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

[David Goldsmith]

WeWork’s bleeding continues as firm cuts 40 locations

Coworking firm WeWork reported a $629 million loss in the third quarter and doesn’t expect to be profitable until the end of next year.

therealdeal.com

WeWork’s bleeding continues as firm cuts 40 locations​

Coworking company lost $629M in Q3, a slight improvement from Q2​

After another brutal quarter, WeWork no longer expects to become profitable this year.
The once-high-flying coworking firm lost $629 million in the third quarter, or about $0.66 a share — a slight improvement from the $635 million it lost in the second quarter.

WeWork reported revenues of $817 million for the third quarter — up $2 million from the prior quarter, but its performance came in below consensus estimates of $865 million in revenue and a loss of $0.44 per share.

The company no longer expects to get into the black this year, CEO Sandeep Mathrani said, a reversal from last year’s prediction that the company would “for sure” turn a profit by the end of 2022.
“It will be in the tail-end of 2023,” Mathrani said on a conference call with analysts Thursday.
To keep cutting costs, WeWork will close another 40 locations, or about 41,000 desks, which it said will save it about $140 million annually. Some 71 percent of WeWork’s locations are occupied — up slightly from the second quarter.

“We decided that to be profitable and sustainably profitable, we should close locations that are obsolete,” Mathrani said on the call, adding in a statement the firm was “leveraging all the tools at our disposal.”
Those tools include extending debt maturities to stave off defaults and give the company more time to get out of the red.
Though the firm cut a deal to extend the deadline on paying off $500 million worth of bonds, WeWork still has about $2.1 billion in short-term debt.

WeWork’s stock rose on the earnings news, despite the earnings miss. As of Thursday afternoon Eastern Time, the company’s stock sat around $2.60 a share — up 7 percent on the day but still down about 78 percent from its debut last year.

 

[David Goldsmith]

Sapir: WeWork hiding behind shell companies in lease dispute

The landlord’s lawsuit at Midtown office building 261 Madison Avenue challenges WeWork’s use of affiliates in breaking leases.

therealdeal.com

Sapir: WeWork hiding behind shell companies in lease dispute​

Midtown lawsuit challenges WeWork’s lease-breaking strategy​

It’s been rough going for WeWork. The co-working company’s bonds are at junk status, its losses are eye-popping and its cash reserves are alarmingly low.
WeWork has tried to reassure investors by saying it continues to cut costs by shedding leases. But getting out of deals can be difficult.

Witness the battle it has had to wage with an affiliate of the Sapir Organization, its former landlord in New York, for breaking a lease at a Midtown office building.
For over a year, the Sapir entity has been suing a WeWork affiliate and co-founder Adam Neumann after WeWork bolted from 261 Madison Avenue. Sapir is alleging breach of contract and seeking about $17 million.

Things got hairier recently when Sapir’s company proposed adding WeWork, the parent company, as a defendant. The move would allow Sapir to pierce WeWork’s corporate veil to go after the firm itself, not just the affiliate that signed the lease.
Sapir’s legal team argued that the parent company deliberately undercapitalized its tenant company, leaving it unable to pay its bills, and that WeWork entities commingle funds and are not independent, but are instead controlled by WeWork.

Sapir’s attorneys essentially claimed that WeWork was playing a shell game.

WeWork “deployed a strategy of directing corporate shell entities to default on contractual obligations to landlords,” Sapir’s lawyers alleged.

WeWork’s attorneys fought back, saying WeWork isn’t liable because Sapir signed a lease with a special purpose entity. The attorneys denied WeWork undercapitalized its tenant entity, claiming it is common in real estate to use special purpose entities, or SPE.
“Landlord’s feigned surprise that tenant was a thinly capitalized SPE completely lacks credibility,” wrote attorneys for WeWork 261 Madison LLC (the tenant) and Neumann in a heavily redacted filing.

A judge this week allowed Sapir to proceed with its amended complaint, meaning it can go after WeWork directly, which has more resources than the tenant entity.
“The court’s decision sends a message to WeWork that it cannot hide behind shell entities to avoid its contractual obligations,” said Sapir’s legal team of Terrence Oved, Darren Oved and Andrew Urgenson.

Darren Oved and Terrence Oved
Sapir’s company filed the suit in August 2021, claiming it only learned from an article in The Real Deal that WeWork surrendered the seven years remaining on its 44,000-square-foot lease. It further alleged that WeWork failed to remove its property and repeatedly returned to the premises after giving it up.

Neumann was named as a defendant because he signed a “good guy guarantee” on the lease.
In October 2021, WeWork filed a response denying the allegations. It also accused 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 Org was struggling financially and “resorted to questionable practices in order to extort WeWork and Neumann.” Sapir’s attorneys denied the allegations.
Neumann, for his part, acknowledged that he guaranteed the lease, but alleged WeWork properly vacated it, thereby voiding the guarantee. The co-founder, who was pushed out as CEO in 2019, noted Sapir reached a deal to lease the space to rival co-working firm Industrious, mitigating damages from WeWork’s departure.

The lawsuit remains pending.
The Sapir Organization bought 260 and 261 Madison Avenue in 1997 and, facing a deadline this year to refinance them, put them on the market in March, seeking $600 million. But this month it was able to refinance them with a $326 million loan.
The company was founded by Alex Sapir’s father, the late Tamir Sapir, a billionaire who partnered with Donald Trump on the former president’s Trump Soho hotel.

WeWork declined to comment. Neumann’s representatives did not return a request for comment.

 

[David Goldsmith]

As profitability eludes WeWork, short sellers make their play

Short sellers piled onto WeWork last year as the coworking company missed on promises to turn a profit.

therealdeal.com

Short sellers make their move on WeWork​

Short sellers have piled onto WeWork as the coworking firm failed to deliver on promises of turning a profit in its first full year as a publicly traded company.

Investors held short positions on more than 27 percent of WeWork’s publicly tradable shares as of Dec. 15, according to MarketWatch. Shorts totaling more than 10 percent of a company’s float are generally a sign that the market is pessimistic on its future; more than 20 percent is a highly shorted stock.

Since it went public about 15 months ago, WeWork has continued to burn through cash and has several times pushed out its timeline to turn a profit, now eyeing later this year.

“Right now all [investors] see is WeWork promised three times to hit its break-even goal and push that out,” said Mizuho analyst Vikram Malhotra, who rates the flex-office company a buy.

WeWork has been able to stem losses but is still burning through cash. The company had $460 million of cash on hand at the end of September, down from $924 million at the start of the year, according to its most recent financials.

The company is trying to get a grip on costs and recently cut 40 locations. CEO Sandeep Mathrani said he now expects WeWork to be in the black at the end of this year.

“It will be in the tail-end of 2023,” Mathrani said on a conference call with analysts in October. The CEO gave the company a vote of confidence in August when he bought about $250,000 worth of stock at $5 a share.

On the balance sheet, the company has $3.2 billion worth of debt maturing in 2025. And it has a $1.25 billion letter of credit due the same year.

With the tech industry cutting jobs and the prospect of a recession looming, investors are concerned about how WeWork will address those maturities.

“The question is, if fundamentals deteriorate: How do you service the debt?” Malhotra said.

