the fund's total revenue and about 5.9% of its gross leasable area.

"The management is taking appropriate actions on behalf of the fund and its shareholders," Valora communicated.

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