New hope or last gasp for WeWork? (Or all CoWorking)

Noah Rosenblatt

Talking Manhattan on
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David Goldsmith

All Powerful Moderator
Staff member

WeWork, Cushman negotiating $150M partnership​

Cushman & Wakefield would invest in WeWork SPAC to help office tenants create flexible workspaces​

At its greatest heights, WeWork once considered acquiring Cushman & Wakefield. Now, the co-working firm is considering a cash infusion from the commercial real estate giant ahead of a planned SPAC deal later this year.

WeWork and Cushman are in talks about forming a $150 million partnership aimed at helping office tenants adapt to remote work and flexible spaces, the Wall Street Journal reported. Cushman would invest the $150 million in the coming merger between WeWork and BowX Acquisition, a SPAC deal that would finally take the co-working firm public.

David Goldsmith

All Powerful Moderator
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“Too much money and no guardrails:” WeWork book authors dish on collapse

Maureen Farrell and Eliot Brown say big-time investors enabled a cult​

Whenever Eliot Brown heard another wild Adam Neumann anecdote, he’d tell his editor. And the response would be: “Why are you not working on a profile of him again?”
So Brown, armed with a perma-smirk and a background in real estate reporting, started gathering string. There was plenty to go around.

Even in an era of Silicon Valley excess, Neumann, the co-founder and chief executive of WeWork, distinguished himself. When Brown’s profile ran in the Wall Street Journal in September 2019, it was a bombshell, detailing just how worried investors in the office-space leasing company were about its conflicts of interest, shoddy governance and mounting losses as it prepared an initial public offering.

Brown’s colleague, capital markets reporter Maureen Farrell, then got a call from a top banker. “I read the article and there’s zero chance [of the IPO],” the banker told her. “Adam Neumann will not be the CEO within 48 hours and the company will not go public.”
“I was like, ‘Wait, what?’” Farrell recalled. “And he said, ‘Yeah, the lead anecdote of the flight to Israel with the marijuana in the box — no banker can stand up and take this company public anymore because it’s an illegal act and no one can let him be the CEO anymore.’”

The banker was right. WeWork, once the fifth highest-valued startup in the world, was not going public and hemorrhaged billions in enterprise value. Neumann was out, as were his cronies.
But there was more: The story of WeWork became a reckoning for high-growth, venture-fueled startups and the financial ecosystem that enables them. That is the subject of “The Cult of We,” Brown and Farrell’s new and deeply reported book. (Read TRD’s review here.)

The Real Deal caught up with the authors to chat about the book, the characters it explores and the lessons real estate and the broader business world can take from it.

WeWork vice chair Michael Gross has such a big presence throughout the book. Why were you so obsessed with him? To me, he’s the poor man’s Aaron Eckhart.​

Farrell: We found him to be just an incredibly fascinating, under-the-radar character. It seemed like he was the man who was able to translate Adam Neumann into Wall Street speak. He had this background as a hedge fund manager, was the CEO of Morgans Hotel Group and was Adam’s BFF for a long time. People talk about him in pitch meetings as being absolutely masterful. Obviously Adam Neumann was [too], but in a very eccentric way that charmed and captivated people. You put Michael Gross in the mix and it was more polished, an amazing combination that led to incredibly successful fundraising.

“When Adam was raising money at a $5B valuation, one senior manager was like, ‘This makes no sense.’ Six months later, Gavin Baker jumped in at $10B”
— Maureen Farrell

Brown: He played the role of the pump-up guy. There was a bit of irony with him and Adam in that neither of them used a computer, and they were the two people selling this as a tech company. He would make things fun. He’d also make things understandable and play the role of investment banker and be this presence. Adam really needed him around.

A lot of the WeWork coverage focused on the symptoms — the excessive spending, the crazy culture. What separates “The Cult of We” is that you looked at the disease itself.​

Farrell: I love how you describe it. There are these guardrails that are supposed to exist and each step of the way, they didn’t. Whether it’s the board of directors — why didn’t they stop him? — the venture capitalists, SoftBank, the bankers doing his IPO. So we thought it was important that if you’re going to understand the whole story, to understand each piece of it.

Brown: The goal is to follow the money. The stuff we can add is, what’s the environment that created this? Adam is just a product of this. It could have been someone else. And maybe that would have been rum instead of tequila and yachts instead of jets, but this is a product of what happens when there’s too much money and no guardrails.

You also hit upon the FOMO culture. It manifests with Gavin Baker [then a Fidelity hedge fund manager], the early big investment that gave WeWork validation, and again with Bill Rudin and Mort Zuckerman and Jamie Dimon. How much of that FOMO is symptomatic of Silicon Valley and how much is specific to WeWork?​

Farrell: It was very much a product of too much money chasing too few deals and Adam Neumann being absolutely masterful and brilliant and manipulative. Knowing that this FOMO existed and knowing each step of the way how to use it to his and WeWork’s advantage.

When Adam was out raising money at a $5 billion valuation, one of the senior managers there was like, “This makes no sense. We have to pass.” And then when he [Neumann] came back six months later, Gavin Baker and team jumped in at a $10 billion valuation. At JPMorgan, we have this character, Jimmy Lee, one of the top bankers there. Adam was very close to him, really respected him. Lee had this ability to cut through the BS of Adam and question things. And when he passed away very suddenly, it was around the same time that everyone started courting [WeWork]. Clearly, Jamie Dimon came to [Neumann] at points and questioned him. But the bank itself was fighting for the lead role on the IPO up until the bitter end.

A lot of people called WeWork out early on, but then you had some blue-chip landlords buying into the story. Rudin at 110 Wall Street with WeLive, Zuckerman coming in as an investor. What was the real estate industry thinking?
Brown: I talked to a bunch of landlords and at first, there was a lot of skepticism and people just didn’t understand the model. As the valuation grew, they switched — people who were cynics started to believe it, which is the opposite of what should have happened. I remember a couple of conversations along the lines of “I still don’t really get it, but who knows, maybe it’ll work out.” The reason is kind of obvious: Landlords want tenants. So it was really strange to see the whole real estate world coalesce around it and accept it. And when you sort of point out the obvious, they’re like, “Venture capital’s not really my thing. I just know that they’re paying me rent and I got good guarantees.”

WeWork broke dozens of leases. They’re in lawsuits on others. Landlords are getting a lot less than was promised. I remember a landlord for one of their earlier buildings told me, “I actually have a strategy. I don’t want to have a really high rent because if things go bad, I want them to cancel the other lease and not mine.” And then I saw a news alert a few weeks ago that that building was still one of the ones that WeWork broke the lease on.

What was the collateral damage in Silicon Valley from the WeWork blowup?​

Farrell: The biggest immediate casualty was SoftBank CEO Masayoshi Son’s Vision Fund II. He was very close to closing yet another deal with various players, including Saudi Arabia’s wealth fund. Everyone just got very nervous watching what was happening at WeWork, so these commitments started falling away. Masa saw that so clearly, and that was why he was so fixated on getting WeWork out the door, so this whole Vision Fund II wouldn’t fall apart.

