Editor’s note: Recession fears and shelved IPOs

Stuart Elliott
Stuart Elliott

“I don’t know why anyone was paying [Adam] for the word ‘we.’ The only word he knew was ‘I.’”

Those were the reflections of a former WeWork executive on the company’s co-founder Adam Neumann, who grew one of the world’s most-hyped startups into a $47 billion behemoth with a presence in 111 cities — until it all came crashing down last month.

Neumann was removed as CEO as he sought to take the company public after investors reportedly grew concerned about a board complicit in letting him take total control of WeWork and in appeasing his worst instincts. To top it all off, WeWork shelved its IPO.

It wasn’t just the private plane (which will now be sold), a notorious party culture or the company’s attempt to expand into other offerings like…wave pools. As reporter David Jeans details, among the most disturbing actions “was Neumann’s use of WeWork loans to purchase buildings, which he later leased back to the company.” He also received $5.9 million for letting WeWork use the word ‘we,’ though he later paid that back after coming under scrutiny.

WeWork is the largest office tenant in New York, Washington, D.C. , central London and other markets, and as it moves forward with new leadership, the broader effect on the commercial market will be the next chapter in this story. Stay tuned.

The company’s troubles also occur at a time when many are holding their breath about what’s ahead for the real estate business. Autumn can be a notoriously dicey time for the stock market, and there are faint echoes of the early 2000 dot-com bust in all of this (regardless of your stance on WeWork as a tech company). And that has major implications for real estate.

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In a series of stories on the looming recession, we look at the highly exposed hotel market, overleveraged real estate firms that could take a hit and private equity’s push into mobile homes as an economic hedge. At the same time, in our annual ranking of most active real estate law firms, the lawyers we spoke to sounded less concerned about a downturn than one might expect. Although they’re getting inundated with calls from landlords in the wake of Albany’s rent reforms, and commercial real estate deals have slowed, most are still saying that the market is on solid ground and they aren’t seeing a seeing a lot of distress.  

Across the sandlot, this month’s cover story features a former Yankee all-star looking to make the transition to New York real estate heavy hitter. A-Rod has been building his national property portfolio for years. Now he’s investing in NYC for the first time, in a partnership with Stonehenge CEO Ofer Yardeni and residential broker Adam Modlin. “As an athlete, there’s a gift and a curse,” A-Rod told The Real Deal’s Katherine Kallergis. “Sometimes, people celebrate and take the meeting. But for the most part, they’re thinking that you’re just an athlete.”

Another big story in the issue has to do with a bombshell that hit the brokerage world last month: the apparent leaking of documents to Corcoran agents, detailing all agents’ splits, gross commission income and sweeteners. We decided to publish an anonymized analysis of the data, which gives an inside look at the city’s second biggest resi brokerage and what’s touted as the most successful subsidiary of publicly traded Realogy.

The data also sheds light on the state of the residential brokerage world in a time of flux, when the traditional brokerage model is being challenged by tech firms. Corcoran, for its part, called the analysis of the data “distorted” and its publication “irresponsible,” and it previously said the leaked information was inaccurate.

There’s that and a lot more to dive into.

Enjoy the issue.