Council's £1 billion property bet shaken by WeWork rent waiver request

WeWork has asked to skip millions of pounds of rent payments owed to Spelthorne Borough Council, creating a major headache for the tiny local authority that has borrowed more than £1bn to bet on commercial property.

WeWork has asked the council to waive the next 18 months of rent in exchange for a five-year extension on its lease, according to documents seen by IFR. It is seeking to weather the hit to its business from the pandemic, which has led to a collapse in use of its shared office spaces. Last month, council leader Ian Harvey told IFR the council had collected 91per cent of rents owed to it for the March quarter and agreed to reschedule much of the rest. But since then Spelthorne"has had to pro-actively engage with some of its tenants and discuss their cashflow issues", according to a recent council report.

The property portfolio generated £50m of rent last year, more than enough to pay the £35m it costs to service debts taken out to fund the purchases. It used £10m of the surplus to add to its general budget, on top of the £14m it gets from tax, rates and grants, and put the remainder into a rainy-day sinking fund.

The strains on council finances have also opened up political fissures. Harvey was ousted as Conservative leader earlier this month amid concerns from other councillors over his property strategy and the party lost control of the council for the first time in history after some of its members formed a breakaway group.The sinking fund should provide the council with a cushion to get through the next couple of years.

"The tenant is a substantial serviced office operator which has been covered in the press in respect of a recent failed IPO," he wrote."The company is on a firm financial footing and is seeking absorb difficulties brought about by the Covid crisis and position itself for long term business."

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