Brown: Katerra, Oyo. Up and down the SoftBank portfolio, companies that had been proceeding on this plan of “burn through gobs of cash” were then suddenly told by SoftBank, “Oh no, no, no, no, no. We meant, you have to be profitable.” And so suddenly everyone had to cut [costs].

Could you speculate on what would have happened in proptech?​

Brown: There was this icy chill that happened right after WeWork. I’ve had a lot of founders tell me that everything that happened with WeWork just cast this awful pall on anything related to property, which is not totally fair. The problem with WeWork was that they were taking a very clear real estate company and selling it as a company that should be getting a tech valuation. But there’s actual tech in real estate — there are companies that are actual tech companies and should probably be getting tech valuations. But instead they got real estate valuations.

“He pushed things so far. All of these things are what crushed the IPO and then the company”
— Maureen Farrell
If you’re doing pure lease arbitrage, which is what WeWork was, you were raising money and getting a high valuation because of the glow of WeWork, in the same way that these random electric vehicle startups that have nothing but a PowerPoint are valued at $2 billion because Tesla is valued at $650 billion. Then when WeWork imploded, the Industriouses of the world and Knotels of the world suffered a real hit. But honestly, the world recognized what their actual business models were.

Farrell: Speaking of Knotel, we have to watch the potential comeback under CEO Michael Gross!

There was a momentous meeting with Adam and Lex Greensill [founder of now-disgraced Greensill Capital].​

Farrell: Lex Luthor. It seems like from our reporting, Masa was completely flipped out that this [WeWork] IPO is going to go off the rails and destroy the whole Vision Fund. If he could keep it private, it wouldn’t get marked-to-market. So he calls in Lex Greensill who has earned a very large degree of notoriety.

Brown: Adam flies to Tokyo and he’s really expecting that Masa is going to give him money to avoid the IPO. And so then he’s horrified to see that Masa just unveils this guy.

Speaking more generally, were they prudent about where they took money from? If you look at the cap table, as the company matures, it is mostly blue-chip investors.​

Brown: I don’t think it’s that they’re prudent. They just manage to always find the ones who had the most to give. They generally went with the highest bidder at every single opportunity. But it happened that those were often some of the best of the best.

There’s a fascinating bit of geopolitics in the book. When Adam Neumann, who is Israeli, is courting Saudi-backed SoftBank, there’s this caveat that comes up.​

Farrell: Masa has committed $4.4 billion to him. Adam and a whole entourage wind up going to Japan to meet Masa and have a big sit-down. And Masa has, or is about to close, his big giant deal with Saudi Arabia’s Public Investment Fund. So there are many [Saudi] emissaries there and Adam and Michael Gross and others give a whole presentation. Afterwards, someone relays the message to Adam that “you need to give some sort of a promise not to invest in the Israeli military.”

Adam is completely horrified by this request. People said that there was a wake-up [call] to what it might mean to take money from Saudi Arabia. What does this mean for him and for the company? He really flipped out and said, “Well, I’m not going to take the money.” Other people talked him down and convinced him to move forward.

And the timing: Saudi crown prince MBS had just taken over PIF. Masa Son is trying to raise money, so he’s pushing and shoving deals through because he doesn’t want to upset the balance of anything else. MBS wanted to be the biggest investor, Masa wanted to run the biggest fund and Adam wanted to have the company with the highest valuation. A triple threat that makes for an amazing story.​

Brown: A hundred percent. It was this constellation of forces and individuals. I studied history in college and there’s intellectual history versus social history. Is history about powerful men having chance encounters? Or about the collective society? And in this case, it was about the actual men, who happened to have this same mindset of “go big or go home,” coming to power at different times. So Masa is trying to raise by far the world’s largest investment fund at the very time that an autocrat with a country and the bank that’s one of the biggest in the world happens to want to spend a ton of it on not oil, and he happens to love Silicon Valley tech.

“The media as an organism really added fuel to the fire”
— Eliot Brown
I envision it like there’s a scene in “Arrested Development” where they’re in Tokyo and Masa is like, “Oh, I’m raising this $100 billion fund.” And MBS is like, “Well, I just happened to be giving away money for Silicon Valley.” It’s this short window because MBS really fell out of the geopolitical favor a year later [after the Saudi state-ordered killing of journalist Jamal Khashoggi]. So had [the SoftBank deal] not happened in this 18-month period, none of this would have happened. And then they also found Adam, who was like, “I will promise you absolutely everything. Just give me all of the money in the world.”
When WeWork had a lot of cash, they were thinking about basically becoming an M&A shop, talking of acquiring Cushman & Wakefield and CBRE’s property-management arm.
Brown: The real estate acquisitions were a bit of financial alchemy. Adam basically realized that the market is valuing him based on his revenue and WeWork was essentially trying to buy real estate companies [to] get all the revenue associated with them.

Adam [also] wanted to expand the business from just office leasing to “we want to do absolutely everything in the real estate space and be the go-to shop for everything.” And one way to do that quickly is to buy the biggest people who already do that. And because the world is valuing you as a tech company, even though you’re much smaller than CBRE, you could think of buying CBRE. The conversations didn’t get terribly far. I mean, they did look pretty closely at Cushman and Wakefield, but ultimately decided not to — I think the WeWork people were not very impressed.

I interviewed Brad Hargreaves from Common and he brought up a really interesting point: He said in the context of real estate, some of the conflicts of interest — investors in both the operating company and property company, for example — were totally par for the course. Adam’s mistake was trying to do them in the tech world.​

Brown: That is largely true for small buildings. If you take it up to the giant institutional level … you don’t see Brookfield and Blackstone buying buildings from [Blackstone president] Jon Gray.

I would push back on that.​

That is a very fair point as they’ve done like nine transactions between Brookfield companies that have confused everyone. Okay. But Blackstone does not end up buying from Jon Gray. I think that it’s also the difference with a public company. You just don’t see companies that are filing S-1s with multi-page lists of crazy conflicts where the CEO owns all these things and is getting fees and rent. The strange part to me is not that Adam did this at first and bought a small stake in [WeWork location] 175 Varick. It’s that once he realized he was on this venture capital path and this IPO path, he didn’t pull back. He actually continued or accelerated the exact same thing.
In 2018, he was buying property in downtown San Jose. His intent was to eventually have WeWork own it all.
Farrell: Every step of the way, it seems like he pushed things so far. All of these different things are what crushed this whole IPO and then the company. It could not be a public company when you have all these conflicts of interest — it’s why it narrowly missed making the public markets. And again, where were the adults? There should be someone here telling him, “This is going to come back to haunt you.” And it’s kind of crazy each step of the way that they did not.

