“Unlawful” and “hypocritical”: WeWork members threaten legal action over fees

(Credit: Alex Tai/SOPA Images/LightRocket via Getty Images, iStock)

(Credit: Alex Tai/SOPA Images/LightRocket via Getty Images, iStock)

A group of WeWork members is threatening the co-working giant with legal action if it continues to collect fees even though the coronavirus has prevented them from using the space.

In a letter to WeWork’s general counsel on Thursday, an attorney for the members said WeWork’s collection of fees was “unlawful” because state and local authorities have directed nonessential personnel to stay home. It is also “hypocritical,” said the attorney, Jim Walden, since WeWork itself has reportedly failed to pay its own rent at some locations.

The members are from New York, Los Angeles, and Washington, D.C., where stay-at-home orders are still being enforced.

“Our clients have no legal obligation to pay their membership fees while the purpose of their membership agreements remains frustrated by the Covid-19 pandemic,” Walden wrote in the letter, first reported by The Hill.

A spokesperson for WeWork declined to comment.

According to Walden, WeWork members have complied with public health mandates because it is law, and not doing so in some locations carries a steep fine. In some cities, police have shown up at WeWork locations to “clear the premises of anyone disobeying the applicable stay-at-home orders.

Two members represented by Walden’s letter said WeWork’s decision to keep offices open has burdened them with health and economic concerns.

“The idea of bringing this virus home is not what I wanted to do,” said Ray Miller, owner of an L.A.-based management production company. Miller pays $2,000 a month for three two-person offices that his team is not using.

“It is a financial burden,” said Lisa Kaneff, a freelance copywriter in Washington. She pays $450 a month for a desk that’s situated within three feet of others. “As a freelancer, I’m my only source of income. WeWork is my overhead. I need every penny I can get.”

Although Miller said his team’s space is less dense than Kaneff’s, he is concerned about communal spaces like the kitchen, waiting areas, conference rooms and even elevators. “The whole concept of co-working is that you’re sharing certain spaces,” he said. “I don’t think the space should be open, quite frankly.”

WeWork has kept its U.S. locations open on the grounds that some members operate “essential businesses.” The company has also said its mail service spares it from executive orders such as New York Gov. Andrew Cuomo’s ban on going to work.

The co-working sector has faced unique pressure to balance low revenue with the need of members. As The Real Deal previously reported, Bond Collective has refused to refund membership, although it is pausing membership and discounting fees for members who need relief.

In the letter, Walden accused WeWork of garnishing fees from some members’ bank accounts without permission. It also called the policy “hypocritical,” citing reports that WeWork didn’t pay its full rent in April.

In recent weeks, angry WeWork members have organized petitions and created YouTube videos to compel the company to change its policy.

WeWork asks landlords to cut rent bill as SoftBank abandons bailout

WeWork CEO Sandeep Mathrani and Softbank CEO Masayoshi Son (Credit: Mathrani by Neilson Barnard/Getty Images; Son by Alessandro Di Ciommo/NurPhoto via Getty Images)

WeWork CEO Sandeep Mathrani and Softbank CEO Masayoshi Son (Credit: Mathrani by Neilson Barnard/Getty Images; Son by Alessandro Di Ciommo/NurPhoto via Getty Images)

SoftBank is abandoning plans to buy $3 billion of WeWork shares from investors, a major blow to the company as it struggles to stabilize during the pandemic.

The announcement was made to a board committee Wednesday evening, according to The New York Times. WeWork’s former CEO, Adam Neumann, is among the shareholders who will now miss out the chance to sell hundreds of millions of dollars worth of stock to SoftBank.

The rescue deal’s collapse comes as WeWork makes efforts to reduce its rent liabilities by as much as 30 percent. According to Bloomberg, WeWork CEO Sandeep Mathrani has been contacting landlords and proposing options including revenue-sharing agreements, with the goal of slashing rent by up to 30 percent.

The publication reported that some landlords pitched by Mathrani were reluctant.

SoftBank said it was walking back on the deal — reached last October — because of “multiple, new and significant pending criminal and civil investigations,” which changed conditions ahead of the deal’s April 1 closing date. The Wall Street Journal reported that SoftBank also cited business interruption from the coronavirus as a reason for reneging.

In response, WeWork’s board said it would evaluate its legal options, “including litigation.”

As of last year, WeWork had $47 billion in lease commitments over the next 15 years. An S-1 filing submitted as part of a botched IPO attempt showed the company had $4 billion in committed revenue from its customers and $2.5 billion in cash, half of which was unrestricted.

