The big investment Adam Neumann received for his latest real estate venture came at a cost: the keys to a portion of his apartment portfolio.
The former WeWork chief executive agreed to hand over part of his real estate holdings for the $350 million investment, the Wall Street Journal reported. The unusual arrangement puts venture capital giant Andreessen Horowitz in the position of being a real estate owner.
How that works: Neumann spent years buying stakes in apartments, particularly in the Sun Belt, after his ouster from WeWork. He has since transferred those holdings to the multifamily venture, Flow. Upon investing in the company, a16z picked up a stake in the apartments as well, becoming a multifamily landlord.
The investment structure doesn’t immediately create a cause for concern for Neumann and would be a mere afterthought if Flow proves successful. If it doesn’t, however, then Neumann sacrificed a multifamily portfolio believed to be valued in the hundreds of millions.
The venture capital giant’s $350 million investment was reported last month, marking the firm’s record for largest single investment in company history. Despite not officially launching yet, Flow was valued at the time at more than $1 billion.
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Flow was announced with little detail, but people familiar with the venture told the outlet it is looking to act as a property manager with the capacity of offering management services to other owners. The model is strikingly similar to doing what the multifamily market what WeWork targeted for offices, but Neumann likely hopes things end differently this time around.
The chief executive was forced out of the company he co-founded after drama at the co-working giant resulted in a shelved IPO. The company was once valued at $47 billion, but it tumbled after its internal combustion, sporting a market cap of only $4 billion as of mid-August.
While WeWork didn’t make it out of the tumult unscathed, Neumann survived financially sound, if with a new wave of name recognition. Neumann’s exit package included a $245 million stock award, which was granted last year. He also received $200 million in cash and had a $432 million loan refinanced.
— Holden Walter-Warner