I want to end with a media question because you cannot extricate the narrative of WeWork from the narrative of its press. I’m thinking of the two Forbes covers and the tons of puff pieces. But I’m also thinking about after the meltdown, one of the big sticking points was that $5.9 million trademark. That’s not really a big deal but it became a huge deal in the media. I remember seven articles in one day on Business Insider, tiny nitpicky things that any startup would have. So since we’re all journalists here: Where did we fuck up?​

Brown: The media as an organism really added fuel to the fire for years. And this was not just with WeWork. This is with everything in Silicon Valley where, the tech press, Forbes, TechCrunch, Fast Company, they were way too close in mindset to venture capitalists. Venture capitalists like to portray a vision of what might happen. And then, you know, the press’ job is to write reality, but these publications were really buying that vision as it’s essentially something that already happened.
We in the press fell too much into a herd mentality. We should have been providing more context. Then, when it was falling, people were saying “this business model is completely doomed. It makes absolutely no sense.” But it makes sense at a [certain] valuation — there’s actually a company that already does this business model. The media portrayed it as too stupid of a concept, not just as an overvalued company.

David Goldsmith

All Powerful Moderator
Staff member

WeWork Shares Rise on First Day of Trading, Two Years After Failed IPO​

The shared-office company has closed locations, renegotiated leases and cut thousands of jobs to reduce expenses during Covid-19​

WeWork Inc. shares rose on their first day of trading Thursday, capping a journey to a listing that included the implosion of its initial public offering in 2019 and the ouster of its co-founder and chief executive, Adam Neumann.

The shared-office company went public through a combination with BowX Acquisition Corp. , a special-purpose acquisition company. Shares closed 13.5% higher at $11.78 Thursday.

In 2019, WeWork’s IPO fell apart as the company faced questions about its corporate governance and how much it was worth. Now the entity that is making its debut on the New York Stock Exchange has undergone a refresh under Chief Executive Sandeep Mathrani. It has closed locations, renegotiated leases and cut thousands of jobs to reduce expenses during the Covid-19 pandemic.

The deal with BowX Acquisition earlier this year gave WeWork a roughly $8 billion equity value. The combination provides WeWork with cash proceeds of about $1.3 billion, the companies said.

SPACs, also known as blank-check companies because they raise money with the purpose of seeking a target to merge with and take public, have risen in popularity as companies seek alternatives to a traditional IPO. Share prices for listed SPACs have retreated this year, leaving many blank-check companies trading below their debut price.

David Goldsmith

All Powerful Moderator
Staff member

WeWork shows more losses in its first quarterly report as a public company​

  • WeWork said total revenue for the quarter was $661 million, up 11% from the previous quarter.
  • The company saw a net loss of $4.54 per share
  • It marks the office start-up's first earnings report since going public through a SPAC merger in October, almost two years after its botched IPO.

WeWork shares closed up more than 3% on Monday after the company announced third-quarter earnings, the company's first report since going public in October.
Total revenue for the quarter was $661 million, up 11% from the previous quarter, WeWork said. The company also saw a loss of $4.54 per share. That's an improvement from the loss of $5.51 per share in the year-ago quarter. No analysts covered WeWork for the third quarter, so there are no estimates to compare the results against.

WeWork went public through a SPAC merger in October, almost two years after its botched IPO.
When it went debuted, WeWork was valued at roughly $9 billion, a steep drop from 2019, when it was privately valued at $47 billion by SoftBank Group. That slowly fell as news of the company's finances unraveled and investors raised concerns over its business model and its founder and then-CEO Adam Neumann.
By the end of September, WeWork said physical memberships grew to 432,000 with a 56% occupancy rate. As companies continue to embrace flexibility, All Access memberships increased to 32,000 by the end of September or 60% over the previous quarter.

David Goldsmith

All Powerful Moderator
Staff member
Time to sell Multi Family?
WeWork Co-Founder Adam Neumann Is Becoming an Apartment Mogul

Entities tied to the entrepreneur have bought majority stakes valued at a total of more than $1 billion in buildings in Southern cities​

Adam Neumann, who built office co-working giant WeWork before resigning as chief executive when his fortunes soured, has a new business venture under way: apartment landlord.

Entities tied to Mr. Neumann have been quietly acquiring majority stakes in more than 4,000 apartments valued at more than $1 billion in Miami, Atlanta, Nashville, Tenn., Fort Lauderdale, Fla., and other U.S. cities, according to court, property and corporate records and people familiar with the transactions. Many of these investments occurred within the past year.

Mr. Neumann has told friends and associates of his ambitions to build a company that would shake up the rental-housing industry, say people familiar with the matter.
Exactly how he plans to accomplish this goal couldn’t be learned, and his investments so far have largely been in traditional apartment buildings. Mr. Neumann has said he wants to create a widely recognizable apartment brand stocked with amenities, according to a person who was part of these conversations. His Nashville property, the 268-unit Stacks on Main, features a saltwater pool, a dog park and valet trash pickup, according to the building’s website.

Mr. Neumann is hoping to appeal to the same sort of young professionals he lured to hundreds of co-working office spaces when he was chief executive at WeWork, said those people familiar with the matter. His flexible office space was renowned for offerings such as free craft beer and fruit water.

D.J. Mauch, a partner in Mr. Neumann’s family office, said: “Since the spring of 2020, we have been excited about multifamily apartment living in vibrant cities where a new generation of young people increasingly are choosing to live, the kind of cities that are redefining the future of living. We’re excited to play a role in that future.”

Mr. Neumann has also invested in a number of startups, according to a person familiar with the matter.

Mr. Neumann co-founded WeWork in 2010 and raised more than $10 billion for a business once valued at $47 billion, persuading investors to value it as a tech company despite its real-estate roots. He also launched WeLive, planned as a network of buildings where people can rent rooms in shared, furnished apartments. The company opened apartment buildings in New York and Virginia, but WeWork closed WeLive after Mr. Neumann’s departure.

The 42-year-old entrepreneur left the company in late 2019 after plans for an initial public offering of stock fell through amid concerns over his management style and heavy losses. WeWork, now publicly traded, has a market capitalization of about $7 billion. That valuation is more in line with real-estate companies than fast-growing tech firms.

Mr. Neumann became rich working at WeWork, and is using his own funds toward buying stakes in the apartment buildings, according to a person familiar with the matter. When Mr. Neumann served as CEO, he and his co-founder sold a total of more than $500 million of stock, largely at higher share prices than today, according to documents and people familiar with the sales. To encourage Mr. Neumann to give up his control of the company, WeWork majority owner SoftBank Group Corp. paid him nearly $200 million for consulting and other fees and bought $578 million of shares from him, according to WeWork securities filings.

Mr. Neumann helped fuel the U.S. co-working craze through his company’s rapid expansion. At one point, WeWork occupied more Manhattan office space than any other company. But he is following the crowd in the already hot apartment business.

