Amazon has been in talks to acquire the Lord & Taylor building, the iconic Fifth Avenue building owned by WeWork.
The e-commerce giant has been negotiating a potential acquisition of the building, six industry insiders told The Real Deal. Two sources said the deal could be valued close to $1 billion. Talks remain fluid, and a deal still faces hurdles before it can materialize.
WeWork did not respond to requests for comment. An Amazon spokesperson said in an email that the company doesn’t “comment on rumors or speculation.”
Amazon was reportedly in talks to lease the building last summer.
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Such an acquisition would have significant implications for both companies. If the deal goes ahead, it could be Amazon’s largest real estate acquisition. The company is known for leasing vast spaces, not for buying office properties.
It would also cement the tech company’s presence in New York, a year after its plans to establish a second headquarters in Long Island City imploded last February.
Amazon has since leased office and warehouse space elsewhere in the city. In December, the company signed a 335,000-square-foot lease at SL Green Realty’s 410 10th Avenue on the Far West Side. It’s also been in talks to lease RXR Realty and LBA Logistic’s 770,000-square-foot logistics center in Maspeth, Queens.
For WeWork, the building is one of the last reminders of the company’s excessive spending under former CEO Adam Neumann. A sale would generate much-needed capital for the embattled company, which was taken over by its biggest backer, SoftBank, following a botched attempt to go public. Through its real estate investment arm, ARK, the company paid $850 million for the property — a figure $200 million higher than a prior valuation.
WeWork is currently undertaking a gut renovation of the 10-story, 106-year-old building, at a total cost believed to be close to $200 million. Completing the renovation is one of the conditions of a potential sale to Amazon, sources said.
The office-space firm closed on the acquisition of the building in January 2019, more than a year after it reached an agreement with Hudson’s Bay Companies to buy it. The acquisition was funded with a $900 million debt package provided by JPMorgan and Starwood. HBC maintains a $125 million preferred equity stake in the building.
Several WeWork employees expressed alarm over the deal at the time because of the high price and perceived conflicts of interest, including that one WeWork board member held interests in the buyer, seller and tenant.
The transaction was further complicated when WeWork was forced to agree to lease the entire building — a condition to satisfy lenders — after longtime occupant Lord & Taylor abandoned plans to remain in the retail portion. This created an uneasy dynamic between ARK and WeWork’s real estate team, who had to negotiate a leasing price that some believed was overpriced.
WeWork’s chairman, Marcelo Claure, this month named real estate industry veteran Sandeep Mathrani as the firm’s new CEO. He was most recently CEO of Brookfield Properties’ retail group. This week, the company tapped Shyam Gidumal as chief operating officer. He joins the firm from Ernst & Young.