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WeWork is hitting the brakes after its IPO went up in smoke — and landlords could pay the price



Jackal Pan/Getty Images; Jacqueline Larma/AP Images; Samantha Lee/Business Insider

  • WeWork is hitting the brakes on growth after its IPO went up in smoke last month, and landlords are worried they could pay the price.
  • Two landlords of WeWork locations in London are holding off on signing new leases with the shared-workspace group, and preparing backup plans for their existing WeWork offices in case the company restructures, according to the Financial Times.
  • WeWork could slash its costs by shutting down the companies holding its leases, stiffing its landlords and leaving them with vacant offices.
  • Less demand from WeWork could hit rents in Manhattan, London, and other cities.
  • Read all of Business Insider’s WeWork coverage here.

WeWork is hitting the brakes after its IPO went up in smoke last month, and landlords are worried they could pay the price.

Two landlords of WeWork locations in London are holding off on signing new leases with the shared-workspace group, and are preparing backup plans for their existing WeWork offices in case the company restructures, according to the Financial Times.

“It would not be prudent for us to do anything [new] with them until we see how the new management will operate,” one of the landlords told the newspaper.

The company could leave landlords out in the cold

The crux of WeWork’s business model is signing long-term leases for properties then dividing them into smaller units, renovating them, and renting them out on a short-term, flexible basis. The strategy has helped it become the largest private tenant in both New York City and London, with 7.7 million square feet of office space in the former and 4.1 million in the latter, the Financial Times reported, citing CoStar data.

WeWork’s aggressive expansion has meant taking on $47 billion in lease obligations, including about $2.3 billion in payments due next year, according to Harvard Business School. However, Fitch lowered the group’s credit rating further into junk territory, to CCC+, last week, warning “default is a real possibility” and flagging a heightened risk of the company failing to restructure.

WeWork’s scale and clout have allowed it to secure favorable terms with landlords where they cover its upfront costs. For example, it wanted 15 months rent-free on an eight-year lease and £100 ($123) a square foot to pay for fitting out offices, a landlord who negotiated with WeWork this summer told the Guardian. The company received nearly $455 million in upfront payments in the first half of this year, its IPO filing shows.

At its current cash-burn rate, WeWork could run out of money next year. The group could opt to slash its expenses by shuttering some of the companies that hold its leases, stiffing its landlords and lumping them with empty offices.

“WeWork has structured many of its leases so that they can simply collapse the special purpose entity it’s trapped in and walk away,” Alex Snyder, an assistant portfolio manager at CenterSquare Investment Management, told the Financial Times. “This vacancy pressure on the market [would] be painful.”

“With so many WeWorks in close proximity to each other, it could easily consolidate tenants in one building, leaving a landlord with an empty space,” an industry veteran told the Guardian.

However, if WeWork skips out on its bills, it would face fresh scrutiny over its business model and find it harder to raise money, Matt Oakley, a commercial property research boss at Savills, told the Guardian. It could also tarnish the reputation of ther serviced office industry, he said.

If WeWork moderates its growth, city rents could suffer

If WeWork slows its roll, rents in cities such as Washington D.C. and Manhattan could suffer, hurting landlords.

“Now that the Goliath of the industry has paused leasing, I think it will make it that much harder for these markets to muster up any kind of meaningful growth,” Snyder told the Financial Times.

“This is the capital market trigger for a de-rating of London office values,” Mike Prew, an analyst at Jefferies, told the newspaper.

However, if WeWork eases off, rivals could pick up the slack.

“We are always in discussions with landlords and those discussions have picked up,” Mark Dixon, CEO of UK competitor IWG, told the Financial Times. “It’s the flight to quality.”

“WeWork’s core business is strong and we continue to evaluate opportunities with our landlord partners. We are committed to the London market,” a WeWork spokesperson told Markets Insider. ”The company intends to fully honor its lease commitments.”

WeWork is reassessing its business after scrapping its IPO

WeWork shelved its IPO last month in the face of scathing criticism of its business model, mounting losses, complex structure, and controversial cofounder and CEO Adam Neumann. Days before its planned flotation, the company was looking at a public valuation below $20 billion — a fraction of the private valuation of $47 billion it secured in January. The risk of raising less than $3 billion, the minimum amount needed to unlock $6 billion in bank financing, spurred WeWork to scrap its plans.