A spokesperson for WeWork declined to comment. Analysts said there’s also a concern that WeWork will have to repay debt by issuing new shares while its stock is down.

WeWork was trading below $1.40 per share on Tuesday, down from its IPO price of nearly $10.

Still, there are optimists. Analysts at BTIG believe that three years’ worth of cost cutting and higher occupancy have set WeWork on the path to profitability.

“The key here is that we believe this will occur without the need for additional equity,” the analysts wrote in November.

WeWork went public in October 2021, and it’s been a bumpy ride since. Short investors piled in almost from the beginning, with short positions peaking at about 38 percent of the float in July. Short interests have since come down, but remain elevated.

Cantor Fitzgerald analyst Brett Knoblauch, who also has a buy rating, said short interest really started picking up around the time that WeWork’s corporate bonds were trading at yields down around 10 percent. Yields have since climbed to about 60 percent.

Short interests may be trending down because the company’s position has improved, he said. Or it could be that the stock has fallen enough for the shorts to cover their positions.

“Given how much shares are off from SPAC price, and even this month, would expect short interest to come down as would assume some would have covered,” he wrote in an email last week.

 

[David Goldsmith]

Bond Collective locked out of Flatiron location by city marshal

Bond Collective was locked out of its Flatiron location after its landlord claims it owes nearly $3 million in back rent.

therealdeal.com

Bond Collective locked out of Flatiron location by city marshal​

Landlord claims coworking firm owes nearly $3M in rent

Members at coworking firm Bond Collective’s Flatiron District location showed up to work Thursday to find themselves locked out by a city marshal.
A notice posted by the marshal’s office stated that the landlord at 115 East 23rd Street had retaken possession of the space, and members scrambled to try and get their belongings.

Court records show that a state judge ordered the lockout after the landlord, First Pioneer Realty, sued Bond Collective last February, claiming the coworking firm had not paid its rent. Bond Collective owed $2.8 million on the space as of November, according to court documents.
Bond Collective co-founder Shlomo Silber told The Real Deal that the location, where space rented for upwards of $300 a month, failed to recover from the financial hit it took during the pandemic.

“There wasn’t a lot of revenue coming in from people not coming into work,” he said, adding that some locations were still struggling while others have bounced back. “Nobody in this industry is without challenges.”
Court records show that Bond Collective had asked its landlord for more time to help its members get out in an orderly fashion, but Silber said the two sides weren’t able to come to an agreement. A representative for First Pioneer did not respond to a request for comment.
“I feel really bad about the process,” he said. “The actual closure of the space didn’t happen as planned.”
Silber said he was working with members to move them to other Bond Collective locations in the city, and in some instances tried to help them cut deals with some of his competitors.
Bond Collective signed the lease on the 23rd Street location in 2013 and it was set to run through 2025. It’s not the only location the company has struggled with.

In Gowanus, landlord Samson Management sued Bond Collective last March, claiming the company owed $4 million in back rent on its space at 68-80 Third Street. In May, the judge in that case issued Bond Collective an order to vacate the space.
In the Financial District, Harbor Group International also sued Bond Collective in March, saying it owed $3.6 million. The two sides settled in December.
Bond Collective has other spaces in Greenpoint, Gowanus, Buwshick and a new location coming in Vinegar Hill, according to its website.
Silber co-founded Bond Collective in 2013 with company president Elie Deitsch. The two secured a $50 million investment from an unidentified New York real estate family to fund an expansion to other cities in 2017, a time when coworking firms were expanding rapidly.

But the industry has since experienced turmoil — most notably with WeWork’s failed IPO fiasco in 2019 — and a number of firms have shut down.
The all-female startup The Wing shuttered its six U.S. locations in August, citing an inability to recover from the pandemic and “increasing global economic challenges.” Amol Sarva’s Knotel went bankrupt in 2021 and was acquired by Newmark — one of several coworking firms that were either acquired by or partnered with large commercial real estate service firms.
WeWork in November reported a loss of nearly $630 million and announced plans to close 40 locations as the company once again pushed back its timeline for achieving profitability.

​

 

[David Goldsmith]

WeWork seeks fresh cash, $3B debt restructure

Co-working company WeWork is looking to restructure debt and raise more cash, with Yardi among those considering investments.

therealdeal.com

WeWork seeks fresh cash, $3B debt restructure​

WeWork, the struggling co-working giant that spent last year in a valuation nosedive and burning through cash, is looking to put out the fire by restructuring its debt and raising new investment.
The company is close to a deal to restructure more than $3 billion in outstanding debt and raise additional cash, people with knowledge of the talks told the New York Times. The cash boost would be in the hundreds of millions, enough to keep the company afloat for another few years.

Real estate software provider Yardi is among those considering a new investment in WeWork.
SoftBank, the company’s largest investor and creditor, is part of negotiations but not expected to put more money into a company it has already dumped $10 billion into since 2017. In January, it lent WeWork $250 million, while in February, it increased the size of a debt facility and postponed a repayment deadline.

A potential deal is still likely weeks away, at least. The possibility of restructuring debt has been in the works for longer, however, as CEO Sandeep Mathrani raised the possibility last month during a call with Wall Street investors.
While the company’s performance is improving under Mathrani’s leadership following the catastrophic end to Adam Neumann’s time, WeWork is still struggling to right the financial ship. The company burned through $700 million in cash in 2022, closing the year with $287 million in its coffers; at the end of 2021, it had $924 million in cash.

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The company lost $568 million in the fourth quarter. Heading into this year, WeWork had $15.6 billion of lease obligations on the books.

​

 

[David Goldsmith]

WeWork faces delisting from New York Stock Exchange

Co-working giant WeWork received a non-compliance notice from the New York Stock Exchange after a dim 30-day trading period.

therealdeal.com

WeWork faces delisting from New York Stock Exchange​

Co-working giant says it has six months to improve

WeWork’s stock is on the clock.
The co-working giant received a non-compliance notice from the New York Stock Exchange, Reuters reported, after its stock closed below $1 on average over a 30-day trading period.

The notice doesn’t mean immediate consequences, as the beleaguered company said it should have six months to regain compliance before being delisted from the exchange.
It won’t be easy for WeWork to recover, though. In aftermarket trading following WeWork’s disclosure on Tuesday, company stock dropped another 2 percent to a meager 48 cents. Shares have dropped 65 percent year-to-date and its market capitalization as of late Tuesday was $361 million, a far cry from its $47 billion valuation in 2019.

Short sellers piled onto the co-working firm last year after it failed to turn a profit in its first full year as a publicly traded company. As of Dec. 15, investors held short positions on more than 27 percent of WeWork’s publicly tradable shares.
The company has been burning through cash and looking for solutions. Last month, it closed in on a deal to restructure more than $3 billion in outstanding debt and raise additional cash, perhaps enough to keep the company afloat for several years.

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In January, SoftBank — WeWork’s largest investor and creditor — lent the company $250 million; a month later, it increased the size of a debt facility and postponed a repayment deadline. SoftBank has poured $10 billion into WeWork since 2017.

WeWork burned through $700 million in cash last year, closing 2022 with $287 million in pocket. At the end of 2021, the company had $924 million at its disposal. The company cut 300 positions at the start of the year.