[NYT] — Sylvia Varnham O’Regan

WeWork gears up for potential legal fight with SoftBank

Softbank CEO Masayoshi Son (Credit: Getty Images, iStock)

Softbank CEO Masayoshi Son (Credit: Getty Images, iStock)

SoftBank recently advised WeWork shareholders that it might renege on part of its rescue package, and a pair of independent directors for the co-working firm are considering all options in response, including legal action, according to Bloomberg and the Wall Street Journal.

SoftBank had struck a deal to buy $3 billion worth of stock in WeWork, effectively rescuing the company after a disastrous initial public offering attempt. However, the conglomerate sent a message to stockholders saying it could withdraw from the agreement in the wake of several government inquiries into WeWork from agencies including the Manhattan district attorney and the Securities and Exchange Commission.

SoftBank has said it is still honoring its obligations laid out in the agreement and has given WeWork more than $5 billion since October, but not every condition for its offer has been met. It can walk away from the deal if government inquiries or investigations result in material liability for WeWork.

“The main beneficiaries of the tender are Adam Neumann, large institutional investors, and some prior officers of the company,” a SoftBank spokesperson told Bloomberg. “Current WeWork employees have already benefited greatly from the repricing of their options in an earlier phase of the tender offer and would receive less than 10% of the proceeds.”

SoftBank is changing its stance on the deal amid plunging markets as the coronavirus spreads. The Japanese conglomerate also said it intends to sell as much as $41 billion of assets to buy back its shares and redeem debt in an effort to halt its falling stock and bond prices, according to the Journal.

Several WeWork locations are still open, but the company could be on the hook for billions in long-term lease liabilities if widespread “work from home” mandates cause tenants to choose not to renew their short-term leases.

Venture capitalist Bruce Dunlevie and former Coach CEO Lew Frankfort make up WeWork’s special committee, and discussed ways they think they could force SoftBank to follow through with its investment during a phone call Thursday night, according to the Journal. The offer was supposed to be completed by April 1.

A WeWork board spokeswoman told the Journal that they were “committed to taking all necessary actions to ensure that the tender offer, which SoftBank has promised to our employees and shareholders is completed.” [Bloomberg, WSJ] — Eddie Small

WeWork sues NY firm over botched development deal

Former WeWork CEO Adam Neumann and Maximus' Robert Rosania (Credit: Kevin Hagen/Getty Images; Ambrosetti)

Former WeWork CEO Adam Neumann and Maximus’ Robert Rosania (Credit: Kevin Hagen/Getty Images; Ambrosetti)

WeWork is suing a New York firm to recoup a $20 million fee it paid for a San Francisco development.

WeWork blamed Maximus, a firm led by Stellar Management alum Robert Rosania, for not not closing on WeWork’s proposed investment in the project and not returning an “exclusivity fee,” Crain’s reported.

The embattled co-working firm had envisioned putting a WeWork and WeLive on the 150-acre, 3,000-unit campus. Maximus was planning to increase the unit count to 7,000 — and Adam Neumann had agreed to pitch in $500 million.

But after WeWork’s spectacular fall from grace last year, which ended in a botched IPO, the exit of its CEO Adam Neumann and a proposed bailout package from parent SoftBank, the deal with Maximus fizzled. Now, WeWork is rapidly shedding assets, and selling some at a steep discount.

On Tuesday, news reports emerged that SoftBank may not follow through on its bailout of WeWork. [Crain’s] — Georgia Kromrei

WeWork in talks to sell off Managed by Q to free up some cash

WeWork's Artie Minson and Managed by Q's Dan Teran 

WeWork’s Artie Minson and Managed by Q’s Dan Teran

WeWork is in talks to the sell the biggest acquisition it made in its free-spending days.

The co-working company is in discussions to sell the workplace management company Managed by Q to a group including one of the company’s co-founders, Bloomberg reported. It’s one of three companies WeWork put on the chopping block as it looks to cut costs.

Co-founder and former chairman Dan Teran is working with a group of investors and executives to buy the company just about eight months after WeWork acquired it.

The deal could free up cash for WeWork as it tries to focus on the core of its business. To stave off a bankruptcy, WeWork’s biggest investor SoftBank recently provided a $9.5 billion rescue package. This week, Goldman Sachs arranged a $1.75 billion line of credit to WeWork and SoftBank.

During a panel in Abu Dhabi on Wednesday, Teran said he is “actively working to buy back my company.”