The sector has experienced rising investor interest since the start of the Covid-19 pandemic, particularly in the booming Sunbelt. Rents are surging in many cities alongside rising household incomes and housing shortages that analysts say are unlikely to disappear soon. Cities such as Nashville and Miami are also attracting migrants from the Northeast seeking warmer weather, less-costly housing and lower taxes.

In 2020, Mr. Neumann acquired a major stake in Alfred Club Inc., a company that provides concierge services such as picking up and dropping off groceries and laundry in residential buildings.

His real-estate holdings, which include two apartment buildings in Atlanta, are mostly recently built properties with more than 200 units and lots of common amenities.

In Fort Lauderdale, an entity tied to Mr. Neumann owns Society Las Olas, according to court records. The 639-unit apartment building includes a co-working space, a putting green and a barber shop, according to the developer’s website.

In downtown Miami, Mr. Neumann recently signed a contract to buy a majority stake in the 444-unit Caoba apartment tower, valuing the property at roughly $200 million, according to a person familiar with the matter. An entity tied to Mr. Neumann also owns the nearby 387-unit Yard 8 apartment building, court records show.

Mr. Neumann has also invested in suburban apartments, where demand has grown as remote workers leave crowded city centers in search of more space. He holds stakes in a building in Decatur, Ga., according to public records, and another in Norwalk, Conn., said a person familiar with the matter.

David Goldsmith

All Powerful Moderator
Staff member
Is this a sell signal for Multi-family?

Entities tied to Adam Neumann picked up $1B in apartment buildings​

WeWork co-founder linked to majority stakes in more than 4K apartments​

Two years after a spectacular rise and fall, WeWork co-founder Adam Neumann’s latest venture is reportedly beginning to take shape.
Entities tied to Neumann have purchased majority stakes in more than 4,000 apartments across the United States, The Wall Street Journal reported, citing records and people familiar with the transaction. The holdings, largely located in Sun Belt cities like Atlanta and Nashville, are valued at more than $1 billion.
Many of the apartment transactions occurred in the past year, according to the Journal. People familiar with Neumann’s dealings told the outlet he is aiming to alter the rental industry and build an amenity-heavy brand, targeting a younger group of renters.

“Since the spring of 2020, we have been excited about multifamily apartment living in vibrant cities where a new generation of young people increasingly are choosing to live, the kind of cities that are redefining the future of living,” D.J. Mauch, a partner at Neumann’s family office, told the Journal.
Neumann appears to be leaning into the multifamily market’s pandemic-fueled hot streak, which has largely spiked rents in smaller, warmer cities that have become popular destinations for migrants giving up the expensive burdens that come with life in a big city.

In addition to the amenity-rich apartment buildings, a person familiar with the matter told the Journal Neumann has also invested in a slew of startups. The Journal reported the former founder in 2020 picked up a majority stake in Alfred Club Inc., a digital personal assistant for multifamily residents.
In the wake of his ouster from WeWork, Neumann and his wife shed a slew of their luxury homes. In August, Neumann sold his Greenwich Village townhouse for $13.65 million, four months after selling his Northern California estate for $22.4 million. In 2020, Neumann sold his Southampton farmhouse for $1.25 million and a Westchester County estate for $3.39 million.

But Neumann has emerged in recent months from the calamity that unfolded at WeWork that ultimately forced him out of the company he founded. WeWork was once valued at $47 billion, but the co-working giant slipped greatly amid drama over a shelved IPO, only going public in November — two years later than planned.

As part of his exit package from WeWork, Neumann received a $245 million stock award in early 2021. Neumann has also received $200 million in cash and the refinancing of a $432 million loan.

David Goldsmith

All Powerful Moderator
Staff member

WeWork, Neumann join forces against Sapir in lease dispute​

Landlord alleges the co-working firm and its former CEO owe $17M for exiting Madison Ave lease​

Two years after their acrimonious split in the wake of an IPO debacle, WeWork and its co-founder Adam Neumann find themselves battling a common foe.
Neumann recently joined WeWork in fighting back against a lawsuit brought by former landlord the Sapir Organization, which alleges the co-working firm abandoned its lease at a Midtown office building in March of last year and owes close to $17 million in damages.
Sapir Organization’s lawsuit, filed in August, alleged that Neumann personally guaranteed WeWork’s lease at 260-261 Madison Avenue and is on the hook for damages.
Neumann filed a response denying the allegations and bringing counterclaims of his own in late December.
The lease, which the suit alleges was supposed to run through 2028, was one of several that WeWork exited last year as it prepared to go public through a SPAC merger.

In the lawsuit, an entity tied to the Sapir Organization claimed it only became aware that WeWork was surrendering its lease after reading an article in The Real Deal in January 2021. It also alleged that WeWork failed to remove its property and repeatedly returned to the premises after the “surrender date.”
In October, WeWork filed a response denying the allegations and accusing Sapir and its CEO, Alex Sapir, of having a “long history of underhanded conduct and mismanagement of their real estate holdings.”
WeWork argued the Sapir Organization was struggling financially and “resorted to questionable practices in order to extort WeWork and Neumann.”

WeWork further alleged that the landlord illegally drew down on a $767,795 letter of credit from Goldman Sachs without proper authorization. WeWork also said it was denied access to the building to retrieve equipment such as coolers, copy machines and shredder bins.
Sapir Organization denied these allegations in a subsequent court filing.
Neumann is now the latest to file claims against the Sapir Organization, using the same attorney as WeWork.
Neumann acknowledged that he guaranteed the lease, but alleged that WeWork properly vacated it, thereby voiding the guarantee. The court filing said the Sapir Organization struck a deal in November to lease the space to rival co-working firm Industrious, thus mitigating damages stemming from WeWork’s exit.

Neumann is asking the court to declare that WeWork vacated and surrendered the premises on March 31, 2021 and to rule the guarantee null and void.
The Sapir Organization denied Neumann’s allegations.
“Unable to delay any further, Neumann’s sudden claims are yet another desperate attempt to avoid liability for his contractual obligations,” said Sapir attorneys Terry Oved, Darren Oved and Andrew Urgenson of Oved & Oved in a statement. “We are not convinced. We doubt the court will be either.’”
In October, WeWork merged with special purpose acquisition company BowX Acquisition Corp to go public on the New York Stock Exchange.

An attorney for WeWork and Adam Neumann, Ricardo Vera of Newman Ferrara, did not return requests for comment. WeWork also did not return a request for comment.