In a letter sent to shareholders last month, CEO Sandeep Mathrani said this was “WeWork’s moment,” buoyed by increased membership and occupancy. The company had 682,000 memberships at the end of last year, the most in its history.

 

[David Goldsmith]

WeWork stock tumbles to record low after news of CEO departure

WeWork stock falls 24.7% after the office-sharing company announces the imminent departure of its chief executive, garnering a downgrade from Mizuho.

www.marketwatch.com

WeWork stock tumbles to record low after news of CEO departure
Published: May 17, 2023 at 1:07 p.m. ET
By Ciara Linnane
‘We…. got it wrong,’ Mizuho analyst says, downgrading stock to neutral from buy

WeWork Inc.’s stock fell 14.6% to a record low on Wednesday, after the office-sharing company announced the imminent departure of its chief executive, garnering a downgrade from Mizuho.

The stock WE was last quoted at 30 cents. On its first day of trading after going public via a merger with a special-purpose acquisition vehicle, or SPAC, on Oct. 21, 2021, it closed at $11.78.

Mizuho analyst Vikram Malhotra cut his rating to neutral from buy and slashed his price target to 30 cents from $1.75.


“We … got it wrong,” the analyst wrote in his note to clients.

WeWork said Sandeep Mathrani, CEO since February of 2020, is stepping down effective May 26. It named David Tolley, a board member, as interim CEO while it conducts a search for a permanent one.

“The abruptness of the decision/announcement leads us to believe this change may not be entirely voluntary,” the analyst wrote, adding that he expects the move to be “disruptive,” especially given current macro headwinds.

“We now see our base case business assumptions, specifically occupancy targets, as unachievable, leading to higher cash burn and eventually driving the need for outside capital. We do not see free cash flow [becoming] positive until year-end 2025.”

The news is the latest blow to WeWork, the infamous startup created by Israeli entrepreneur Adam Neumann, that at its peak was valued at $47 billion.

The company began life renting office space to gig-economy freelancers in Manhattan in 2010, before expanding rapidly to 425 locations in 27 countries using money raised from private investors, notably Japanese conglomerate SoftBank.

Neumann was ousted in 2019 after botching the company’s then planned IPO, wangling a billion-dollar package on his way out the door. The company and its founder’s colorful history was captured in the Apple TV series, “WeCrashed,” starring Oscar winner Jared Leto as Neumann, as well as in a Hulu documentary called “WeWork: or The Making and Breaking of a $47 Billion Unicorn.”

By the time it merged into SPAC BowX Acquistion Corp., its valuation had shrunk to $9 billion.

Under Mathrani’s leadership, the company has made substantial progress in right-sizing the cost structure and eliminating more than $2.3 billion of recurring costs, according to Mizuho’s Malhotra.

It has improved its occupancy rate to 75% from the low in the mid-40s seen during the COVID pandemic, and restructured its balance sheet to wipe out $1.2 billion in debt.

“We see the CEO change as disruptive in terms of strategy and likely employee turnover,” he wrote.

Still, Mizuho has some faith in the flexible model for the office space, under which it viewed WeWork as a quasi “call option” — assuming the office sector partially recovers.

“Our Bull Case incorporates the company being able to drive occupancy to over 80% the next 12 months and our Bear Case assumes corporate restructuring,” the analyst said.

In its most recent earnings, WeWork had narrowed its first-quarter net loss to $264 million, or 34 cents a share, from $435 million, or 57 cents a share, in the year-ago period. The FactSet consensus for per-share losses was 35 cents.

Revenue grew 11% to $849 million, compared with the FactSet consensus of $849.3 million.

 

[David Goldsmith]

A Midtown office loan’s in trouble. Is WeWork to blame?

A $65M office loan backed by APF Properties’ 25 West 45th Street hit trouble this month. WeWork’s quiet departure may be to blame.

therealdeal.com

A Midtown office loan’s in trouble. Is WeWork to blame?​

Rent at APF’s 25 West 45th Street can’t cover payments on $65M debt

As WeWork’s lease-breaking rattles office landlords, the firm’s discrete exit from one Midtown office tower may have pushed the property to the brink of distress.
Last week, a $65 million loan backed by 25 West 45th Street landed in troubled territory after a decline in occupancy dragged down operating income, a Moody’s ratings action detailed.

The building, owned by office landlord APF Properties, reported 82 percent occupancy as of November and nine more leases nearing their end, according to Morningstar data.
As of March, the property carried a debt service coverage ratio of 0.93 percent, signaling cash flow fell just short of covering operating expenses on a loan that comes due in just six months.

APF grappled with broken leases and rent arrears throughout the pandemic, but WeWork’s departure may have served the biggest blow.
In early 2019, mere months before WeWork’s failed IPO, the coworking firm nabbed space at four APF buildings, including two floors at 25 West 45th Street.
WeWork did not begin paying rent at 25 West 45th until the second quarter of 2020 and found itself in a legal dispute with APF that December. The landlord alleged WeWork failed to submit the required documents for its requested reimbursement on improvement expenses.
Despite the litigation, WeWork appears to have opened up shop in the building by early 2021. The location first went live on WeWork’s site in February 2021, online archives show.
But by November 2021, the firm’s 25 West 45th listing had been wiped from the web.

It’s unclear whether WeWork terminated its lease with APF. The firm, which is led by Kenneth Aschendorf and Berndt Perl, did not respond to a request for comment.
But records point to an exit.
The building’s occupancy dipped to 73 percent from 86 percent the same year that the listing vanished. WeWork’s lease covered 12.5 percent of the property, according to Morningstar.
The floors WeWork occupied — the second and 15th — are each listed as available on the commercial leasing site SquareFoot.

The coworking firm with the 18-cent stock price has proved an equal irritant at another APF Property: 183 Madison.
After leasing space at the building in 2019, the firm failed to pay rent from September 2021 through March 2022 and has been frequently delinquent since. WeWork is current as of this spring. But APF extended a lease amendment that offered the firm a $4.3 million break on the last seven years of its lease.
Given those challenges, Aschendorf’s comment in 2019 after inking four leases with the startup carries a certain irony.
“WeWork is exactly the type of firm we would want to have across our portfolio,” Aschendorf said then.

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[David Goldsmith]

WeWork’s arrears trigger office owner tears

After WeWork quit paying rent at 315 West 36th Street, owner David Berley defaulted on the property’s loan payments.

therealdeal.com

WeWork’s arrears trigger office owner tears​

Firm quit paying rent on 315 West 36th Street, driving default

As WeWork labors to dig itself out of debt, the co-working firm is letting leases go to seed, leaving its landlords facing delinquency and default.
WeWork quit paying rent at 315 West 36th Street, Morningstar commentary shows, sapping revenue at the Garment District office building and driving its owner to default on debt payments last month.

David Berley, chair of Walter & Samuels, nabbed full ownership of the building in 2015, buying out SL Green’s partial stake a few months after WeWork had inked a lease for 93 percent of the building’s total square footage.
At the time, Berley said he expected the neighborhood would “realize significant rent growth in the future.”

In 2018, Berley refinanced the debt on 315 West 36th Street with a $77 million loan set to mature a few years before WeWork’s lease was up.
But in the past seven months, the co-working firm stopped making rent payments, Morningstar data signals, wiping out the overwhelming majority of Berley’s net cash flow.
In April, the owner fell delinquent on monthly debt payments and has failed to make a payment since. The loan transferred to special servicing in June for payment default, according to Morningstar.

