London Deals for WeWork Buildings Falter Amid IPO Market Fallout

Jack Sidders, Bloomberg News

NEW YORK, NY - SEPTEMBER 13: A WeWork office facility stands in the DUMBO neighborhood in the Brooklyn borough of New York City on September 13, 2019. WeWork has chosen to list their IPO on the Nasdaq with a September 23 trading debut. The company is now considering a valuation of potentially less than $20 billion after being previously valued on the private market for as much as $47 billion. The company has also reduced CEO Adam Neumann's voting power after receiving sharp criticism of their corporate governance. (Photo by Drew Angerer/Getty Images) , Photographer: Drew Angerer/Getty Images

(Bloomberg) -- Deals for two major London buildings leased mostly to WeWork are on the ropes.

Saudi-based Sidra Capital has pulled out of a 90 million-pound ($112 million) deal to buy 70 Wilson Street near London’s financial district as the flexible-office giant’s planned initial public offering got an increasingly rocky reception from investors, according to people familiar with the matter, who asked not to be identified discussing private negotiations.

Separately, talks have stalled on the sale of WeWork Waterloo, which the company describes as the largest co-working facility in the world, according to other people with knowledge of the negotiations. Singapore-based Bright Ruby Resources Pte Ltd. had agreed last month to buy it and an adjoining property leased to Royal Dutch Shell Plc for about 850 million pounds. It’s not clear what impact WeWork’s roller-coaster IPO has had on Bright Ruby’s appetite for the deal, the people said.

We Co., which owns WeWork, pushed back its IPO this week to buy time to overcome concerns about its governance, slashed valuation and business prospects. The decision sent the company’s bonds plunging and added a sour note to a medley of high-profile, but frequently disappointing, IPOs this year.

Read more: WeWork’s Breakneck Growth Hits Resistance as Banks Get Cold Feet

The delay also comes at a critical time for major backer SoftBank Group Corp., which is trying to raise money for a successor to its Vision Fund. SoftBank’s biggest investors, including Saudi Arabia’s Public Investment Fund, are reconsidering how much to commit to the new vehicle as the Japanese conglomerate’s bet on WeWork sours.

WeWork has lease obligations of $47 billion and continues to burn cash to fund its rapid expansion, putting pressure on the company to raise new capital. But the company’s model of signing long leases, then renting out short-term space to members, as well as its complex relationship with co-founder Adam Neumann, have polarized investors assessing the planned offering.

WeWork Waterloo, originally known as Two Southbank Place, is fully leased to WeWork and boasts a skate ramp, retro arcade games and a library in its cavernous lobby. Negotiations on a sale, which were first reported by React News in August, are ongoing and there’s no certainty about their outcome, one of the people said.

Representatives of Almacantar SA, the developer selling the buildings in London’s Waterloo district, and WeWork declined to comment. A representative for Bright Ruby wasn’t immediately able to comment.

Sidra Capital was in talks to buy 70 Wilson Street in London’s Shoreditch district from a venture led by Columbia Threadneedle Investments, the people said.

Representatives of Sidra Capital, Columbia Threadneedle and WeWork declined to comment.

--With assistance from Lucca de Paoli and Alfred Cang.

To contact the reporter on this story: Jack Sidders in London at jsidders@bloomberg.net

To contact the editors responsible for this story: Shelley Robinson at ssmith118@bloomberg.net, Patrick Henry