Company executives have scrambled to limit the fallout. They have overhauled WeWork’s corporate governance, revamped its share structure, and replaced Neumann with two co-CEOs. Artie Minson and Sebastian Gunningham plan to lay off between 10% and 25% of the group’s employees as they seek to cut costs and refocus on the core business, Business Insider reported, citing a source familiar with the situation.

Read more: ‘The emperor has no clothes’: Billionaire debt investor Howard Marks slammed WeWork’s business model and valuation

Read more: A New York real estate group sounded the alarm on WeWork years before it plunged into chaos

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Bed Bath & Beyond CEO addresses over-cluttered stores



  • In an interview with The Wall Street Journal, Bed Bath & Beyond’s new CEO Mark Tritton discussed his plans to turn around the business. 
  • Tritton said he would address the issue of its over-cluttered stores that are putting customers off from buying anything. 
  • Executives at JCPenney, Gap, and H&M have all recently highlighted the same issue in their own stores.
  • Read Tritton’s interview with The Wall Street Journal here.
  • Visit Business Insider’s homepage for more stories.

Bed Bath & Beyond’s new CEO has a plan to fix the beleaguered retailer, and it includes a major decluttering of its stores. 

In a recent conversation with The Wall Street Journal, CEO Mark Tritton, who was previously chief merchandising officer at Target, laid out his plans for the company. 

Tritton told The Journal that tests done in his first few months at the helm of the company revealed that less is more when it comes to product assortment. He used the example of can openers in his interview, which he reportedly cut down from 12 different brands to three and saw sales rise. 

Tritton said that overcrowding of product in its stores is leading to “purchase paralysis” and he now has plans to cut inventory by more than 10% in 2020.

When Business Insider’s Shoshy Ciment visited a Bed Bath & Beyond store in New York in July, she encountered this issue first-hand.

“From our first steps in, the store was overwhelming. There was merchandise packed top to bottom on shelves that lined every wall,” she wrote.

Analysts have said the same thing. Neil Saunders, managing director of GlobalData Retail, previously described its stores as being a “hodge-podge of product,” that is “tightly crammed into a space” and “is largely devoid of inspiration.”

“This makes them hard and sometimes unpleasant to shop,” he wrote in an email to CNBC in 2018.

But Tritton isn’t the first Bed Bath & Beyond executive to address this issue. Former CEO Steven Temares said the company was making plans to launch “show more, carry less initiatives” in a call with analysts in 2017.

However, Tritton stressed to The Journal that it would be different this time around and customers should expect to see an entire “reworking of the store experience.” The company plans to spend around $400 million on store remodels, which will include wider aisles, speedier checkout lines, and less inventory piled high to make the shopping experience more enjoyable for the customer. 

These changes will be rolled out at 25 stores this year, Tritton said. 

Bed Bath & Beyond

Toiletries piled high at a Bed Bath & Beyond store in New York.

Shoshy Ciment/Business Insider

‘We need to find ways to fill the stores creatively… not just with garments’

Bed Bath & Beyond isn’t the only retailer to be guilty of overcrowding. Gap, H&M, and JCPenney have all identified a similar issue in their own stores.

JCPenney has frequently been called out by analysts as being one of the worst offenders for this. Its CEO Jill Soltau said in an earnings call in February 2019 that she was focused on reducing the amount of inventory and clearing “unproductive inventory” in stores. 

This is “great for our cash flow and great for gross margin, but it’s also critically important to the customers’ experience,” she said on the call.

Newer store concepts such as Everlane and Bonobos are making the “less is more” shopping experience more appealing with their so-called guideshop stores that stock a limited amount of inventory. Shoppers can come and experience the brand, try on items and order these in stores to have them shipped directly to their homes. 

And legacy brands are taking notice of this. In an interview with Business Insider in January 2019, H&M’s US president Martino Pessina discussed the company’s strategy for its flagship stores and the downside of overfilling it with inventory.

“If you treat it just like a normal store but bigger, it becomes really overwhelming,” he said. “We need to find ways to fill the stores creatively and not just with garments.”