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WeWork told its landlord it will not re-lease the space it has vacated, servicer commentary notes. Neither Walter & Samuels nor WeWork immediately responded to requests for comment.

WeWork has been causing landlords grief from coast to coast.
The firm backed out of 75,000 square feet of coworking space at Irvine, California’s Lakeshore Towers in May. WeWork was the property’s second largest tenant with 8 percent of the building’s leasable area.
Owner General Electric Pension Trust subsequently failed to make monthly interest payments in June and July on the building’s $195 million loan, according to Morningstar.
The $70 million loan on APF Properties’ 25 West 45th Street in Midtown Manhattan fell into troubled territory in June after WeWork seemingly ditched its office space, the building’s largest lease. Servicer commentary noted occupancy declines had taken a whack to revenue.
The same month, an entity tied to former WeWork CEO Adam Neumann defaulted on a $31 million backed by a San Jose office property. The building was just 1 percent occupied in January and reported net cash flow of $245,000 in the red.

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[David Goldsmith]

You heard about this first here! Lol.

WeWork Cites ‘Substantial Doubt’ That It Can Stay in Business

The co-working company will seek to raise capital as it searches for a chief executive. Its battered stock plunged further.

www.nytimes.com

WeWork Cites ‘Substantial Doubt’ That It Can Stay in Business​

The co-working company will seek to raise capital as it searches for a chief executive. Its battered stock plunged further
By Peter Eavis
Aug. 8, 2023
WeWork, which lost billions of dollars building and operating a global empire of co-working spaces, warned investors on Tuesday that it might not be in business for much longer.
“Substantial doubt exists about the company’s ability to continue as a going concern,” the company said in a financial filing.
The announcement did not come as a surprise. WeWork’s stock has been trading for pennies for months as investors concluded that the company’s financial obligations and losses had become overwhelming. The company went through a financial restructuring this year to buy more time for a turnaround effort, but soon after that, Sandeep Mathrani, the chief executive seen as the company’s savior, suddenly departed.
WeWork’s stock lost nearly a fourth of its value in trading after the announcement on Tuesday, which was issued after market hours along with the company’s quarterly earnings.

Four years ago, many in the real estate world and beyond believed that WeWork, under its charismatic chief executive, Adam Neumann, was destined for meteoric growth. They bet that individuals, small businesses and large companies would give up their traditional office space and choose instead to work from WeWork locations, which were sleekly designed and often served beer and kombucha to build a sense of community.
The company spent huge sums leasing and renovating hundreds of locations around the world, but it never took in enough customers to cover its rent bill. “This has never been a business model that worked,” Vicki Bryan, chief executive of Bond Angle, a research firm, said Tuesday.

‘Going Concern,’ Going Bust​

Jason KaraianReporting on corporate jargon
The phrase strikes fear in the hearts of accountants. When a company publicly uses the term “going concern,” which a lot more are doing these days, it’s almost always bad news.

WeWork has been on the brink before.
It nearly collapsed in 2019 after it failed to carry out an initial public offering. Then, it was bailed out by SoftBank, the Japanese conglomerate, which ended up becoming WeWork’s largest shareholder and a major creditor.

Like many other office space companies, WeWork was hit hard by the pandemic shift to working from home. But as people trickled back to the office, it believed it still had a future, and became a publicly traded company in 2021 by merging with a special purpose acquisition company.

Though WeWork’s occupancy rates improved and its losses shrunk, it was still burning through enormous amounts of cash. In the first half of this year, its operations consumed $530 million, almost as much as in the first half of 2022.

Since the end of 2017, WeWork has lost $15 billion. SoftBank has taken losses of more than $10 billion on its investments in the company.
If WeWork were to collapse and stop its lease payments, it could deepen the rout in the office space market and heap further pain on commercial landlords in cities like New York and San Francisco.

On Tuesday, David Tolley, the interim chief executive, pointed to some bright spots in WeWork’s business, like growth in revenue, but he listed the headwinds the company faced, including a surfeit of office space in the market and increased competition from other co-working companies.
To increase its chances of remaining viable, WeWork said it would need to reduce its lease costs and other expenses, increase revenue and seek “additional capital via issuance of debt or equity securities or asset sales.”
A WeWork spokeswoman declined to comment further.

 

[David Goldsmith]

These real estate firms lost the most on WeWork

Cushman & Wakefield, Adam Neumann and Shaquille O’Neal are among the players facing losses after WeWork’s share collapse.

therealdeal.com

These real estate firms lost the most on WeWork​

Cushman & Wakefield, Starwood among investors with sinking shares

WeWork’s implosion isn’t only impacting the co-working giant.
Real estate firms who bet on WeWork when it went public are now experiencing the pain of the company’s slide into potential nothingness, Bisnow reported. The company recently said there was “substantial doubt” it would be able to keep the business afloat in the near future.

That was not welcome news to firms like Cushman & Wakefield. When WeWork went public two years ago at an $8 billion valuation, the commercial real estate brokerage invested $150 million. As WeWork’s market capitalization sank to $275 million on Friday, Cushman’s investment also plummeted.
While the exact value of Cushman’s investment isn’t up to date, it disclosed at the end of the first quarter that its stake was valued at $3.8 million.

Barry Sternlicht’s Starwood Capital hasn’t fared much better. Starwood never specified its investment in WeWork, though funds managed by the company raised $800 million to buy shares two years ago.
A document WeWork filed in March with the Securities and Exchange Commission revealed that two of Starwood’s opportunity funds owned 12.5 million shares. If those shares were purchased at the $10 share price during the initial public offering, the $125 million investment would be down to $1.6 million, as of Friday.

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Others set to suffer at the hands of WeWork’s near demise include real estate investor Cohen & Steers (8 million shares owned as of the spring), Chinese investor Oceanwide (1 million shares), development firm war horse (800,000 shares) and naturally, ousted WeWork founder Adam Neumann (20 million shares).
Even NBA legend Shaquille O’Neal owned 12,000 shares as of March. Japanese investor SoftBank is WeWork’s biggest investor, owning more than 450 million shares.

WeWork is planning a 1-for-40 reverse stock split on the New York Stock Exchange next month in an effort to avoid delisting for the company’s moribund stock price, which is mired around 13 cents. Company stock has fallen 99 percent in the 22 months since it went public. The company recently said there was “substantial doubt” about the company’s continued operations due to membership cancellations and a lack of cash.

 

[David Goldsmith]

Ominous Sign: Nearly Two-Thirds Of WeWork Locations In NYC Are In Older Buildings

In Manhattan, 64% of WeWork's leases are in Class-B and Class-C buildings.

www.bisnow.com

Ominous Sign: Nearly Two-Thirds Of WeWork Locations In NYC Are In Older Buildings


WeWork is edging closer to bankruptcy, threatening to leave scores of New York landlords in the lurch with no recourse in an unkind market.
Placeholder
Bisnow/Miriam Hall
A WeWork location in Manhattan

The New York Stock Exchange Wednesday suspended trading of SoftBank-backed firm's warrants and began to delist them, because of low trading levels and a penny stock share price. The company, which reported “substantial doubt” regarding its ability to continue operations earlier this month, has reportedly hired real estate advisers and lawyers to counsel the firm on how to restructure and stay out of bankruptcy court.

