Regus owner locked in £800m battle with landlords

Oliver Gill
·2 min read
An IWG shared office at No 18 King William Street in the City of London
An IWG shared office at No 18 King William Street in the City of London

Shared offices provider IWG will this week test the mettle of landlords with the threat of putting a subsidiary that guarantees rent payments into bankruptcy protection.

Jersey-based Regus plc, the name best associated with IWG, could be placed into insolvency within days, meaning it will not be on the hook for lease guarantees worth almost £800m.

IWG runs serviced offices but does not typically own the buildings. Office tenants are responsible for paying rent to landlords, but Regus plc usually provides guarantees to protect the property owners against non-payment of rent.

Putting Regus plc into bankruptcy protection could render these guarantees worthless while leaving IWG, run by Monaco-based millionaire Mark Dixon, comparatively financially unscathed. 

The move, first reported by trade title CoStar last week, sparked anger among landlords this weekend. “This was not about Covid, this was clearly pre-determined,” one property owner told the Sunday Times. “It is immoral at best.”

A spokesman for IWG said: “The Covid-19 pandemic is a black swan event and it has severely impacted our business and presented us with unforeseen challenges. Regus plc does not operate any of our centres. 

“It supplies rental guarantees to only 15pc of IWG’s global network. In any restructuring of a guarantor, none of our operations are affected. As the business has expanded in recent years to meet the increased global demand for distributed working, so has the value of the guarantees.”

Meanwhile, WeWork has pulled planned office openings over the summer, its website suggests, as the ongoing Covid-19 pandemic causes many companies to delay a return to workplaces.

The office rental company’s website said it had 808 locations across the world that were “open or coming soon”. At the end of April, it had listed 845 locations, slightly down from 848 at the end of December.

A spokesman said: “We have been reviewing our leases globally since autumn 2019 in order to rightsize our footprint and ensure all of our locations are creating value for our portfolio in the long term.

“We continue to grow strategically as we see increasing demand for our flexible workspace solutions.”

Commercial landlords have struggled to collect rents from businesses during the coronavirus crisis, with retailers attempting to renegotiate leases instead.

One former major player, Intu, even collapsed into administration.

Separately, one of the world’s biggest private equity funds has backed a return to London offices.

KKR, the former owner of Boots pharmacy, acquired a 5.4pc stake worth almost £75m in London developer Great Portland Estates, Bloomberg reported.

The private equity giant is now the sixth- largest investor in the FTSE 250 firm, according to Bloomberg data. 

KKR and Great Portland both declined to comment.