The Daily Dirt: Clock is ticking for WeWork and its landlords

WeWork could begin bankruptcy proceedings as early as this Monday, Nov. 6, just a few months after warning of “substantial doubt” that it could continue operating.

But the clock isn’t only ticking for the troubled coworking firm. Its many office landlords are also facing a time crunch.

The countdown began in early October, when WeWork skipped $95 million in debt payments. That triggered a 30-day grace period, after which the firm would be considered in default. But, it struck a last minute forbearance agreement to avoid that, giving it seven more days, or until Nov. 6, to make the payments.

The firm has maintained that it intends to renegotiate its office leases, and implies that the threat of bankruptcy is little more than a negotiating tactic. That’s because a bankruptcy, which sources told the WSJ could kick off shortly after a default, would allow WeWork to get out of its leases at minimal cost.

That could sink a handful of New York offices where WeWork is a major tenant. The co-working firm’s major New York landlords owe $2.6 million in CMBS debt. Many of those landlords are already facing low occupancy rates, not to mention that in some cases WeWork hasn’t paid rent for much of the year.

The fallout from WeWork’s struggles has already begun for some landlords.

Kushner Companies and Aby Rosen’s RFR defaulted on a Dumbo office complex after WeWork left a majority leasehold there.

At least nine properties where WeWork is or was a major tenant have been watchlisted, with one delinquent and one in special servicing.

The office owners with the most exposure to the potential fallout include Walter & Samuels, Winter Properties and CIM. Charles Cohen, who has $635 million in delinquent New York office debt, is also exposed at 750 Lexington.

WeWork executives have signaled their intent to renegotiate leases for months, with little indication as to the potential outcome. With the clock running out, we may be about to get the answer.

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What we’re thinking about: WeWork’s problems may have been exacerbated by the pandemic, but the firm’s troubles began years before Covid, thanks in no small part to co-founder Adam Neumann. Still, I can’t help but wonder what the firm’s fate would have been without the pandemic? Could it have dug itself out? Send a note to david.westenhaver@therealdeal.com.

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Closing Time

Residential: The priciest residential closing Friday was $6.8 million for a condo at 1355 Firstt Avenue in Lenox Hill.

Commercial: The most expensive commercial closing of the day was $3.4 million for a six-unit building at 148 Atlantic Avenue in Cobble Hill.

New to the Market 

The priciest residence to hit the market Friday was a condo at 15 Central Park West in Lincoln Square asking $45 million. Douglas Elliman has the listing.

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A thing we’ve learned: Jeff Bezos is officially moving to Miami after three decades in Seattle. But the move isn’t just about the city’s thriving party scene, which Bezos has been known to enjoy, and to be closer to his parents. It’s also that his focus is shifting to Blue Origin, his spaceflight company, which is expected to attempt its first orbital mission next year. 

Elsewhere in New York

— The long-delayed construction of the rail tunnel under the Hudson River is set to accelerate with a $3.8 billion boost in federal funding, the New York Times reports. The next phase of work in the $16.1 billion Gateway project is expected to begin in the coming weeks, Senator Chuck Schumer announced Friday. Actual digging of the tunnel is slated for 2025.

— Gov. Kathy Hochul and Mayor Eric Adams announced the launch of the Induction Stove Challenge, a request for proposals from manufacturers to produce energy-efficient induction stoves for replacing gas stoves in New York City Housing Authority buildings. The program aims to install 10,000 modern induction stoves in NYC public housing, starting with a pilot program that will introduce prototype stoves in 100 NYCHA apartments. Firms have to submit concept details by Jan. 9. Selected companies will have 12 months to produce a working prototype.

— Federal agents raided the home of a top fundraiser for Mayor Adams on Thursday. The raid occurred shortly after Adams arrived in Washington D.C. for a meeting at the White House, The City reports. But Adams canceled his schedule and returned to New York when news of the raid broke.