But keeping Chapter 11 at bay comes down to managing the firm's massive real estate footprint, negotiating lower rents or terminating leases with landlords.

That will be a bitter pill in Manhattan, where 64% of WeWork's leases are in Class-B and Class-C buildings, according to Avison Young, leaving many landlords who are ill-equipped to deal with replacing a major tenant caught in the crosshairs.

“It's rarely ever a good situation for a commercial landlord to have your tenant teetering on bankruptcy,” said John Giampolo, a bankruptcy, restructuring and real estate litigation attorney at Rosenberg & Estis. “You're making matters worse in a market for commercial tenants that many analysts are saying is not great in general.”

WeWork famously became the city’s biggest private tenant, surpassing JPMorgan Chase, when it announced in September 2018 that it had leased 5.3M SF of office space. Its expansion somehow accelerated after that, with giant leases signed at decades-old buildings.

It signed a 236K SF deal at CIM's 1440 Broadway in December 2018, for example, and a 200K SF deal at One Seaport Plaza in February 2019. In September that same year, WeWork signed a 362K SF lease at William Kaufman Organization’s 437 Madison Ave.

Today WeWork occupies more than 8.6M SF of office space in Manhattan, according to Avison Young data provided to Bisnow. That accounts for 1.7% of the borough’s total inventory.

WeWork lists four locations in Queens and Brooklyn, including at Rudin and Boston Properties’ Dock 72 in the Brooklyn Navy Yard, where the coworking firm leases 220K SF. At the Jacx, Tishman Speyer’s building in Long Island City, WeWork has 217K SF, The Real Deal reported. Tishman and Rudin declined to comment.

“They’re not even 2% of the market right now,” Danny Mangru, manager of market intelligence at Avison Young in New York City, told Bisnow. “Obviously, with what's going on, any new addition of supply … will certainly have an impact on the market.”

Its market share has come down somewhat from its peak following the tumult at the business, starting with a failed initial public offering, the ouster of former CEO Adam Neumann and an aggressive cost-cutting campaign thereafter.

In October 2021, it went public after merging with BowX Acquisition Corp. Its share price debuted at $10, then went up to $11.79 on its first ever day of trading. On Thursday afternoon, after a 10% rally in intraday trading, it was trading at 13.4 cents a share.

In May, CEO Sandeep Mathrani abruptly left his position, and its chief financial officer left a few weeks later. David Tolley is leading the company as interim CEO.
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Bisnow/Miriam Hall
Dock 72 in the Brooklyn Navy Yard, viewed from the water.

Brokerage Savills pegs WeWork's Manhattan footprint at 6.9M SF, Commercial Observer reported. A WeWork spokesperson declined to clarify how much space the firm occupies in the city.

As of Dec. 31, WeWork said it occupies 18.3M rentable SF in Canada and the U.S., per a filing with the Securities and Exchange Commission.

WeWork has greater market share in some neighborhoods than others. About 17% of WeWork’s NYC footprint is in the Gramercy/Flatiron submarket, where it occupies 3.7% of that area’s inventory, according to Avison Young. A total of 13.6% of WeWork’s space is in the Penn Station submarket, accounting for 2.2% of that area's inventory.

Across Manhattan, availability is at a record 19.9% Mangru said — and if WeWork moves to hand space back in large quantities, it would push a decades-high availability rate further northwards.

"If you’ve got a couple million square feet coming back to the market — and that's obviously not going to be absorbed right away," Mangru said. "What that's gonna look like, it's still a bit uncertain."

It is that uncertainty that will be the big challenge for landlords. Giampolo of Rosenberg & Estis said landlords who are owed substantial outstanding rent by WeWork, in the event of a bankruptcy, will have their rent arrears seen as a “nonpriority general unsecured claim.”

That means landlords who have been owed rent before the bankruptcy may not have a good chance for recovery. A priority claim, he said, would be rent that accrues after bankruptcy is filed.

“Typically, general unsecured claims do not receive substantial recovery, even in Chapter 11 bankruptcy, because secured and priority claims have to be satisfied first,” he said. “If I were a landlord with WeWork, I’d be asking myself, 'What are my prospects for a replacement tenant?' … Some landlords might do well to start soft shopping.”

Many landlords are already a step ahead, like RXR Realty CEO Scott Rechler, whose company has WeWork as a tenant at 75 Rockefeller Plaza and 620 Sixth Ave. Earlier this year, Amazon leased 90K SF with WeWork at the building — along with a 210K SF deal at 1440 Broadway.

"I think all of us that have been attuned to this for some time, have been cognizant that WeWork was a credit risk," Rechler said. "Lenders, everyone's afraid of WeWork."

Over the last 18 months or so, he said RXR has negotiated to better position itself, including baking in the right to cancel with WeWork. He added that there are no traditional WeWork coworking spaces in the RXR portfolio, but enterprise locations only, meaning there is a “substantial” user in the space, like Amazon.

"The advantage of that is you can have direct conversations with that user," Rechler said. "Rather than doing a membership WeWork, you can do a direct deal with that company."
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Google Maps
RXR Realty's 75 Rockefeller Plaza in Midtown Manhattan, where WeWork is a tenant

Not everyone will be in that position, however, and the stakes are high. Nationally, there are 48 properties with WeWork as a top five tenant backing CMBS loans, with a combined outstanding loan balance of $7.1B, according to Trepp data.

The median exposure to WeWork across these 48 properties is 76K SF, or about 22% of a property’s total leasable space. In some cases, WeWork competitors could consider taking the space, but they will be able to be choosy about the spaces they select and likely the price they will pay.

Industrious CEO Jamie Hodari said in an interview that landlords and occupiers alike had been reaching out to his firm — the third-largest U.S. coworking operator after IWG and WeWork — in the wake of WeWork's going concern warning at triple the rate of an ordinary week.

“They're trying to very quickly get their thoughts together and make some decisions,” he said. “I think a lot of landlords are trying to figure out, 'Does that mean I need to try to front-run a bankruptcy and do something quickly before an official bankruptcy is filed?'”

But for many, there is not a huge amount to be done but to wait, said Ruth Colp, the CEO of Wharton Property Advisors, who has arranged WeWork deals on both sides and runs her business in a WeWork space.

"If you're a landlord and you’ve got WeWork as a tenant, and WeWork is paying their rent, you're going to cross your fingers, and you're going to hope WeWork is just going to continue to pay their rent," she said. "There's nothing really else that you could do. You can start to look around at other potential operators to take that space. But none of those deals are going to be easy."

 

[David Goldsmith]

WeWork’s NYC landlords owe $2.6B in CMBS debt. Can they repay it?

As WeWork tries to negotiate lease savings and exits, CMBS data shows borrowers heavily exposed to the firm are already struggling.

therealdeal.com

WeWork’s NYC landlords owe $2.6B in CMBS debt. Can they repay it?​

NYC owners with most-exposed buildings include Walter & Samuels, Winter Properties, CIM

Since WeWork broke the news that staggering losses would force it to rework “nearly all” of its leases, the co-working firm’s New York landlords have braced for the worst.

