As WeWork seeks to renegotiate hundreds of leases, the very person who roped the firm into those deals has been looking to pick up space formerly leased to the co-working firm.
A court filing reveals that in June, former WeWork wonderboy Adam Neumann was in talks to lease space at 88 University Place in Manhattan. The negotiations appear to have been between Neumann’s family office and the building’s landlord, Arch Companies, for the 11th floor.
The lease discussions were revealed in litigation in federal court. Neumann has long occupied some space in the building, which played a role in the controversy that tanked WeWork’s first IPO attempt and led to Neumann’s ouster.
A spokesman for Neumann says he is not currently in discussions for the additional space in the building.
The 11-story office building at 88 University Place was leased to WeWork and co-owned by Neumann, the company’s co-founder and CEO. It was one of many buildings that WeWork leased from Neumann. Critics called the leases a conflict of interest for WeWork and an example of self-dealing by its charismatic leader.
WeWork refuted the accusations at the time, characterizing the deals as “related-party transactions” that were reviewed and approved by WeWork’s board or an independent committee and disclosed to investors.
Neumann’s adventure at 88 University Place, just south of Union Square, began in 2015. He teamed up with fashion designer Elie Tahari to acquire the building for $70 million.
Neumann and Tahari planned a renovation and then quickly leased the space to WeWork, according to the Wall Street Journal. In 2017, WeWork struck a deal to lease 70,000 square feet in the building to IBM. The lease was one of the first in which WeWork leased nearly an entire building to one company.
During the pandemic, IBM vacated the space, leaving the building mostly vacant.
Manhattan-based Arch Companies acquired a stake in the property and secured a $71 million bridge loan from CIM Group in June 2022. Tahari and Neumann kept an interest in the property, but Arch Companies is the majority owner. WeWork no longer controlled space in the building.
The building was only about 50 percent occupied at the time, according to Arch Companies.
Arch Companies also took space at 88 University for an office on the 11th floor, according to the firm’s website. Arch later looked to get out of the lease in its own building, but needed to run that past the property’s lender.
But now Arch’s portfolio is facing issues because of higher interest rates and the firm has sought to rework some of its loans, according to court filings.
In a June email about the state of the portfolio, Arch Companies executive Michelle Miller said the firm is “hopeful that Adam Neumann is taking the 11th floor and that additional lease will be helpful to both the property’s cash flows and the lender’s flexibility to let Arch out of its lease.”
Miller said the money would be a big help to Arch’s corporate cash flows. She added that Neumann’s family office would need to pay Arch for the company’s investment in the space.
Last week, WeWork told its landlords on a conference call that it will try to renegotiate nearly all of its leases. The company said its leasing costs remain too high and will seek to leave underperforming locations. The news came as WeWork faced the threat of bankruptcy.
Neumann was bought out of WeWork after its disastrous IPO attempt in 2019. He left with a generous exit package estimated to be worth hundreds of millions of dollars, then bought apartment buildings across the country. Last year, Neumann founded Flow with backing from venture capital firm Andreessen Horowitz.
This article has been updated with a comment from a spokesperson for Adam Neumann.
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