David Goldsmith

All Powerful Moderator
Staff member
SoftBank Operating Chief Marcelo Claure to Leave After Pay Dispute

Japanese tech giant’s fix-it man had sought up to $2 billion in compensation, according to people familiar with the matter​

SoftBank Group Corp. said Chief Operating Officer Marcelo Claure, who helped clean up problems at the firm’s investments including WeWork Inc. and Sprint Corp., is leaving the company after a dispute over billions of dollars in pay.
Mr. Claure’s departure, announced by the company, comes after he sought as much as $2 billion in compensation that he believed he was promised by SoftBank’s chief executive, Masayoshi Son, according to people familiar with the matter.
He will walk away with his investment in a Latin American fund SoftBank raised that was overseen by Mr. Claure, a stake currently valued at about $300 million that could grow over time if the bets pay off, one of the people said. He will also receive severance of between $30 million and $50 million, this person added.

Mr. Claure is the latest lieutenant of Mr. Son to leave SoftBank, which runs the technology-focused Vision Fund and owns stakes in some of the world’s biggest startups in addition to its Japanese telecom business.

The full terms of the settlement couldn’t be learned. Mr. Claure also has personal investments in many companies that SoftBank itself or the Vision Fund has backed. The New York Times previously reported the pay dispute.
SoftBank shares have fallen by more than half since their peak last year, hurt by Alibaba Group Holding Ltd. ’s troubles with Chinese regulators and, more recently, a selloff in tech stocks spurred by the prospect of interest-rate increases in the U.S. However, news of Mr. Claure’s departure following reports of tensions between him and Mr. Son lifted the stock price slightly.
In Tokyo trading Friday, SoftBank shares closed 2.2% higher at 4,795 yen. That is 55% below the peak reached in March 2021. SoftBank owned nearly a quarter of Alibaba as of its most recent filing and it has been hurt by the sharp fall in the Chinese e-commerce company’s share price.
Other SoftBank executives who have left include Chief Strategy Officer Katsunori Sago, who resigned in March 2021. Meanwhile, longtime Son colleague Ronald Fisher left the company’s board in June.

SoftBank didn’t give a reason for Mr. Claure’s departure. Mr. Son issued a brief statement thanking Mr. Claure for his contributions and wishing him “continued success in his future endeavors.” Mr. Claure described Mr. Son as a “mentor and friend during my tenure.”
Tokai Tokyo Research Institute analyst Masahiko Ishino said the unexplained parting of ways would likely revive investor concerns about succession plans for Mr. Son, who is 64 years old and founded SoftBank four decades ago.

Mr. Ishino said it was clear “who is going to be responsible for the nuclear football when the U.S. president can no longer function. If the same happens to SoftBank, we have no idea who will be in charge.”
A SoftBank representative, asked for comment, referred to Mr. Son’s remarks at a shareholder meeting in June 2021. At the time, he said he was always thinking about succession and looking to groom candidates inside and outside the company.

Mr. Son also suggested at the meeting that he could stay in charge until he was 70 or 80 years old. He cited advances in medicine and the example of Warren Buffett, who remains chairman and chief executive of Berkshire Hathaway Inc. at the age of 91.
The departure of Mr. Claure “means that Mr. Son is becoming alone. Although it isn’t likely to affect SoftBank’s operations, investors will likely become worried that Mr. Son’s management may be slightly more dogmatic through having fewer advisers,” Mr. Ishino said.
Former Sprint Chief Executive Michel Combes will take over Mr. Claure’s role as chief executive of SoftBank Group International, which includes SoftBank’s investments in Latin America.
A 6-foot-6 Bolivian, Mr. Claure first met Mr. Son in 2012, when Mr. Claure was an entrepreneur running a company, Brightstar Corp., that distributed cellphones and resold used handsets. SoftBank ultimately bought Brightstar and put Mr. Claure in charge of Sprint, the money-losing American cellphone provider.
Mr. Claure tried to turn Sprint around while SoftBank pursued its longstanding and ultimately successful attempt to merge Sprint with T-Mobile US Inc. The unwinding of the Sprint stake included a personal investment by Mr. Claure in T-Mobile.

In May 2018, he became SoftBank Group’s chief operating officer and the next year found himself in charge of dealing with another crisis. SoftBank had a controlling stake in WeWork, the shared-office company that nearly collapsed after a failed attempt at an initial public offering in 2019.
WeWork founder Adam Neumann, another Son protégé, left and Mr. Claure took over as executive chairman. He guided the company to an IPO in October 2021.
According to a SoftBank filing in Japan, Mr. Claure earned ¥1.795 billion, equivalent to $15.6 million, in the year ended March 31, 2021, an unusually high level for a Japanese company although not uncommon in the U.S.
Mr. Son has a history of cultivating hard-charging executives for top roles at SoftBank, only to part ways with them later. In 2014, he wooed Nikesh Arora from the company then known as Google Inc. and anointed Mr. Arora as his successor. Two years later, Mr. Arora was gone.

David Goldsmith

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WeWork partners on flex space availability​

Partner Upflex to establish 6K locations worldwide​

CEO Sandeep Mathrani is putting the “we” in WeWork in a strategic partnership with a flex workplace startup aimed at expanding the company’s global reach.
WeWork is joining forces with office space marketplace Upflex to provide increased access to coworking spaces, according to an SEC filing. Financial terms of the arrangement were not disclosed.

The partnership will give WeWork members access to Upflex’s aggregated portfolio of more than 4,800 third-party spaces across the globe. Upflex’s spaces are provided by more than 700 operators in 80 countries.

WeWork will have the exclusive right to sell Upflex’s inventory to its members. In return, Upflex customers will be able to book WeWork spaces through the provider, the first time WeWork has allowed bookings from a third-party platform.
For WeWork, the partnership allows the country to increase its network of spaces without making major capital investments.

In addition to the increased access to spaces for customers of both companies, WeWork will also be a participant for Upflex’s Series A funding round.

The partnership is among WeWork’s first expansion moves since going public. The company last month bought Dallas-based coworking space Common Desk in a deal expected to close by March. At the time of the deal, the 10-year-old company reached 4,000 customers at 23 locations in 13 cities in Texas and North Carolina.

The acquisition marked the company’s shift from its 2020 strategy of offloading companies, including office management startup Managed by Q and social network Meetup.
WeWork went public in October via a SPAC merger with BowX Acquisition Corp., two years after its failed IPO. After going public, the company announced its net losses narrowed to $802 million in the third quarter, down from $941 million a year earlier.

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WeWork’s losses narrow but are still huge​

Shared workspace company expects revenue to surge 30% this year​

WeWork’s quarterly losses narrowed throughout 2021, but the year’s total was a sobering reminder of the flex office company’s struggle to regain its former glory.
WeWork’s stock tumbled around 3 percent Friday, then rebounded, after the company reported a $4.4 billion net loss for the year. That’s up from losses of $3.1 billion in 2020 and $3.3 billion in 2019.

As of midday the stock was trading at around $5, just off a record low earlier this month. It has given up more than half its value since going public at a $9 billion valuation via a SPAC merger with Menlo Park, Calif.-based BowX Acquisition Corp. in October.
On an earnings call Friday, CEO Sandeep Mathrani denied earlier reports that the company was in talks to raise new equity capital at the discounted valuation.
“We have no intent to issue equity,” Mathrani said. “We were never in the market to have a broader equity issuance.”

