A bankruptcy court has approved the sale of flex-office provider Knotel to brokerage Newmark.
Newmark officials said they expected the deal to close quickly, Commercial Observer reported. The brokerage provided $20 million in debtor-in-possession financing after Knotel filed for bankruptcy in January, and its stalking-horse bid of $70 million brought it closer to acquiring the coworking company.
“Flexible workspace has been one of the fastest-growing areas of commercial real estate, and we expect this adaptive model will play an important role in the future of our industry,” Newmark CEO Barry Gosin told the publication.
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While it is not clear how many Knotel locations will remain open, a filing with the New York Department of Labor indicated that Newmark plans to employ “many, if not most” of the 106 Knotel staffers in New York City.
Newmark was an early investor in Knotel, and Gosin has defended the flex-office provider’s business model.
But problems at the company emerged before the pandemic, as leasing fell and vacancies rose. Broader questions over whether the firm could achieve profitability — and comparisons of its business model to that of WeWork — persisted.
While Sarva said he expected Knotel to turn a profit by the end of 2020, it instead lost about $49 million in the first half of that year and owed vendors $84 million, Business Insider reported.
The onset of the pandemic brought more problems for Knotel, as offices emptied out and more companies announced shifts to hybrid work-from-home models. The firm drew a number of lawsuits from vendors who accused Knotel of halting rent payments in the wake of the pandemic.
[CO] — Georgia Kromrei