WeWork’s exit from their buildings would exacerbate the owners’ struggles with vacancy and falling valuations as their mortgages come due.
Landlords that count WeWork as a top five tenant owe about $2.6 billion in CMBS debt, an analysis of Trepp data shows. About half of those loans come due within 12 months and nearly 80 percent are either watchlisted, delinquent or in default.

Kushner Companies and Aby Rosen’s RFR are already weathering the fallout of a WeWork departure. The landlords failed to refinance their Dumbo office complex and landed in maturity default last month. WeWork had ditched a majority leasehold in one of the portfolio’s four buildings.
Other WeWork-exposed buildings have still-performing debt, but would be hit hard if the co-working firm quit its leases — something it could freely do if it enters bankruptcy protection.

Highest vacancy risk​

When WeWork was still in growth mode, a handful of bullish landlords went all in on the startup.

Winter Properties, led by David Winter and David Millstone, leased the entirety of 57 East 11th Street to the coworking firm in 2018, then scored $55 million in financing on the property.
With such heavy exposure, a WeWork exit would be devastating. The foreclosure on Walter & Samuels’ 315 West 36th Street serves as evidence.
The landlord acquired the Garment District office building in 2015, a few months after WeWork had leased 93 percent of the building. This year, WeWork quit paying rent. The landlord defaulted on the building’s $77 million debt in June. In September, its lender filed to foreclose and this month, the building’s valuation was cut by two-thirds, according to Trepp.
WeWork did not comment for this article.
The firm’s cost-cutting strategy does not rely solely on exits. The company is also trying to amend lease terms to reduce rents, using the implied threat of bankruptcy — leaving landlords with nothing — as leverage.

But rent reductions are no panacea. Winter Properties has been down that road. It proved a rough one.
In 2020, servicers watchlisted the $55 million loan backed by 56 East 11th after WeWork botched its initial public offering. In June 2021, the firm modified its lease with Winter, securing rent abatements and credits from August through November of that year.
By the end of 2021, the cash flow at 57 East 11th Street was only covering about 80 percent of the monthly debt service.
The lease amendments burned off in January 2022, and at the end of the year, the debt service coverage ratio had rebounded to 1.33, meaning revenue exceeded debt costs. Still, the drop in 2021 signals how drastically a few months of rent cuts can hurt a building.
Winter Properties co-CEO David Millstone did not return a request for comment.

Another Walter & Samuels’ property, 214 West 29th Street, is in similar straits. At the end of last year, its revenue couldn’t cover debt service on its $45 million loan.
When WeWork first rented the space in 2018, its lease comprised a little over half of the building’s square footage. But the property’s total occupancy fell to 65 percent in December, according to Morningstar, suggesting the firm and perhaps other tenants downsized.
Walter & Samuels did not respond to a request for comment.
The good news for both sponsors is they have some time. The debt collateralizing both buildings does not come due until 2029, affording them a chance to fill space should WeWork cut and run.

​

Impending maturities​

For other top landlords, looming maturities create a time crunch.

CIM Group and Australian pension fund QSuper hold a $399 million mortgage backed by 1440 Broadway. WeWork has the building’s largest lease at 41 percent of the total rentable area.
In March, the Midtown building’s revenue was covering just 75 percent of debt payments. The loan has a floating rate, meaning monthly debt service swelled as interest rates shot up.
When the loan was made in 2021, ratings agency DBRS Morningstar flagged the heavy exposure to WeWork, noting it had “shuttered many of its facilities.” But WeWork did have a reliable tenant subleasing 210,000 square feet at 1440 Broadway: Amazon. And yet the loan still went bad.
The $399 million mortgage, due next May, was sent to special servicing this month, according to Trepp, which noted that WeWork is “no longer listed as a tenant.” The property — valued at $540 million only two years ago — will be deeded back to the lender, according to the analytics firm.
A spokesperson for WeWork contested that it had vacated, stating that WeWork is still a tenant and a change in building ownership would not affect that.

CIM declined to comment and QSuper did not return a request for comment.
Of the WeWork landlords with CMBS debt, Tishman Speyer has the most skin in the game.
In 2021, the property giant nabbed $425 million to refinance Long Island City’s The Jacx.
Tishman Speyer borrowed at a floating rate and, like CIM, suffered as the Federal Reserve hiked interest rates. A little over a year after the refi, the DSCR had fallen by 38 percent, from a robust 2.51 to a still-healthy 1.56. But the loan has been watchlisted since May, although it is still marked performing by Morningstar.
The loan came due in September. Tishman Speyer had options for three one-year extensions. A spokesperson for the firm said it had exercised one of them.

Fifth Avenue debts​

Loan extensions may offer temporary reprieves for landlords grappling with a WeWork tenancy. At two watchlisted properties along Fifth Avenue, owners are trying to kick the can.
Beacon Capital Partners is finalizing a long-term extension at 575 Fifth Avenue where WeWork holds the largest lease: 19 percent of the building’s rentable area.
And after the Schwalbe family saw 385 Fifth Avenue sent to specially servicing in April for imminent maturity default, the owner signed “a pre-negotiation agreement” in May to modify the loan, according to Morningstar. WeWork holds the property’s largest lease there as well, with nearly 22 percent of the square footage.
Beacon did not respond to a request for comment. The Schwalbe family could not be reached.

The details of the workouts have yet to hit Morningstar. To modify a loan, the borrower has to meet certain covenants. Office landlords must report a healthy DSCR, for one, typically between 1.25 and 1.4.
Last December, 385 Fifth Avenue had a DSCR of 1.3. But a June reappraisal showed the property’s valuation had slipped 31 percent from when the loan was made in 2013.
On 575 Fifth Avenue’s floating-rate debt, updated financials were not available.

 

[David Goldsmith]

Redirecting

WeWork Backers King Street, SoftBank at Odds Over Restructuring

(Bloomberg) -- WeWork Inc. and its creditors are locked in discussions over who will take the keys to the struggling co-working firm as the end of a debt grace period approaches, according to people with knowledge of the matter.

WeWork’s top backers including SoftBank Group Corp. and bondholders including King Street Capital Management are each seeking to take control of the company via a new restructuring after pouring money into the firm, said the people, who asked not to be identified because the discussions are private. BlackRock Inc. and Brigade Capital Management are also part of the negotiations, separate people familiar with the matter said.

WeWork is seeking to finalize the restructuring deal in the coming weeks, and may execute it as part of a bankruptcy filing as soon as November, the people said. Terms of the deal have not been finalized and plans may change.

Representatives for WeWork, SoftBank, King Street and BlackRock declined to comment, while Brigade didn’t respond to requests seeking comment.

In many restructuring scenarios, discussions center around how much debt a company can support, and therefore which creditors need to swap their debt for equity. SoftBank and the bondholder group have been negotiating how to treat a letter of credit facility SoftBank provided the company in 2020 that has since been amended multiple times, the people said. WeWork may need access to the facility to help support its short-term financing needs, some of the people said.

The latest talks follow a rapid downfall for the firm, which has gone from star startup under flamboyant and charismatic co-founder Adam Neumann to repeat defaulter. In March it struck a deal to slash $1.5 billion of debt in a deal with the King Street led-group and SoftBank.

