As cash-strapped WeWork readies to rework an untold number of leases, a foreclosure filing at a Garment District office building may serve as a harbinger of the fallout to come.
Walter & Samuels chair David Berley is facing foreclosure at 315 West 36th Street after defaulting on debt payments on the building’s $77 million CMBS loan, court records show.
The firm acquired full ownership of the building in 2015, a few months after WeWork signed a 15-year lease for 93 percent of the property’s total rentable area.
As the coworking firm’s financials deteriorated, it quit paying rent at the property and told Berley it would not release the space, according to servicer commentary reported in Morningstar.
WeWork’s 315 West 36th Street location disappeared from the company’s website between August and December of last year, digital archive The Wayback Machine shows.
Walter & Samuels did not respond to a request for comment.
The Garment District debacle isn’t Berley’s only scuffle with WeWork.
In 2018, WeWork inked another 15-year lease for 50 percent of the square footage at 214 West 29th Street, a Chelsea office building Walter & Samuels has owned since the mid-1970s. The coworking firm then sub-leased that space to commercial tenants.
Three years later, Walter & Samuels slapped WeWork with a $37 million suit for allegedly trying to move its tenants to another location after defaulting on rent payments.
In April 2021, a court ruled in WeWork’s favor after the firm paid off those arrears, agreed to advance three months’ rent to Walter & Samuels and “reaffirmed its commitment to the terms of the lease,” a decision reads.
The landlord immediately appealed that decision, then withdrew the appeal in December of that year. WeWork’s site still lists 214 West 29th as one of its open locations.
Walter & Samuels has since seen occupancy at the Class B building slip to 65 percent. The loan is currently watchlisted as net cash flow is not covering debt service, according to Morningstar.
New York landlords are bracing for a slew of lease modifications after WeWork told investors this month it would try to renegotiate “nearly all its leases.”
As those amendments are hammered out, it’s likely more lawsuits will follow.
Earlier this week, DivcoWest, owner of 311 West 43rd Street, sued WeWork for $30 million after it walked away from its office space at the Midtown West building.
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