On a shorter time frame, the company’s results presented a more favorable picture of the flex office business, which came into question as former CEO Adam Neumann made an ignominious exit in 2019 and the company fumbled its first attempt to go public.
WeWork’s net losses totaled $803 million in the fourth quarter, down from $844 million in the third, as revenue climbed to $718 million from $661 million.
The company expects $4 billion in revenue in 2022 — a 30 percent gain year-over-year — with employers and workers looking to hybrid work models in the wake of pandemic office shutdowns.

“As companies recognize the need for purposeful engagement and intentional collaboration and design a strategy tailored to the unique needs of their people and businesses, we are seeing a greater shift to flex,” CEO Sandeep Mathrani said on an earnings call Friday.
The company’s flex office spaces were 63 percent occupied at quarter-end, up from 56 percent three months earlier. Occupancy is a function of gross and new desk sales, churn and capacity.

Consolidated gross desk sales, which include renewals, totaled 164,000 in the fourth quarter, up from 155,000 in the third.
WeWork has suspended its expansion plans in Russia in response to that nation’s invasion of Ukraine and is “executing on divesting operations in the region,” Mathrani said on the Friday call. Earlier this month the company had said it would continue to operate in Russia on a tentative basis.

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Sandeep Mathrani succeeds Marcelo Claure as WeWork chairman​

Co-working firm also appoints Saurabh Jalan, a partner at SoftBank, to its board​

WeWork CEO Sandeep Mathrani will now take an additional role at the co-working company.
The company announced Tuesday that Mathrani will become WeWork’s chairman, a position held by Marcelo Claure until he left his roles at WeWork and Softbank after a reported disagreement over compensation. Claure was said to be seeking $2 billion from the Japanese investment company.

WeWork also appointed Saurabh Jalan, a partner at SoftBank Group, to WeWork’s board, filling a seat that had been held by Claure. Jalan oversees SoftBank’s stakes in WeWork, T-Mobile US, and Deutsche Telekom AG, among other companies.

Mathrani, the former CEO of the retail giant GGP, was appointed CEO of WeWork in February 2020. Mathrani helped take the co-working company public through a special purpose acquisition company, or SPAC, last year.

Claure, who led SoftBank’s Latin American investment fund, was at odds with SoftBank over his responsibilities in addition to his compensation, a person familiar with the matter previously told The Real Deal. The person said the scope of assets that Claure oversaw was shrinking and that had become a point of contention.
Claure worked closely with SoftBank chairman and CEO Masayoshi Son, who tapped him to fix WeWork’s issues upon providing a golden parachute to the co-working company’s co-founder Adam Neumann to step down as CEO in 2019.

Claure had been chief operating officer of the Japanese investment company since 2018 after leading Sprint. He became executive chairman of WeWork in 2019.

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WeWork names new CFO

Andre Fernandez to be co-working giant’s third CFO since March 2020​

WeWork has named a new chief financial officer, the third changeover in the role since March 2020.
The co-working giant on Thursday named Andre Fernandez as CFO, effective June 10. He’ll replace Benjamin Dunham, who is departing after about 18 months on the job.
Dunham is not leaving because of financial disclosure issues or accounting matters, according to the Wall Street Journal, but his next steps are unknown.
Fernandez previously served as the CFO at Atlanta-based software company NCR Corporation. He’s also served as an executive with CBS Radio and Journal Communications, where he also was the CFO.
WeWork CEO Sandeep Mathrani said in prepared statements Fernandez will be part of a transition for the company as it shifts “from transformation to growth and innovation.”
The CFO position has been a game of musical chairs in recent years. In March 2020, 25-year corporate finance veteran Kimberly Ross took the position, only to step down for “personal reasons” after six months. Dunham then took up the role, moving over from being head finance officer for WeWork’s Americas division.

This is one of several leadership changes at the company in recent months. In March, WeWork announced Mathrani would also be taking on the position of chairman, replacing Marcelo Claure after he left his roles at WeWork and Softbank following a reported disagreement over compensation.
Analysts largely cast the move as positive in notes to their clients reported by the Journal, but Josh Wimberley, founder of executive recruiting firm LeadChange LLC, told the outlet the turnover was “definitely not standard.”
WeWork’s stock rose 3.09 percent to $7.00 on Thursday, but the stock is down 18 percent overall from the start of the year.
WeWork, which went public in October 2021 after merging with a SPAC, is coming off of a quarterly performance better than revenue guidance forecasted. WeWork generated $765 million in revenue in the first quarter, up 7 percent from the previous quarter and 28 percent year-over-year.
Company guidance forecasts revenue between $800 million and $825 million for the second quarter.

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Former WeWork hub, hollowed out by IBM’s exit, gets $70M refi​

Arch revamping 88 University Place as it rebuilds occupancy​

After two years of turmoil, a Greenwich Village office building is mounting a comeback.
Arch Companies is refinancing 88 University Place to pay for renovations and lure new tenants after IBM vacated WeWork’s space in the early days of the pandemic, leaving the office building largely empty.

The firm closed on a $70.5 million refinancing loan to upgrade the 11-story property, its representatives told The Real Deal.

The Greenwich Village building was the site of controversy when WeWork co-founder Adam Neumann, as CEO of the co-working firm and part owner of the building, leased it to WeWork.
As of August 2019, Neumann owned part of the building through a partnership with Tahari Capital, the investment fund outgrowth of the Tahari fashion label, which tried to sell it.

The building’s current ownership partnership includes Arch Companies, Tahari and “other existing partners,” according to Arch, which declined to say if Neumann was among them.
IBM signed a membership deal with WeWork in 2017 to occupy 70,000 of the building’s 90,000 square feet. It was unprecedented at the time for one company to exclusively occupy an entire WeWork building.

Just over three years later, as the pandemic cleared out offices and WeWork was trying to recover from Neumann’s profligate management, IBM announced it would end its lease and vacate the building.
Now, with the $70.5 million bridge loan from a CIM Group–managed fund, the owners are revamping the 10 stories of office space and pitching tenants a “boutique” experience. High-end space has become increasingly important to firms trying to lure their workers back to the office.

The renovations, which are underway, include a rooftop terrace, gym, bike storage and lounge. “It’s very rare for this type of building this size to have amenities,” said Jared Chassen, partner at Arch Companies.

The upgrades have already attracted new tenants, bringing the building’s occupancy rate up to about 50 percent over the past four months, said Jeffrey Simpson, managing partner at Arch. “We’re really excited to transform this building,” he said. “I would be surprised if we’re not fully spoken for before year end.”

