WeWork, Neumann join forces against Sapir in lease dispute

Landlord alleges the co-working firm and its former CEO owe $17M for exiting Madison Ave lease

Alex Sapir, Adam Neumann and Sandeep Mathrani (The Sapir Organization, Getty, Wikipedia, iStock)
Alex Sapir, Adam Neumann and Sandeep Mathrani (The Sapir Organization, Getty, Wikipedia, iStock)

Two years after their acrimonious split in the wake of an IPO debacle, WeWork and its co-founder Adam Neumann find themselves battling a common foe.

Neumann recently joined WeWork in fighting back against a lawsuit brought by former landlord the Sapir Organization, which alleges the co-working firm abandoned its lease at a Midtown office building in March of last year and owes close to $17 million in damages.

Sapir Organization’s lawsuit, filed in August, alleged that Neumann personally guaranteed WeWork’s lease at 260-261 Madison Avenue and is on the hook for damages.

Neumann filed a response denying the allegations and bringing counterclaims of his own in late December.

The lease, which the suit alleges was supposed to run through 2028, was one of several that WeWork exited last year as it prepared to go public through a SPAC merger.

In the lawsuit, an entity tied to the Sapir Organization claimed it only became aware that WeWork was surrendering its lease after reading an article in The Real Deal in January 2021. It also alleged that WeWork failed to remove its property and repeatedly returned to the premises after the “surrender date.”

In October, WeWork filed a response denying the allegations and accusing Sapir and its CEO, Alex Sapir, of having a “long history of underhanded conduct and mismanagement of their real estate holdings.”

WeWork argued the Sapir Organization was struggling financially and “resorted to questionable practices in order to extort WeWork and Neumann.”

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WeWork further alleged that the landlord illegally drew down on a $767,795 letter of credit from Goldman Sachs without proper authorization. WeWork also said it was denied access to the building to retrieve equipment such as coolers, copy machines and shredder bins.

Sapir Organization denied these allegations in a subsequent court filing.

Neumann is now the latest to file claims against the Sapir Organization, using the same attorney as WeWork.

Neumann acknowledged that he guaranteed the lease, but alleged that WeWork properly vacated it, thereby voiding the guarantee. The court filing said the Sapir Organization struck a deal in November to lease the space to rival co-working firm Industrious, thus mitigating damages stemming from WeWork’s exit.

​​Neumann is asking the court to declare that WeWork vacated and surrendered the premises on March 31, 2021 and to rule the guarantee null and void.

The Sapir Organization denied Neumann’s allegations.

“Unable to delay any further, Neumann’s sudden claims are yet another desperate attempt to avoid liability for his contractual obligations,” said Sapir attorneys Terry Oved, Darren Oved and Andrew Urgenson of Oved & Oved in a statement. “We are not convinced. We doubt the court will be either.’”

In October, WeWork merged with special purpose acquisition company BowX Acquisition Corp to go public on the New York Stock Exchange.

An attorney for WeWork and Adam Neumann, Ricardo Vera of Newman Ferrara, did not return requests for comment. WeWork also did not return a request for comment.

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