Managed by Q was valued at $249 million in January following a new funding round, according to a report citing PitchBook data. It wasn’t clear how much the company is being valued at now in the negotiations between WeWork and Teran. [Bloomberg] – Rich Bockmann

Goldman Sachs will lead Phase II of SoftBank’s WeWork rescue plan

Softbank CEO Masayoshi Son and Goldman Sachs CEO David Solomon (Credit: Getty Images)

Softbank CEO Masayoshi Son and Goldman Sachs CEO David Solomon (Credit: Getty Images)

WeWork’s got a new bank and a new line of credit.

Goldman Sachs arranged a $1.75 billion line of credit for SoftBank Group with WeWork listed as a co-borrower, according to Bloomberg. The credit line is part of a larger bailout package SoftBank has committed to securing.

WeWork was listed as a co-borrower in a bid to attract other lenders willing to front lines of credit to the beleaguered co-working company, which is desperate for cash after its failed initial public offering, Bloomberg reported.

The new credit line replaces the company’s previous $1.1 billion facility and will reportedly free up additional cash previously being used as collateral. To complete SoftBank’s plan for $5 billion in debt financing for WeWork, a further $3.3 billion is needed. According to Bloomberg, Goldman is canvassing other banks in a bid to secure the rest of the plan by the end of the year.

Following WeWork’s botched IPO in September, co-founder Adam Neumann was ousted from his role as CEO and SoftBank assumed a controlling stake in the company.

To prevent the co-working firm’s bankruptcy, SoftBank ironed out a $9.5 billion rescue package with a $5 billion debt facility, a $1.5 billion commitment and a $3 billion stock tender offer.

SoftBank had delayed paying out the $3 billion offer, prompting WeWork’s junk bond price to sink and its risk premium to skyrocket.

Prior to Goldman Sachs leading its search for financing, WeWork largely relied on advice from JPMorgan Chase, which has had to defend its role in the failed IPO and the suspect corporate governance. JPMorgan’s CEO Jamie Dimon last month said he and the bank have “learned lessons” following the WeWork implosion. [Bloomberg] — Erin Hudson

As co-working firms leave London, a new arriver plans to make a splash

Newable Flexible Workspace's Brett Million and Serendipity Labs CEO John Arenas

Newable Flexible Workspace’s Brett Million and Serendipity Labs CEO John Arenas

A flexible office space firm is entering the London co-working market, at a time when others are shuttering operations there.

Serendipity Labs, a company that provides on-demand office space in primary and secondary markets, said Friday that it has entered an agreement to license 25 locations in the U.K., including 12 in London.

The New York-based firm, which uses franchise and management partnership agreements with its landlords, will partner with U.K.-based firm Newable Flexible Workspace, a subsidiary of consulting firm Newable Limited.

“Through licensing arrangements, it’s a way for us to grow in an asset-light brand approach to this industry,” said John Arenas, a former executive at Regus, who launched Serendipity Labs in 2011.

London is considered among the most crowded co-working markets in the world, with close to a dozen major companies operating in the city, and a multitude of smaller firms. Nearly 5 percent of the city’s office stock is co-working, according to a Cushman & Wakefield report from April. The competitive landscape has prompted some firms to reevaluate their strategy there.

WeWork, the world’s largest coworking firm, is currently assessing whether to proceed on 28 new leases in the city, Bloomberg reported, as it plans massive job cuts in the city. Recently, San Francisco-based RocketSpace, told employees it would close its 1,500 seat London location by the end of the year.

“I dont think its a harbinger of things to come,” Arenas said of RocketSpace’s closure. “It really was an accelerator helping businesses.”

Serendipity Labs expansion to the U.K. overshadows the challenges facing other office space firms in the U.S. Aside from WeWork, which in recent months has taken drastic steps to salvage its business, smaller firms have also encountered disruptions.

Last month, New York-based Corporate Suites was briefly evicted from a Manhattan office building due to a payment dispute. And on Thursday, The Real Deal reported that Montreal-based firm Breather had laid off 17 percent of its staff.

In the meantime, Arenas said his firm is discussing similar licensing agreements with operators in Australia and Canada. He previously has said he plans to open as many as 300 locations.

Last year, Serendipity Labs entered an agreement with China’s largest co-working firm, UCommune, to serve as its U.S. partner, and open a location at 28 Liberty Street in Manhattan. In the U.S., Serendipity Labs currently has 37 locations in 29 cities.

South Florida home sales struggle in October, Cipriani and Terra plan luxury condo

Every day, The Real Deal rounds up South Florida’s biggest real estate news, from breaking news and scoops to announcements and deals. We update this page throughout the day. Please send any tips or deals to [email protected]

This page was last updated at 6 p.m.

