A forced relocation and collapse of hotdesking firm WeWork could leave the former London-based regulator with a €30 million balance sheet hole for 2024.
Brexit and the dramatic collapse of hot desking company WeWork have conspired to cause a toxic balance sheet problem for EU medicines regulators – and lawmakers want the European Commission to intervene, he told Euronews.
In 2017, the European Medicines Agency (EMA) was forced to move from London’s luxury Canary Wharf neighborhood – and new tenants unable to pay rent could leave it with a €30m annual bill for which taxpayers could get into trouble.
On Thursday (11 January), MEPs from the European Parliament’s Budget Committee questioned representatives of both the Commission and the EMA in a closed-door hearing that focused on the issue.
Lawmakers from across political divides stood by the agency and called on the EU executive to find a sustainable way to allow the EMA to operate without being distracted by real estate concerns, several sources present at the meeting told Euronews. ‘encounter.
Although the hearing was only an information point, not followed by any vote or binding decision, the dispute could drag on for several more weeks, “at least until February”, a parliamentary source told Euronews.
After Brexit, EU members decided to move the EMA from the UK, where it opened in 1995, to Amsterdam, even though the agency had signed a 25-year lease for offices in 2014. London, without exit clause.
Competition among EU members to host the agency, with 19 candidate cities, was so tough that it had to be decided by drawing lots, according to diplomatic sources.
Although the London lease had initially been discussed as part of a Brexit deal between the EU and the UK government, those talks became increasingly fractious and the issue of the lease was “suddenly removed” from the negotiations, the EMA said in a document sent to lawmakers.
This left the EMA to take matters into its own hands, including through litigation. After an English court ruled that Brexit was not a legitimate reason to terminate the contract, the agency had to find another tenant to avoid having to pay for the empty premises, although the solution did not last long.
After a year and a half of searching, the EMA in 2019 sublet its London headquarters to hot desking company WeWork, the former Wall Street darling that promised to upend office culture, before dramatically collapsing in 2023 .
Since then, the company has been in contact with its owners – including the EU agency – to renegotiate its leases, an EMA spokesperson told Euronews.
“WeWork continues to operate its operations from its London headquarters and is not in breach of its financial obligations,” the spokesperson said, adding that the occupancy rate of the former EMA premises is one of the highest in London.
However, the EMA has agreed to allow WeWork UK to suspend leasing payments for the first three months of 2024, at a cost of 5.3 million euros, the agency said in a confidential document sent to MPs and obtained from Euronews.
The EMA’s real estate consultant expects WeWork to sell its entire headquarters by the end of March, the document continues, which would leave the agency with a total net exposure for 2024 of 30 million euros, including rent, legal and property management costs.
In the document, the EMA says it will continue to look for other tenants in an effort to reduce the future financial impact. But it is “unrealistic” to expect WeWork UK or other potential tenants to continue paying the full amount.
“It seems increasingly likely that the Union Budget will have to contribute to the rent of the 30 premises in Churchill Place,” the EMA document adds.
The support of Parliament
The European Commission may now have to step in to cover the EMA’s financial losses for 2024 and ensure that the agency’s budget can meet legal obligations towards third parties.
This would involve using the EU budget – itself funded by national governments, and therefore taxpayers – to cover the costs, but some believe the move would still not be large enough.
According to the agency, convincing the Commission to fill the financial gaps while the EMA is busy finding other subliteraries cannot be a long-term solution.
“Regardless of tactical solutions that might be proposed”, the issue requires “a political solution at the highest level”, the EMA’s confidential document reads, suggesting the need for further talks between the Commission and the UK government.
In its response to MEPs, also seen by Euronews, the Commission implied that it does not want to go that far, saying that it is the EMA’s job to “decide the best way to minimize losses arising from the contract it has entered into”. .”
Lawmakers disagree and fear the issue means the EMA will divert limited financial and human resources from its core mission of evaluating medical treatments, which has seen it play a key role for anti-inflammatory vaccines in recent years. Covid.
“It is embarrassing that an agency in charge of health issues is now dealing with real estate issues,” center-right German MEP Monika Hohlmeier, present at the meeting, told Euronews after the EMA revealed it had spent its time monitoring real estate markets and developing building occupancy models.
For Hohlmeier this is proof that all future EU construction contracts require a mandatory exit clause.
“No one can predict whether long-term contracts will last as long as hoped,” he said. “There can always be unexpected events.”