The Working Capitol restructures, mounts back-up plan
Co- working and lifestyle operator The Working Capitol ( TWC) says it plans to undergo a restructuring exercise to better protect the company as it negotiates terms with two of its largest landlords that own properties that account for about 58,500 sq ft of its floor area in the Keong Saik neighbourhood.
“The restructuring is not something we wanted to resort to and was a back-up plan in the event our landlords rejected our proposed payment plan,” says Ben Gattie, co- founder of TWC, in an interview with EdgeProp Singapore.
“We are trying to bridge the gap between our community members who are struggling to pay rent at this time and our landlords,” he adds.
In a media release on June 24, the co-working operator says, “Having not received any rental relief or accommodation from some of their landlords during these trying times, ( TWC) is taking urgent measures to protect the business while at the same time bridge the gap between stakeholders. This is a tried and tested process in Singapore which will not affect the day- to- day operations of the Keong Saik campus.”
TWC also says its restructuring will protect the business from “any short-sighted drastic action from these uncooperative landlords”.
On June 30, The Business Times reported TWC was unable to reach an agreement with landlords, Crocodile International and AIA Singapore, to renegotiate about $610,000 worth of rental payments. The same article also reported that the operator has filed for a court-supervised restructuring amid debts of $ 13.2 million owed to creditors, excluding related parties.
However, Gattie does not expect the impasse with the landlords to continue. “I don’t think they expected us to take such drastic action as to restructure. I believe they were not necessarily taking our requests too seriously at the time.”
Heightened Alert, heightened problems
According to Gattie, the announcement of the Phase Two (Heightened Alert) has been particularly challenging for the co- working operator.
Although it has yet to fully recover from the “circuit breaker” last year, the company was at least moving in the right direction before the Heightened Alert ( HA) kicked in on May 16.
“We approached our landlords with a proposal that outlined a payment plan during the Heightened Alert,” says Gattie. The plan would ease the company’s cash flow over the HA period and allow it to offer some rental relief to its F& B partners and selected co-working members.
“We were trying to see how much we could afford to distribute this time around,” he adds. “Unfortunately, when we presented this payment plan to our landlords they were unwilling to consider it.”
In the crowded co- working space in Singapore, TWC has positioned itself as a placemaker and a “neighbourhood builder”. Since opening its flagship co- working space in a shophouse at 1 Keong Saik Road, TWC has expanded into 15 more shophouses along the row.
The company also brought in new F&B partners including American fast-food chain Shake Shack and Japanese unagi- speciality restaurant Man Man, to add a family-friendly environment and draw the lunchtime crowd to the Keong Saik area.
“We’ve made a conscious effort to try and grow the neighbourhood, not just from a lifestyle standpoint but the work environment as well,” says Gattie. “We are constantly looking at how we can add the right operators and partners to turn Keong Saik into a more holistic neighbourhood.”
Sharing the rental burden with partners
Gattie says that the company has contributed to the overall real estate value proposition in the area, benefitting the community and the landlords of the shophouses the operator rents from. However, the operator’s exposure to more F&B partners made it vulnerable to the closures and safe management measures due to the pandemic.
“We have a significant exposure to F&B on top of our flexible workspace product and we saw first-hand how the pandemic was affecting these businesses last year,” says Gattie.
Together with his management team, Gattie made the decision to extend rental relief to its F&B partners and some of its co-working clients early last year — even before the announcement of any government support measures and without knowing if they could recoup it from their landlords at the time.
This proved to be the right move as the roll-out of government measures was “drip-fed to the community” as the situation evolved in the first three months of 2020, he says.
Some of the relief for TWC’s co- working clients was in the form of credits, and that was decided “on a case- by- case basis”, according to Gattie. Others were offered lease extensions at a lower rate or a commitment from them to grow their space needs with the operator in the future.
“We lease our spaces from a few landlords and they all operate differently,” observes Gattie. “But they’re all quite similar in that they can be pretty slow to reach back into their pockets. Thankfully, a lot of the rental relief we provided last year came back to us from our landlords through the various government announced support schemes.”
Gattie says providing rental relief was necessary to stabilise the community and landlords will respect that action.
“I think many flexible workspaces and smaller co- working operators in Singapore do not realise they have this type of restructuring option available to them, and they let their landlords force them to dig deeper into their own pockets,” he says.
Still optimistic about the New Normal
Gattie is already looking forward to the gradual rollback of safe management measures. In 3Q2021, the company will announce new expansion plans to open a new location in a different neighbourhood.
TWC’s goal is to help create resilient and vibrant neighbourhoods by future- proofing shophouses and making these heritage properties relevant and celebrated as new spaces, he explains. “Shophouses lend a unique sense of heritage and culture that is difficult to replicate in newer office buildings,” says Gattie.
“We want to continue to champion the shophouse, and the new space is not going to be just co- working; it will consist of almost all categories of commercial and residential options.”
He adds that although the TWC at Keong Saik area focuses on co- working due to its proximity to the CBD, other locations could be geared towards a more lifestyle, health and wellness focus or even some residential accommodation options, he reckons.
However, TWC will enter new locations with strategic partners as the whole huband- spoke model can be replicated without much downtime. “From a business perspective, it only makes sense to enter a new neighbourhood with at least 20,000 sq ft in a hub location,” says Gattie. “It will have enough scale to expand, invest and enjoy operational efficiencies.”