October was a rough month for home sales in South Florida. Single-family home sales rose in Miami-Dade and Broward counties in October, but fell in Palm Beach County, and condo sales fell across the region, according to newly released figures from the Miami Association of Realtors. [TRD]

The Cipriani family’s next project will be a luxury condo tower in Coconut Grove. Less than a year after opening its Mr. C Miami hotel in the Grove, the Ciprianis are working with David Martin’s Terra to launch a Mr. C branded mixed-use condo project nearby at 2655 South Bayshore Drive, according to a press release. The development is the first major residential project for the Mr. C brand. [TRD]

The Miami Association of Realtors launched a commercial multiple listing service. South Florida Commercial Property Search is the only commercial MLS in South Florida with a consumer-facing website, according to a press release. The website was launched with the Beacon Council and Florida Power & Light. [TRD]

SoftBank is looking to whittle down its WeWork rescue package. The $9.5 billion agreement has drawn ire from WeWork employees because of a generous payout to founder and former CEO Adam Neumann, according to Bloomberg. [TRD]

The Related Group’s Jon Paul Pérez is partnering with an affordable housing developer to launch a new venture focused on Section 42 housing. Pérez, executive vice president at Related, is working with Patrick Plunkett on Perez Housing Associates. The company will operate independently from Related, and will focus solely on buying, rehabbing and running properties under Section 42 of the low income housing tax credit program. [TRD]

The Green Companies purchased a four-story Class A office building in Kendall for $13.2 million. The Green Companies bought the 63,206-square-foot building at 11731 Mills Drive in Miami for $209 per square foot, records show. The seller is Nuveen, a subsidiary of TIAA. The property is 84.6 percent occupied by two tenants, Everglades University and VITAS Healthcare. [TRD]

These stores are defying the retail norm. Department stores like Macy’s are struggling while discount stores like Target, Walmart, TJMaxx and Marshalls have increased their market share. Macy’s sales fell 3.9 percent at stores that have been open for at least a year. Target’s physical stores and online shop saw a 4.5 percent bump, with a 10 percent increase in clothing sales. [CNN]

Rep. Ilhan Omar’s housing plan has a $1 trillion price tag. The plan seeks to create 12 million affordable units and repeal the Faircloth Amendment, which has barred the construction of public housing units since 1998. The plan comes on the heels of plans released by Sen. Bernie Sanders and Rep. Alexandria Ocasio-Cortez. [TRD]

Sen. Kamala Harris and Rep. Maxine Waters are the latest federal politicians to introduce a housing bill. The proposal, dubbed the Housing is Infrastructure Act, would invest $70 billion in the construction of new public housing and $10 billion to ease zoning restrictions for new affordable housing. The pair also proposed $6 billion to invest in housing for the elderly, the disabled or veterans. [CNBC]

Do not hide or delete documents, WeWork execs tell employees amid layoffs. As thousands of WeWork employees prepare to be laid off this week, the embattled company’s leadership has issued a warning to them: don’t leak information, and don’t delete anything. [TRD]

Software exec sells Palm Beach vacant lot for $17M. A software executive sold a vacant lot in Palm Beach for $17 million, after receiving town approval for a new custom home. Bill and Julie McDermott sold the 0.8-acre property at 445 North Lake Way for $475 per square foot, records show. 444 North Lake LLC, led by Holly Gershon of Boca Raton, bought the property. [TRD]

Bridgewater wagers $1B on market drop. Bridgewater Associates LP has bet more than $1 billion that stock markets around the world will decline by March, according to the Wall Street Journal. The bet would pay off for Bridgewater if either the S&P 500 or the Euro Stoxx 50 decline, according to the Journal. [WSJ]

Do not hide or delete documents, WeWork execs tell employees amid layoffs

WeWork co-CEOs Sebastian Gunningham and Artie Minson (Credit: Getty Images and Twitter)

WeWork co-CEOs Sebastian Gunningham and Artie Minson (Credit: Getty Images and Twitter)

As thousands of WeWork employees prepare to be laid off this week, the embattled company’s leadership has issued a warning to them: don’t leak information, and don’t delete anything.

In an email sent Wednesday evening from co-CEOs Artie Minson and Sebastian Gunningham, employees were reminded that the company would take violations of its policy “seriously.”

“It has come to our attention that some employees may be considering deleting materials from their WeWork computers, or forwarding information and documents outside of WeWork,” the email read, a copy of which was seen by The Real Deal.

“You should all be aware that company computers are WeWork property and you may not delete or destroy company materials on these devices. Additionally we want to remind you that you may not share information or documents outside of the company.”

