RGN-Group Holdings, an affiliate of Regus Corp, is prepared to permanently shut the doors at some of its workspace locations. The temporary office leasing company put part of its portfolio into Chapter 11 bankruptcy in response to the lowered demand urban office markets are facing during the coronavirus pandemic.
💎 Data Digs
Regus and its affiliates aren’t just facing a shrinking occupancy rate. In the past year, the number of Regus employees on LinkedIn fell by 20%. The company might see its staff headcount get even smaller following the bankruptcy filing.
⚔️ Big Picture
- With just $100,000 of cash on hand at the end of 2019, RGN experienced significant challenges during the second and third quarters of 2020 as the pandemic disrupted the business plans and operations of certain locations within its U.S. portfolio.
- With “near universal adoption of work-from-home policies,” RGN faced lower occupancy rates than the company anticipated when it decided to make investments in office buildings, James Feltman, a managing director at financial consultancy Duff & Phelps, said in a first-day declaration.
- RGN leases office spaces from landlords and then rents them out to occupants. Feltman said many tenants were unable to make their contractual payments because of the economic hardships they faced due to Covid-19.
- RGN intends to use the Chapter 11 process to obtain a “breathing spell” from landlords' collection efforts to restructure new lease terms. If unsuccessful, RGN plans to wind down the operations of the applicable office centers.
- Other Regus affiliates, including RGN-National Business Centers and H Work, also filed for Chapter 11 protection. Together, the debtors owe parent Regus $433 million for working capital loans.
⚡ Get Ahead
If RGN does close its locations, other coworking and short-term rental operators are bound to fill the void. Competitors include WeWork and Servcorp.