KBRA Credit Profile (KCP) Releases Research – Coronavirus (COVID-19): Affiliate of On-Demand Office Provider Regus Files for Bankruptcy—CMBS Exposure Examined

NEW YORK--(BUSINESS WIRE)--Kroll Bond Rating Agency (KBRA) releases a special report that provides details on the bankruptcy filing for RGN-Group Holdings, LLC (RGN), which is a subsidiary of Regus Corporation (Regus). Regus is an on-demand office and coworking provider that offers over 1,000 locations in North America through a variety of workplace solution brands including Regus, Spaces, HQ, and Signature by Regus. U.S. operations for Regus previously filed for Chapter 11 bankruptcy in 2003. Regus faced severe headwinds operationally with business plan disruptions caused by the COVID-19 pandemic. Voluntary and government-mandated work-from-home polices muted demand for temporary office space, which lowered occupancy rates across the company’s portfolio of locations. A reduction in revenues was caused by concessions in pricing for offered workspaces, coupled with many sublessees’ inability to pay Regus amid the economic contraction caused by the pandemic. Regus has sought to defer rent payments or modify lease terms with landlords at many locations to reduce costs and boost liquidity. Due to the bankruptcy filing, if negotiations are unsuccessful, Regus could seek lease rejections, which would have an adverse impact on office, retail, and mixed-use properties that serve as collateral for CMBS loans.

KBRA Credit Profile (KCP) examined its $700 billion coverage universe of more than 1,100 transactions and identified 157 properties collateralized 151 loans ($12.97 billion by allocated loan amount) across 191 transactions with exposure to an affiliate or franchise of Regus. Regus serves as the largest tenant for 30 properties ($493.3 million) within the exposure group and operates as the sole tenant for three properties ($69.4 million). Due to the corporate structure of Regus, the RGN’s bankruptcy proceedings do not encompass all Regus locations.

Click here to view the report.

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