Excess inventory takes up valuable store space, puts pressure on margins, and creates a less appealing shopping experience for customers. Moreover, it’s generally more susceptible to discounting, which can, in turn, erode brand image. 

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Rod Blagojevich says he didn’t know he would be release today



  • Former Illinois Gov. Rod Blagojevich flew home to Chicago after being released from a prison in Colorado. 
  • Blagojevich’s sentenced was commuted by President Donald Trump on Tuesday. He served eight years of his 14-year sentence. 
  • In a flurry of interviews before boarding his plane, the former governor said he did not know he was going to be released today. He also said his party affiliation was “Trumpocrat.”
  • In 2011, he was convicted of 17 corruption-related charges. 
  • Visit Business Insider’s homepage for more stories.

Former Illinois Governor Rod Blagojevich said he was a “Trumpocrat” in an interview following his release.

“He’s got a obviously a big fan in me,” Blagojevich said according to NBC News. “If you’re asking what my party affiliation is, I’m a Trumpocrat.”

Blagojevich, who was sentenced to 14 years in prison in 2011 on corruption charges — including trying to sell former president Barack Obama’s senate seat — was released after President Donald Trump signed papers commuting his sentence on Tuesday.

He left a federal prison in Colorado to fly home to Chicago after serving eight years of his 14-year sentence. 

When reporters asked if he had changed, Blagojevich said, “Misfortune has silvered my hair. That’s pretty obvious,”  according to KCNC-TV.

He told reporters that he learned he was being released from other inmates and news reports. He also said he had no idea it was going to happen. He also said when he found out his first thought was whether he’d be able to go for a run before his release because it helps him stay disciplined. 

Blagojevich said the eight years in prison gave him time to get closer to god and he now wants to do good. He now wants to “fight against the corrupt criminal justice system” that could put people into prison for “things that aren’t crimes.”

Trump had previously been publicly hinting at commuting Blagojevich’s sentence. The President said the sentence was unfair and was moved when he saw the former governors wife make appeals on television. 



Blagojevich was found guilty of 17 counts in 2011 and was imprisoned in March 2012. 

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Boeing 737 Max: Foreign object debris found in stored undelivered jets



  • Boeing has found debris, likely left over from manufacturing, in several stored 737 Max aircraft, Leeham News reported.
  • The items, known as foreign-object debris, or FOD, were in the planes’ fuel tanks. Boeing will inspect all 400 finished, undelivered airplanes for FOD.
  • Boeing has been plagued by quality-control issues on other aircraft, and has been accused of prioritizing delivery deadlines over safety in manufacturing.
  • Visit Business Insider’s homepage for more stories.

Boeing has discovered foreign objects in the fuel tanks of some undelivered 737 Max aircraft, according to a new report from Leeham News.

The items were considered foreign-object debris, or FOD, Leeham reported. FOD consists of items left over from manufacturing, such as tools, rags, or spare parts.

FOD is usually found during inspections before delivery to airline customers.

However, problems involving FOD have plagued Boeing at the North Charleston, South Carolina factory that produces the 787 Dreamliner wide-body aircraft. An April New York Times investigation found claims of shoddy production and poor quality control, and airlines complained to Boeing about quality issues in delivered aircraft in 2019.

Boeing has faced criticism that it rushed development of the 737 Max in order to catch up with its rival Airbus, which had unveiled an updated version of its successful A320 family of planes.

It has also been accused of prioritizing delivery deadlines over safety at various manufacturing sites, including the Renton, Washington, factory where the 737 Max is built, leading to missed problems and production mistakes, including FOD.

Boeing will inspect all 400 stored, undelivered 737 Max planes before they’re delivered to customers, Leeham reported. The inspections are reportedly unlikely to delay the plane’s return to service.

Boeing is already planning to perform extensive maintenance checks and tests on stored aircraft when the grounding ends. Business Insider first reported in September that the plane-maker was reaching out to retired technicians for help getting the planes ready for delivery quickly.

The FAA was notified about the FOD discovery, Leeham reported. The issue is unrelated to the technical problems that have grounded the 737 Max for nearly a year.

Boeing did not immediately return Business Insider’s request for comment.

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