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Adam Neumann lists (another) Westchester estate​

WeWork co-founder, wife selling Bedford Hills home for $4.5M​

Selling in Westchester seems to be working for Adam Neumann, who is looking to part with a property in the Manhattan suburb for the second time in two years.
Neumann and his wife, Rebekah Paltrow Neumann, are selling their home at 227 Honey Hollow Road in Bedford Hills for $4.5 million, the New York Post reported. They anonymously bought the property for about $2.5 million in 2017.

The 34-acre estate includes a 6,200-square-foot colonial home built in 1987. The home has six bedrooms and seven bathrooms, as well as a library, den, study, home office and dining room with a skylighted ceiling. The grounds also include a pool and tennis courts.
Daniel Ginnel of Ginnel Real Estate was the listing broker for the property.
The property isn’t far from Linden Farm in Pound Ridge, which the Neumanns bought in an off-market deal in 2016 for $15 million. That was a major coup for the couple, as the 60-acre estate was asking for $28 million.

Two years ago, the WeWork co-founder and his wife sold their five-bedroom home in Katonah, another Westchester town, for more than $3 million. That home was reportedly purchased by Evan Goldstein, a New York surgeon, and his partner, Andrew Yu; it wasn’t revealed who purchased the Bedford Hills estate.

The couple sold off a number of luxury properties across the country after Neumann’s ouster from WeWork, which came after a failed attempt at an IPO. Neumann largely stayed out of the public eye in the years following his exit, instead focusing on selling luxury homes in the Hamptons, Gramercy Park and California.

Neumann has started to emerge from his hibernation, though. In May, Neumann’s family office and Invictus Real Estate Partners sold a two-property multifamily portfolio in Connecticut for $293.5 million. The partners bought the Norwalk assets fewer than two years earlier for $226 million.
Entities tied to Neumann have reportedly purchased majority stakes in upwards of 4,000 apartments across the country. The holdings, largely centered in the Sun Belt, have been valued at more than $1 billion.

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WeWork’s net loss shrank 31 percent to $635 million in the quarter.

WeWork posts a smaller loss as its office occupancy grows.​

The provider of flexible work space said its memberships grew 33 percent in the second quarter and its occupancy rate climbed to 72 percent.

WeWork reported a smaller quarterly loss on Thursday as it continued its effort to turn a profit after the coronavirus pandemic upended its office-centric co-working business.
The company said revenue increased 37 percent in the second quarter, to $815 million, from the same period a year earlier, as workers continued to return to offices. WeWork’s net loss shrank 31 percent to $635 million in the quarter, which ended June 30, from the year-ago period.
“Simply put, it’s growing revenue and continuing to cut expenses,” said Alexander Goldfarb, a managing director and senior research analyst at the investment bank Piper Sandler.

The company said its occupancy rate rose to 72 percent during the quarter, and memberships grew 33 percent from a year earlier to 658,000.

“As we head into the second half of the year, we remain confident in our proven ability to execute against our goals of growing revenue, increasing occupancy and continuing to drive towards profitability,” Sandeep Mathrani, WeWork’s chief executive, said in a statement on Thursday.
WeWork can capitalize on a shift to hybrid work, which has become a challenge for companies that usually sign long-term leases on office space, said Vikram Malhotra, a senior equity research analyst at Mizuho Americas, because its offices are in central business districts, and it can serve large and small tenants.

WeWork leases flexible office space, from dedicated desks to entire floors, to tenants that range from start-ups to Fortune 500 companies. In July, it introduced an app-based service intended to help companies manage their space needs and book its shared services like conference rooms.

“Not only does it help existing customers manage their WeWork footprint but their total footprint,” Mr. Malhotra said of the service.

The earnings statement released on Thursday was the second quarterly report for WeWork, which made its market debut in October through a merger with a publicly listed shell company known as a special purpose acquisition company.

WeWork shares rose more than 8 percent in premarket trading on Thursday.

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Joel Schreiber’s Billionaires’ Row apartment faces tax foreclosure

Bank of New York alleges WeWork’s first investor owes $1.3M on condo​

Joel Schreiber achieved a fair measure of celebrity in the real estate world by becoming the first investor to buy a stake in WeWork, way back in 2010. It’s been a rocky road since.
In the latest snafu, a Billionaires’ Row penthouse he owns is facing foreclosure for unpaid taxes.

Bank of New York bought a tax lien on the unit along with dozens of others from New York City in February. This month, the bank filed a lawsuit alleging an entity tied to Schreiber owes $1.32 million in taxes. The bank seeks to foreclose on the property, at 146 West 57th Street.
Schreiber became WeWork’s initial investor when he made Adam Neumann an offer in 2010. Since then, Schreiber has garnered as much attention for his legal battles: He has a long list of litigation with former partners and lenders.
Around the time of his WeWork investment, Schreiber was mostly dabbling in Brooklyn real estate, including the purchase of a Williamsburg residential and retail portfolio with RedSky Capital and JZ Capital Partners.
But in 2014, Schreiber’s firm, Waterbridge Capital, saw a rare opportunity to buy a Billionaires’ Row condo with views of Central Park on the cheap.
An entity tied to Waterbridge purchased the penthouse in the Metropolitan Towers Condominium for $7.32 million along with a smaller unit, 32D, in 2014 from Sony Entertainment, according to public records. The entity, WBSH MET Tower, then got a $5 million loan from InterAudi Bank. Schreiber signed the loan documents.
In 2016, the entity secured an additional $500,000 from InterAudi bank and consolidated that with the $5 million loan. Documentation for the $5.5 million loan lists it as “care of” the prominent New York commercial broker Soly Halabi at 7 Times Square, an address connected to both Waterbridge and the investment firm Forefront Capital.
By late 2020, the condo unit faced issues beyond taxes: The condo board placed a lien against it for unpaid common charges of about $41,000. It is unclear whether that has been resolved. The board did not return a call for comment.
Over the years, WBSH MET Tower has contested its taxes with New York City, most recently in 2019, when it filed a petition alleging the “assessed valuation exceeds the full value of the real property.” The petitions were all signed by Halabi as a member of WBSH MET Tower.
In a positive sign for Schreiber, the smaller unit, 32D, sold for $750,000 in May, records show.
The penthouse played a role in a lawsuit against Schreiber by Forefront Income Trust, an affiliate of Forefront Capital. Schreiber pledged the penthouse as collateral for a $2.5 million, 90-day loan from Forefront in 2015, according to an exhibit attached to the lawsuit. Forefront alleged that Schreiber defaulted on the loan and over-pledged his collateral.
Then in late 2020, the Department of Justice charged Forefront Income Trust’s CEO Bradley Reifler with defrauding North Carolina Mutual Life Insurance, the oldest African American life insurance company in the country, out of $34 million. The agency said Reifler put it in high-risk investments and diverted some for personal and business use.
(Two years earlier, North Carolina Mutual Insurance had entered into a settlement with Schreiber concerning loans transferred from the insurer’s assets to Schreiber through Reifler, according to the North Carolina Commissioner of Insurance.)
In June, the lawsuit between Forefront and Reifler was discontinued, according to court documents.
Harry Shapiro of Smith and Shapiro, who represents Schreiber, said “any debts and loans involving WSBH Met Tower and Forefront Income Trust were fully paid and satisfied by WSBH Met Tower.” He did not comment on the tax lien.
Schreiber’s legal battles come as his firm, Waterbridge Capital, is trying to close on the $155 million purchase of Union Bank Plaza, a 40-story tower in Downtown L.A. His firm was revealed as the winning bidder in July.
Meanwhile, he is facing a foreclosure on a 1.1 million square foot commercial building, also in Downtown L.A., at 801 South Broadway. Schreiber put the property entity into bankruptcy to stop the foreclosure.
Schreiber is also facing a lawsuit by Goldman Sachs alleging that he pledged WeWork stock in exchange for a $20 million loan after having sold some of the stock prior to WeWork’s public offering in 2021. Schreiber’s attorney denied that in a court filing but did not return a request for comment. Halabi also did not comment.

