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Landlord DivcoWest Sues WeWork for $30M for Payment on Manhattan Property
By: Benyamin Davidsons
Wework’s woes seem to keep multiplying.
As reported by the NY Post, landlord DivcoWest has sued Wework demanding $30 million—or payment in full for its prime Midtown Manhattan property which the co-working giant abandoned. DivcoWest, the San Francisco-based real estate titan, filed the lawsuit on Thursday in Manhattan, alleging breach of contract at its building at 311 W. 43rd St. The enormous suit, coupled with Wework other disputes, may push the ailing company into bankruptcy.
The problems started in December, when Wework failed to pay its rent for the property. It already owed $1.9 million to the landlord. DivcoWest, smelling trouble, had quickly terminated the lease. The office sharing company vacated the property, but DivcoWest maintains that the rent is still owed for the entire duration of the original contract — which wasn’t supposed to terminate till 2032. DivcoWest claims that Wework never provided formal notice of its exit and that it never officially surrendered its lease. The lease agreement signed by Wework includes a clause that “prohibits early surrender or ‘abandonment of this lease’ without landlord’s written consent, which [the] landlord had never provided,” as per the lawsuit.
The 14-story office building at the center of the dispute is centrally located between Eighth and Ninth avenues. Known as The Press Building, it was constructed in 1903 and renovated in 2016, boasting about 193,000 square-feet of space. DivcoWest, founded in 1993 by Stuart Shiff, had famously purchased the building in 2018 from Billy Macklowe for $131 million. Two years earlier, Wework had entered a contract to take on 64,000 square feet at the building till 2032.
Wework, co-founded in 2010 by Adam Neumann, finally had its IPO in Oct. 2021, adding its name to the New York Stock Exchange. The office-sharing company, now led by President Artie Minson JR, boasts 779 locations in 39 countries as of 2022. Despite reported revenue of $3.24 billion in 2022, profits are still questionable, and the company is said to be close to the brink of bankruptcy. As of Monday, the company’s stock price opened at $4.11, well below the $40 high from just six months ago, and way below the 52-week high of $142.
The company, once valued at $47 billion has seen its worth depreciate drastically, down to a market cap of $215 million. As per the Post, Wework is currently working franticly to significantly cut costs. It has already hinted to its landlords that it plans to renegotiate “nearly all” of its leases. Last month, WeWork already expressed “substantial doubt” that it will be able to continue operation, even if a judge favors it in the lawsuit brought forth by DivcoWest.
For its part, even if Divco is granted a victory in the suit, it may still not be able to get paid if the co-working giant opts to file for bankruptcy. As per Bloomberg, such a move would also spell serious trouble for New York City’s lackluster commercial real estate market, as Wework rents a total of roughly 6.8 million square feet at more than 70 locations in Manhattan alone.