A key component of its latest plan calls for the termination and renegotiation of a substantial number of its leases, Bloomberg previously reported. The company is also looking to sharply cut costs like selling, general and administrative expenses, some of the people said.

The March deal saw bondholders swap unsecured bonds for new longer-dated notes and inject new money into WeWork. SoftBank also exchanged some of its debt holdings and converted more than $1 billion of bonds into equity.

WeWork has been operating under a 30-day grace period after it skipped interest payments due earlier this month. The grace period expires Oct. 31.

 

[David Goldsmith]

I mean, hard to imagine it completely fails but that debacle was crazy last year with the pulled IPO and 80%+ drop in expected valuation vs bailout valuation. Just so many damn players in this space + WeWorks liabilities = lots of uncertainty

WSJ News Exclusive | WeWork Plans to File for Bankruptcy as Early as Next Week

Once a venture capital-backed star with an astronomical valuation, the flexible-office-space provider is now preparing for chapter 11 protection, according to sources.

www.wsj.com

 

[David Goldsmith]

I remember when this building was called The Vogue. It was owned by the father of one of our partners when we bought 27 West 9th Street. The building was famous for being inhabited almost entirely by garmentos and hookers.

Rejected WeWork space going residential

At 980 Sixth Avenue in Manhattan, Vanbarton Group plans to convert office space that WeWork rejected in bankruptcy into apartments.

therealdeal.com

Rejected WeWork space going residential​

Vanbarton to convert 100K sf at 980 Sixth Avenue

One of the Manhattan co-working locations that WeWork ditched in bankruptcy will be converted into apartments — an early sign of how landlords are dealing with the failure of what was once the city’s largest office tenant.
The Vanbarton Group will convert about 90,000 square feet of office space at its 980 Sixth Avenue mixed-use tower into rentals, a source familiar with the plan told The Real Deal.

The company, headed by founders Richard Coles and Gary Tischler, began working on a plan for the site several years ago as WeWork’s struggles became more apparent, the source said. With WeWork now out of the picture, the space will soon be turned into about 100 apartments.
A representative for Vanbarton declined to comment.
The 25-story building, just north of Herald Square between West 36th and West 37th streets, already has 380 rental apartments above the former co-working space and retail on the ground floor.
WeWork signed a lease there in 2017 during its big push into Manhattan. By 2019 the company was the largest private office tenant in the city with 8.9 million square feet, surpassing JPMorgan Chase.

​

But the co-working company’s well-documented troubles took their toll, and last week WeWork filed for Chapter 11 bankruptcy protection in New Jersey federal court. The company moved immediately to cancel about 70 of its locations, including the Vanbarton space.
Other locations included Kushner and RFR’s Dumbo office building at 81 Prospect Street, Brookfield’s 1619 Broadway, Hudson Square Properties’ 205 Hudson Street and various buildings owned by smaller landlords.

Vanbarton bought 980 Sixth Avenue in 2018 for $316 million. The company renovated the building in 2021, rebranding it as The Hollingsworth with an address at 70 West 37th Street.
Vanbarton is one of the most active developers converting offices into housing. The company is working on transforming the 1970s era office building at 160 Water Street in the Financial District into 586 apartments. Next door, Vanbarton converted 180 Water Street to 573 units from 2015 to 2017, then sold its stake to conversion partner Metro Loft Management for $450 million.

​

 

[David Goldsmith]

WeWork’s NYC lease cuts include Kushner, Vanbarton buildings

Co-working firm WeWork moved to reject 40 leases across New York City as part of its restructuring in bankruptcy court

therealdeal.com

WeWork’s NYC lease cuts include Kushner, Vanbarton buildings​

MAP: Where shrinking co-working giant plans to ditch 40 leases

WeWork’s bankruptcy filing has more trouble in store for already struggling New York City office owners as it seeks to immediately ditch a slew of spaces.
Kushner and RFR’s Dumbo office building, Vanbarton’s Midtown tower at 980 Sixth Avenue and a handful of locations owned by smaller landlords are among the 40 leases the co-working firm moved to reject as part of its restructuring in bankruptcy court.

A number of the leases are around in or near Manhattan’s Garment District, an area home to many older Class B office buildings and among the hardest hit by pandemic-era work policies.

Leaflet map created by Adam Farence | Data by © OpenStreetMap, under ODbl.
WeWork also plans to cut leases in Downtown Manhattan and Northern Brooklyn. Among the properties named in the filing are Kushner and RFR’s 81 Prospect Street in Dumbo, where WeWork was the second largest tenant.

Vanbarton refinanced 980 Sixth Avenue, known as the Hollingsworth, for $240 million in March 2020, the month that pandemic shutdowns began. WeWork reportedly leased 75,000 square feet at the tower, which has 380 luxury apartments and a retail component.
The proposed rejected leases are in buildings owned by mid-sized and institutional landlords.

​

WeWork has already moved out and closed its operations where it is seeking to ditch its lease.
“The debtors’ lease portfolio has been, and continues to be, a significant contributing factor to their current financial challenge,” the company said in a filing in bankruptcy court. “Rejecting the leases will help ease the debtors’ cash burn and increase the debtors’ liquidity.”

The company, working with real estate advisor Hilco, is in active negotiations with 400 landlords to rework its leases in markets across the country.

Property Address	Landlord
1 Little W 12th St New York, NY 10014	Bobby Cayre – Aurora
1 Union Square West New York, NY 10003	Lori Buchbinder – Buchbinder & Warren (management company)
10 East 38th Street New York, NY 10016	XSuresh Sani, First Pioneer Realty
l0 East 40th Street New York, NY 10016	Attorney Larry Wohl
1156 6th Avenue New York, NY 10036	APF Properties
130 Madison Avenue New York, NY 10016	Walter & Samuels
161 Avenue of the Americas New York, NY 10013	Stellar Management
1619 Broadway 11th Floor New York, NY 10019	Mack Real Estate Group
183 Madison Avenue New York, NY 10016	APF Properties
200 Broadway New York, NY 10038	Westfield
205 Hudson St New York, NY 10013	Trinity Wall Street
22 Cortlandt Street New York, NY 10007	Moshe Drizin
229 West 36th Street 4th floor New York, NY 10018	Investcorp
255 Greenwich Street New York, NY 10007	Jack Resnick and Sons
261 Madison Ave New York, NY 10016	Sapir
28 West 44th Street New York, NY 10036	APF Proerties
311 W 43rd St. New York, NY 10036	Divco
315 W 36th Street New York, NY 10017	Walter & Samuels
38 West 21st Street New York, NY 10010	Jack Vogel Associates
419 Park Avenue South New York, NY 10016	Walter & Samuels
437 5th Avenue New York, NY 10016	Joseph P Daly Real Estate – Larry Wohl
437 Madison Avenue New York, NY 10022	William Kaufman Org.
44 Wall Street New York, NY 10005	Gaedeke Group
483 Broadway New York, NY 10013	The Cayre Group
500 5th Avenue New York, NY 10110	Moises Cosio
505 Park Avenue New York, NY 10011	Yeung Yin Chi – Glorius Sun
511 West 25th Street New York, NY 10011	Artemis Real Estate Properties
54 W 40th St New York, NY 10018	Allied Partners
599 Broadway New York, NY 10011	Prima Capital Advisors
6 East 32nd Street New York, NY 10016	Himmel & Meringoff
7 West 18th Street New York, NY 10011	ASB Capital Management
8 West 40th Street New York, NY 10018	Jack Resnick & Sons
81 Prospect Street Brooklyn, NY 11201	RFR & Kushner Companies
980 6th Avenue New York, NY 10018	Vanbarton Group
77 Sands St Brooklyn, NY 11201	RFR Kushner

​

 

[David Goldsmith]

https://www.nytimes.com/2024/02/06/business/dealbook/neumann-wework-takeover.html

WeWork’s Co-Founder Is Trying to Buy the Company​

Adam Neumann, the co-working company’s onetime chief, has sought for months to buy the now-bankrupt business, but accuses its current leaders of stonewalling him.

