CIM Group Forecloses on 88 University Place

CIM Group has foreclosed on Arch Companies’ 88 University Place, a boutique office building plagued by controversies.

CIM, the lender, alleged the owners of the 11-story building stopped making debt payments last summer. The Los Angeles-based firm initiated a U.C.C. foreclosure on the equity interest in the property.

The default occurred, according to CIM, as Arch Companies spiraled into chaos. Arch partners Jeffrey Simpson and Jared Chassen attempted to fire each other, and Simpson then went to war against the firm’s main investor, the Wiener family, alleging it started a coup against him.

In late 2023, Judge Joel Cohen barred Simpson from running the company and placed the Wiener family’s 35 Oak Holdings temporarily in charge.

“I am left with an abiding sense that whatever Mr. Simpson’s talents are as a real estate business person, this business is broken at the moment,” Judge Cohen said at one hearing. “It was broken on his watch.”

But 88 University Place’s troubles pre-date Arch’s demise.

WeWork co-founder Adam Neumann partnered with fashion designer Elie Tahari in 2015 to buy the building for $70 million. They quickly leased space to WeWork, of which Neumann was CEO. The co-working firm then signed a deal with IBM for the storied company to take 70,000 of the building’s 90,000 square feet.

The arrangement between Neumann and WeWork came under scrutiny in 2019 as WeWork prepared for an IPO. Investors were concerned about a possible conflict of interest, according to the Wall Street Journal.

But that was far from the building’s biggest problem. During the pandemic, IBM vacated the space, leaving a massive vacancy.

Arch acquired a stake in the property and secured a $71 million loan from CIM Group in June 2022 to renovate the building. Arch itself used office space in the building and Neumann’s multifamily startup Flow leased there as well. Neumann’s company Flow Carbon lists an address at the property.

CIM started sending Arch Companies default notices last summer, alleging the owners failed to pay interest on its mortgage and on a mezzanine loan. The lender also alleged Arch changed its lease from the 11th floor to the second without the lender’s consent.

Mark Lapidus, WeWork’s former head of real estate who has been linked to Neumann’s more recent real estate ventures, discussed a potential resolution with Arch Companies and CIM in an email thread.

“CIM won’t consider an equity deal with the ongoing disputes, but they might consider it with me,” Lapidus said in an email on November 9, 2023, filed as an exhibit as part of a lawsuit in the New York Supreme Court.

“If both sides agree to relinquish all rights and become passive limited partners without protections, I may be able to maintain equity in the deal. I haven’t discussed this with CIM yet, but I’m hopeful,” he said.

His optimism was misplaced. The email thread quickly spiraled out of control.

Simpson, the ousted Arch partner, requested a meeting at 88 University Place to discuss a resolution with CIM Group. Kevin Wiener replied that Simpson was not allowed to enter the building.

When Simpson arrived outside, a dramatic scene ensued. Police were called.

The situation devolved even further as Simpson became enraged with Kevin and Michael Wiener for taking control of Arch.

On March 6, Simpson sent an email to Kevin Wiener.

“YOU DON’T KNOW ANYTHING, GO BACK TO CANADA AS YOU ARE PLANNING TO DO ANYWAY AFTER YOU ARE FINISHED RUINING THE BUSINESS THAT I BUILT. THE GROWN UPS WILL HANDLE IT. YOU WILL NEVER BE ALLOWED BACK IN THE US WHEN WE ARE DONE WITH THIS NONSENSE. DON’T SEND ME ANYTHING MORE, YOU WILL BE PROVEN GUILTY ON ALL RESPECTS – GOOD THAT YOU DUPED ONE JUDGE, YOU WON’T DUPE OTHERS . . . LIKE A COWARD THAT YOU ARE. THIS ISNT A VIDEO GAME KEVIN.”

Weiner responded, “Jeff I’m already in Canada.”

The next day, Simpson put a company he and Chassen once controlled, JJ Arch, into bankruptcy protection. Last week, a bankruptcy judge dismissed Simpson’s proposed plan, citing bad faith.