WeWork's Bankruptcy Is Just Starting To Play Out Across CRE
It is difficult to know how WeWork’s bankruptcy will play out in the coming weeks and months at a detailed level. Generally speaking, WeWork’s credit event is an obvious negative for the CRE Office market. However, there will be CRE fallout beyond the Office segment. I am surprised that this fallout is not capturing more Financial media coverage.
For example, WeWork seeks to reject 65 leases across the U.S. and Canada in cities such as New York, Boston, San Francisco, Chicago, Oakland (see the list HERE).
The 65 leases roll up into various CMBS offerings and the ratings agencies are already downplaying the risk in my view.
WeWork’s bankruptcy will push yields higher for investment grade and non-investment grade credit, particularly as companies seek to rollover debt in 2024.
WeWork’s bankruptcy will force a marking-to-market for CRE property owners. It will also be the catalyst for various CRE property owners to sell, especially smaller owners who can’t afford to not be ahead of the curve.
Perhaps WeWork’s restructuring will be the credit event that triggers a CRE contagion that could force the Fed to execute another bailout similar to its Bank Term Funding Program from March 2023 that we write about each week.