WeWork’s founder is trying to buy it​

Adam Neumann shot to fame by turning WeWork into a cultural and business phenomenon, before being ousted from the work space operator in dramatic fashion.
But for the past several months, he has been trying to buy the now-bankrupt business — with the help of the hedge fund mogul Dan Loeb, DealBook is the first to report.
Neumann’s new real estate company Flow Global is pushing WeWork to consider its takeover approach, according to a letter his lawyers sent to WeWork’s advisers on Monday. Flow which has already raised $350 million from the venture capital firm Andreessen Horowitz, disclosed in the letter that Loeb’s Third Point would help finance a transaction. (Read the letter.)
Flow has sought to buy WeWork or its assets, as well as provide bankruptcy financing to keep it afloat.

But Flow’s lawyers accused WeWork of stonewalling for months. “We write to express our dismay with WeWork’s lack of engagement even to provide information to my clients in what is intended to be a value-maximizing transaction for all stakeholders,” wrote the lawyers led by Alex Spiro of Quinn Emanuel, who also represents Elon Musk and Jay-Z.
It’s the latest twist for WeWork, which over its 14-year history became a symbol of venture capital excess. The company grew rapidly, becoming the biggest tenant in many major cities and attaining a paper valuation of $47 billion. And Neumann — backed by billions from the Japanese tech giant SoftBank — increasingly pitched it as a way to “elevate the world’s consciousness.”
But Neumann stepped down as C.E.O. in 2019 after WeWork failed to go public, largely because of investor concerns about its business model and corporate governance. The company began to struggle and sought repeatedly to renegotiate its leases and cut costs. (It’s unclear whether WeWork’s stakeholders would be comfortable selling the company back to the man whom some of them see as helping to create its troubles.)
WeWork filed for bankruptcy this past November. In a restructuring plan filed with the bankruptcy court on Sunday, the company said that it had more than $4 billion in secured debt alone and that major creditors included SoftBank. At a court hearing on Monday, lawyers for landlords and others complained that WeWork may not have enough money to pay rent.

Some experts have suggested that WeWork could be sold for a fraction of its outstanding debt, perhaps for as little as $500 million.

Neumann has sought to invest in WeWork for years. In October 2022, according to the letter, he sought to arrange “up to $1 billion in financing to stabilize WeWork.” But the company’s C.E.O. at the time “shut down that process without explanation,” the lawyers wrote.
When WeWork filed for Chapter 11, Neumann said at the time that “with the right strategy and team, a reorganization will enable WeWork to emerge successfully.” But he has also said that Flow — which is focusing on the residential real estate market — would “compete or partner” with his former company.

Flow’s lawyers wrote in the letter sent on Monday that “in a hybrid work world where demand for WeWork’s product should be greater than ever,” the math of combining the two companies “could significantly exceed” WeWork’s stand-alone value.

 

[David Goldsmith]

WeWork cuts deals to save operations in two NYC locations

The bankrupt co-working company will keep operating at Dock 72 in Brooklyn and on Fifth Avenue in Union Square.

therealdeal.com

WeWork cuts deals to save operations in two NYC locations​

Company reaches agreements at Brooklyn Navy Yard, Union Square

WeWork has reached agreements with landlords at Dock 72 in the Brooklyn Navy Yard and 71 Fifth Avenue in Manhattan’s Union Square, Crain’s reported.

The company will continue operations at both locations, in the second and third agreements the company has reached with New York City landlords since declaring bankruptcy.
It has been unclear until now where WeWork would continue operating when bankruptcy proceedings wind to a close. The company has already canceled more than three dozen leases across the city and has a long battle ahead to remain afloat.

Boston Properties’ and Rudin Management’s Dock 72 is Brooklyn’s first ground-up office development in a decade.
WeWork occupies 200,000 square feet and came in as the building’s anchor tenant in 2019. The company also agreed then to provide programming to other tenants. The company stopped paying rent after filing for bankruptcy, BXP said in a November earnings call.

​

Specifics aren’t publicly known, but WeWork is set to pay discounted rent at Dock 72 and hold a shorter lease term, though it appears it will hold on to all of its space. WeWork also isn’t paying back rent accumulated during bankruptcy.
The building has had a busy week, with Pratt Institute agreeing to take 63,000 square feet across a full floor.

Meanwhile, at Madison Capital’s 71 Fifth Avenue, WeWork is decreasing both its space and its rent. Prior to the agreement, WeWork leased 73,000 square feet at the Union Square property, occupying more than 40 percent of the rentable square footage. Unlike at Brooklyn Navy Yard, WeWork is set to honor more than $600,000 in unpaid rent at 71 Fifth Avenue.
The only other WeWork lease in the city to be restructured up until this point came at CIM Group and QSuper’s 1440 Broadway in Times Square. It is continuing to operate 300,000 square feet at the location, though both lease term and rent were reduced across its ten floors, which are mostly leased to Amazon.

​

 

[David Goldsmith]

WeWork moves HQ to Union Square offices

WeWork is moving its headquarters to the Schaffer family’s 18 West 18th Street as the co-working firm works through bankruptcy proceedings

therealdeal.com

WeWork moves HQ to Union Square offices

Co-working firm rejected 300K sf at Kato International’s Tower 49


WeWork is moving its headquarters downtown as it deals with the final days of its bankruptcy battle.

The embattled co-working firm is shifting corporate operations to its Union Square outpost at 18 W. 18th Street, Bisnow reported.

The news comes after the company said in an April bankruptcy filing it intends to reject its 300,000-square-foot lease at Kato International’s Tower 49, a Midtown property previously home to one of the firm’s largest locations. The firm first signed a lease at the tower in 2016.

WeWork said it would relocate its 2,800 members from 12 East 49th Street as it consolidates its portfolio. The property was among five in New York City where WeWork rejected leases.

The co-working firm has leased space at the 18th Street property owned by the Shaffer family since 2018, when it picked up roughly 167,000 square feet.

At the time, the new lease added office space a block away from its corporate office on West 18th Street, the Commercial Observer reported.

The company is targeting a bankruptcy exit this month, ending a trail of negotiations with landlords and canceled deals in markets across the country.

The firm said last month it anticipated $8 billion in rent savings on the back of its plan to shutter around 150 co-working locations, while keeping another 150. It has also reached agreements with 92 percent of its secured-note holders to clear more than $3 billion in debt obligations.