New York (CNN Business)WeWork, the co-working startup on unsteady financial footing, is spending $438 million to renovate an iconic building, according to a new securities filing.
In October 2017, department store operator Hudson’s Bay agreed to sell the Lord & Taylor building on Fifth Avenue in Manhattan to WeWork for $850 million with the idea that the building would serve, at least in part, as the startup’s headquarters. The deal closed in February 2019, with Hudson’s Bay preserving $125 million of preferred equity interest in the building.
According to a filing by Hudson’s Bay Friday, which was first reported
on by Bloomberg, the redevelopment has already begun and, when finished, will have two floors of retail, a basement food hall, nine floors of office space “with a total net rentable area of approximately 680,493 square feet.”
Additionally, the filing states that the building had $603 million of outstanding debt at the close of the sale and is expected to have $900 million in outstanding debt after the redevelopment is completed.
WeWork declined to comment.
The renovations come as the company is struggling to get its business in order after a costly, disastrous IPO attempt and the ouster of its cofounder and CEO Adam Neumann.
In a financial update this week, WeWork reported a net loss of $1.25 billion
in the most recently completed quarter, a period of heavy spending as the company sought to go public.
Neumann stepped down as CEO in September amid reports that some investors — including its largest, SoftBank — wanted to push him out. Meanwhile, the money-losing company needed a fresh injection of capital. Shortly after that, WeWork pulled its IPO. The situation was so bad that the company reportedly couldn’t lay off staffers as anticipated because it couldn’t afford to pay severance.
Last month, SoftBank took majority ownership (80%) of WeWork as part of a deal to pump $5 billion into the company. The Japanese conglomerate also accelerated a $1.5 billion equity investment originally due next year. The package valued WeWork at $8 billion, just a fraction of its peak valuation.
The company has said it will focus on its core co-working business moving forward. WeWork plans to sell off many of the startups it acquired over the years, as well as wind down its own business bets, including its school. As a result, major layoffs are expected to hit the company in the coming weeks.