Evictions, unpaid vendors and back rent: Lawsuits mounting against Knotel
Flex-office provider slashed staff, scaled back once-ambitious plans
As it retreats from its once-ambitious expansion plans, Knotel is facing an escalating barrage of evictions, claims from unpaid vendors and lawsuits seeking millions of dollars in back rent.
In recent weeks, Knotel’s landlords have filed more than a dozen claims against the flex-office provider as it slashes staff and scales back its real estate footprint, court records show. The actions include two evictions, an escalation from previous lawsuits seeking to force Knotel to pay its back rents — and a sign that landlords may be running out of patience with the once-hot startup.
Last week, PRD Realty Corp. moved to boot Knotel from its space at the company’s building at 38 East 29th Street, where it claims the startup owes nearly $50,000 in unpaid rent and taxes from October.
And in late October, Justin Management filed in late October to kick Knotel out of its space at 115 West 30th Street, where the landlord claims it’s owed nearly $153,000.
A spokesperson for Knotel declined to comment.
In total, Knotel has been hit with 21 lawsuits in New York State Supreme Court seeking nearly $10 million in damages. Most of those cases seek to compel the parent company to enforce the guarantees it provided for the LLCs that lease Knotel locations.
The largest lawsuit was filed by an entity controlled by Brooks Brothers owner Claudio Del Vecchio, which is seeking $3 million from Knotel for its space above the company’s flagship store at 11 East 44th Street. An LLC controlled by Del Vecchio bought the building last year for $105.8 million from landlord Aion Partners. Right before the sale went through, that firm had leased space to Knotel.
In the lawsuit, the landlord claims that it’s owed back rent from April through July, plus $2.35 million in construction costs for the space.
Knotel was once valued at $1.6 billion, but was blindsided along with other flexible-office companies by the coronavirus earlier this year. The startup has reacted by making cuts to reduce costs.
The company, led by Amol Sarva, has gone through three rounds of layoffs this year, the most recent of which in late October brought Knotel’s headcount to 250 employees.
“We have no crystal balls, but the scenarios that we considered didn’t pan out. I own that,” Sarva wrote in an email to company employees announcing the cuts.
The company is also looking to trim 60 percent of its 4.8 million-square-foot global portfolio.