When asked, a WeWork representative would not say if a particular incident prompted the email, and declined to comment further.

The email follows a steady string of news reports about the company’s demise, many of which cited anonymous sources. Since abandoning plans to go public at a valuation of $47 billion over the summer and then ousting disgraced CEO Adam Neumann (who received a $1.7 billion golden parachute), the company has been in freefall.

Sources told TRD that as many as 4,000 employees are expected to be laid off in coming weeks, though WeWork said Thursday that 2,400 would be affected globally. It’s unclear if WeWork’s figure includes 1,000 maintenance workers who would be transferred to JLL, or employees at other companies WeWork acquired.

Fear that employees could delete or remove documents is the latest concern for WeWork executives as regulators begin to pick apart the downfall, and probe allegations of self-dealing. Following a whistleblower complaint, the firm is being investigated by the U.S. Securities and Exchange Commission about allegations WeWork executives approved the $42 million acquisition of another office-space startup, Spacious, without going through due diligence — a highly unusual move. The New York Post first reported the investigation.

A separate investigation was launched by the New York State Attorney General’s office to probe multiple transactions involving former CEO Adam Neumann that were scrutinized for potential self-dealing.

The company’s largest investor, SoftBank, last month committed to a $9.5 billion financing package to save WeWork from potential bankruptcy, a payment that included Neumann’s $1.7 billion exit package.

Ten-X Commercial laid off half of its workforce, Miami professor who taught class on money laundering allegedly laundered millions

Every day, The Real Deal rounds up South Florida’s biggest real estate news, from breaking news and scoops to announcements and deals. We update this page throughout the day. Please send any tips or deals to [email protected]

This page was last updated at 6:30 p.m.

Private equity giant scoops up mobile home park in Hollywood. The Carlyle Group purchased a mobile home park in Hollywood for $25.2 million, another example of private equity firms buying up mobile home communities. [TRD]

Gables Residential sells dev site near Shops at Merrick Park. A national apartment builder sold a development site near Shops at Merrick Park in Coral Gables to BF Group, a local developer. Development options for the property include a hotel and office building. [TRD]

Copperline Partners closes on bulk co-op deal in Palm Beach. The price was $35 million, and the property could be redeveloped by its new owner into a luxury hotel. [TRD]

Grove Isle developers face new lawsuit over proposed project. Grove Isles Associates is facing another legal challenge to its plans for a new condominium complex in the waterfront luxury community in Coconut Grove. [TRD]

CMBS loan for Starwood’s Mall at Wellington Green is in trouble. The $680 million CMBS loan for a Starwood mall portfolio that includes a large Wellington property has been sent to special servicing, according to Trepp. [TRD]

Why Compass, @properties and tech startups are diving into bridge loans. To help clients increase their purchasing power, a number of residential brokerages have launched bridge loan programs that let clients borrow money to pay for a new home before they sell their old one. [TRD]

Long Island politicians want HUD to investigate real estate discrimination. U.S. representatives Kathleen Rice and Thomas Suozzi are drafting a letter to HUD Secretary Ben Carson to call for a probe into the “steering” that a Newsday investigation found was commonplace in the broker community. The representatives will also request that the department end its “harmful rollback of fair housing measures.” [Newsday]

Proptech startup Eden completes $25M Series B. Eden, a proptech startup that helps landlords manage parts of the workplace like scheduling cleaning services and ordering snacks, raised $25 million in its Series B funding round. Soho-based venture-capital firm Reshape led the funding round, Eden announced Tuesday. [TRD]

Ten-X Commercial laying off half of its workforce. Ten-X Commercial, an online real estate transaction platform, eliminated half its workforce after efforts to sell the company fell through. Close to 100 employees in offices in Texas, New York and California were given notice on Monday morning during a call with executives, according to people on the call and those familiar with the matter. [TRD]

Miami professor who taught class on money laundering allegedly laundered millions. University of Miami professor and author Bruce Bagley taught classes on corruption and money laundering, but federal prosecutors are saying that he also helped launder at least $3 million in money from Venezuela through his bank accounts, according to the Miami Herald. On Monday, the 73-year-old Bagley was arrested on one count of conspiracy to commit money laundering and two counts of money laundering. He could face 20 years in jail on each count. [Miami Herald]

The New York State Attorney General’s office has launched an investigation into WeWork. The embattled office-space company, which is soon set to lay off thousands of workers, confirmed to Reuters that it had received a request from the state’s AG office, led by Letitia James. [TRD]

Compiled by Keith Larsen