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Coworking startup The Wing shuts down​

Firm cites challenges from pandemic, sends customers to IWG​

National /
August 31, 2022 04:11 PM
By Pat Ralph

The Wing’s wings have been permanently clipped.
The coworking startup has permanently shut its six U.S. locations effective immediately, the company wrote in an email to members on Tuesday. Insider was first to report the shutdown.
The startup told the publication that it has arranged for workspace and membership needs to be handled by coworking space operator IWG.
The firm described the months since it reopened its coworking spaces during the pandemic as “extremely challenging.”
“With the backdrop of the Covid pandemic and increasing global economic challenges, we have been unable to recover and grow the level of active membership and event activity necessary to run a financially sustainable operation,” the company wrote.
The Wing was co-founded by Audrey Gelman and Lauren Kassan in 2016 as an all-female co-working space. At its peak, the company had 11 locations in two countries. The firm eventually downsized to six locations: three in New York City and one each in Chicago, Los Angeles and San Francisco.
But in recent years, the company has had financial troubles that were exacerbated by the pandemic and allegations of workplace discrimination.

The Wing faced a lawsuit in 2018 that argued the startup’s female-only membership was discriminatory. The company later amended its membership policy to allow all genders to join.
The firm’s valuation plummeted from $365 million in 2018 to $200 million in 2020 after WeWork divested its stake following its botched IPO. The Wing’s revenue dropped by 95 percent in the pandemic as the company was forced to close its coworking spaces and lay off employees.
The startup came under further scrutiny in 2020 when the New York Times reported allegations of racism and workplace discrimination against its employees of color. Employees told the publication that they weren’t paid enough for “immense physical, intellectual and emotional labor.”
Amid the backlash, Gelman stepped down as CEO, saying it was “the right thing for the business” and the best way to bring the Wing “into a long overdue era of change.” She was replaced by a three-person team consisting of Kassan, Celestine Maddy and Ashley Peterson.
When The Wing reopened its locations last year, the startup rolled out a slew of more diverse faces to its board of directors. The company also started an advisory board to guide the board of directors and management on operations and diversity moving forward.

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WeWork stock has taken a WeDive. Will it resurface?
WeWork was on the verge of the corporate comeback story of the century.

Wild child CEO Adam Neumann was gone, losses were shrinking and experienced executives were taking the co-working firm public just two years after its disastrous IPO attempt.

For WeWork, the successful public offering was a triumph. “Yes, we’re not the $47 billion behemoth we once claimed to be, but we’re still worth billions! The business model is good! It was just our crazy founder!”

It was a fuck-you to legions of doubters.

But the joy didn’t last. Since WeWork’s SPAC offering late last year, its stock has come crashing down. It closed at $2.65 a share Friday, down from a high of $13.02 a year ago.

To be sure, the stock market has had a terrible 2022. On Thursday, the Dow dropped 450 points. The S&P 500 sank to a new low for the year. Even Apple, a stalwart during down times, fell 5 percent. It’s a bloodbath everywhere you look.

But WeWork has not simply been caught in a wave of investor pessimism. The company has real problems.

It lost $635 million in the second quarter. It has $2.1 billion in short-term debt. And, despite Neumann’s initial claims to the contrary, WeWork is an office company. It operates in the real estate sector hit hardest by the pandemic.

A key issue for WeWork’s stock besides profitability is Beta — an indicator of the stock’s volatility compared to the stock market as a whole. A Beta of 1 means the stock fluctuates the same as the entire market does. WeWork’s Beta is 1.57. At the moment, that is bad for any company, but especially so for unprofitable ones, and even worse for SPAC companies like WeWork.

“It checks every box of what you would be scared of in this environment,” said Alex Snyder, an analyst at CenterSquare Investment Management, who follows WeWork.

Good news for WeWork: It only lost $635M last quarter
WeWork names new CFO
“WeCrashed” offers few heroes but plenty of lessons for real estate
So the real question remains: Is WeWork heading into bag holder territory?

Maybe. But perhaps Ziploc, not Hefty, should be the bag of choice.

WeWork has been heading in the right direction under CEO Sandeep Mathrani. As of June, revenue was up 37 percent and losses down 31 percent from a year earlier. Occupancy had climbed back to pre-pandemic levels.

And the economy’s expected downturn could actually help the firm. More uncertainty could lead office users to ditch long-term contracts in favor of short-term leases, like the kind WeWork offers. The company is also positioning itself as a beneficiary of hybrid work.

But first WeWork must weather the storm. To do this, it needs cash.

WeWork had $625 million on hand as of June 30, down from $924 million at the end of 2021.

“I say they have got at least another year of rope,” said Snyder.

If not, the company will have to find more cash. Doing so by issuing shares is an unappetizing option with the stock trading under $3.

“They will not want to raise money at these prices and I know Sandeep is smart enough to avoid the dilution,” said Snyder.

If WeWork got to the point where it needed money, it would likely choose convertible debt, Synder said. The company could later convert that debt to equity if the stock price recovers.

Keep in mind, the company still has backing from SoftBank, which, despite its flops, plans to launch its third Vision Fund.

WeWork is in a gray area. No one knows what the future holds for office buildings. The only people who claim to are those who depend on them (paging Marc Holliday and Bruce Flatt).

But WeWork has made improvements under Mathrani. It cut leases and slashed overhead. Selling, general and administrative expenses in the second quarter decreased $38 million from the prior year to $189 million.

Unlike other SoftBank-backed companies, such as Compass, WeWork was not in the “grow at all costs, eat my competitors, spit them out and stomp on them” phase prior to the market downturn. It was not even in the “we are actually a tech company” phase. It was in the “let’s stay in our lane” phase.

What WeWork is good at is getting detached millennials and transient workers into a shared space. Now it just needs to hunker down during the shitshow in the markets and it could get through to the other side in decent shape.