Adam Neumann Submits $500M+ WeWork Bid

The ousted co-founder and CEO of WeWork, is making headlines with a bid to buy back the bankrupt coworking he helped create for over $500 million.

Jordan B. & Han-Gwon Lung
March 27, 2024

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Good morning. Adam Neumann submits a bid to repurchase a bankrupt WeWork for over $500M, partnering with various funds. Meanwhile, demand for luxury apartments in LA is up, with vacancies down significantly.

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TRY AND TRY AGAIN

Neumann Bids $500M to Buy Back Bankrupt WeWork

Source: traded

Adam Neumann, the ousted co-founder and CEO of WeWork, is making headlines with a bid to buy back the bankrupt coworking firm he helped create for over $500 million.

First, some background: Under Adam Neumann’s leadership, WeWork transformed coworking spaces into trendy hubs, rapidly expanding since its 2010 inception. A pivotal meeting with SoftBank’s Masayoshi Son escalated its growth, ballooning its valuation to $47 billion, only to crash to $9 billion amid failed public offering attempts and governance issues, culminating in Neumann’s exit. Burdened by costly leases, WeWork declared Chapter 11 bankruptcy. At its peak in 2018, it was Manhattan’s largest private office space holder.

Back from the dead: Five years after his dramatic departure, Adam Neumann has proposed a buyback of WeWork with an offer exceeding $500 million. The origins of Neumann’s funding for this bid are shrouded in mystery, as previous claims of financial support from Dan Loeb’s Third Point have been disputed.

Financing questions: Neumann, along with his family office Nazare and real estate venture Flow, backed by Andreessen Horowitz, filed a notice of appearance in WeWork’s bankruptcy docket. “Two weeks ago, a coalition of half a dozen financing partners — whose identities are known to WeWork and its advisers — submitted a potential bid for substantially more than the Wall Street Journal reported,” said a representative of Flow. Reports suggest the bid could swell to $900 million, pending detailed evaluation.

➥ THE TAKEAWAY

Looking ahead: Neumann’s bid adds another dramatic chapter to the saga of WeWork and its charismatic founder. It’s clear that, given WeWork’s bankruptcy filing last November, any acquisition offer must receive the nod from its creditors. Currently, they are in the process of assessing the company’s valuation. This figure hinges on the lease concessions WeWork secures from landlords and the final count of locations it opts to shut down.

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✍️ Editor’s Picks

Changing tides: CRE professionals are more willing to invest these days as long-term concerns slowly fade. 25% are focused on deploying capital, while 46% expect lower rates.
Bridge breakdown: A container ship struck Baltimore’s Key Bridge, causing it to collapse and block the port entrance, with up to 15K jobs impacted.
Rent revolution: The DOJ is still criminally probing RealPage for alleged price fixing, sparking a federal proposal to ban algorithmic rent pricing.
Election upset: Chicago voters rejected Mayor Johnson’s real estate transfer tax plan, with 53% against the proposed measure to raise taxes on transactions over $1M.
Fee frenzy: Dallas may implement development fee increases of up to 2,400%, generating $8.5M in revenue if implemented immediately.

🏘️ MULTIFAMILY

Fraudsters foiled: A recent survey finds that over 50% of property managers observe various renter fraud types, with only 17% implementing fraud prevention initiatives.
Urban chic living: Range Group plans to build 72 luxury units in Manhattan’s Fulton Market, including 14 affordable units, 3.6KSF of commercial space, and 32 parking spots.
Rent wars: Population growth and employment gains are fueling rent disparities between apartment markets, with South Florida leading nationally.
Housing equality rising: Almost 50 years later, New Jersey may enforce the Mount Laurel Doctrine to ensure affordable housing in all 564 municipalities.
Oracle’s valley homes: A San Jose firm plans to build hundreds of homes on 38 acres at Oracle’s (ORCL) Santa Clara campus, per city documents.

🏭 Industrial

Fair-weather forecast: Industrial sector giants Link Logistics and Prologis (PLD) predict strong growth with plans for significant new developments in 2024.
Texas treasure: EQT Exeter Real Estate Income Trust Inc. buys a nearly 450KSF asset in Georgetown, TX for $60.9M.
Industrial leases soar: Westfield Company secures three tenants for its 159KSF Pivot Denver campus, inking leasing deals with Total Tool and Crescent Electric Supply.

🏬 RETAIL

Retail revolution: Sunbelt Investment Holdings Inc. has started construction on Buckeye Commons, a 410KSF retail center featuring a 160.9KSF Costco.
Retail realignment: Canada Goose, facing sales declines, restructures with corporate roles cut by 17% and shifts its DTC strategy for growth.

🏢 OFFICE

Trump’s towering plan: Plans for a $15M, 45KSF office building at Trump National in Jupiter, FL could act as an HQ that hosts all of Trump’s companies.
West Coast recovery: San Francisco’s office market saw record vacancy rates at 36.6%, with leasing activity expected to continue declining.

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SUPPLY AND DEMAND

Luxury Renters Flocking to Higher-End Units in LA

Renters seeking higher-end, pricier apartments driving LA multifamily demand

Source: RealDeal

Renters in LA are showing a clear preference for luxury apartments, driving demand and impacting vacancy rates, as reported by CoStar.

By the numbers: Luxury unit vacancies in LA have fallen to 8.6% from 10% last summer. Renters now opting for four- and five-star apartments have played a crucial role in this ‘flight to luxury,’ with a total of 8.3K leases signed in the past 12 months at top-tier properties.

Luxury vs. lower-end: While demand for luxury apartments surged, lower-end units saw rising vacancy rates. One-and two-star properties, making up 65% of the market, saw negative demand (-2.9K units) last year. In contrast, three-star properties, comprising 20% of the market, showed modest positive demand (320 units), highlighting the clear preference for higher-quality living spaces.

Rental rebound: After a significant period of decline, LA apartment rents have finally rebounded overall. Average asking rents rose by 0.4% PSF in February, following 0.2% growth in January, indicating a rental market that’s slowly gearing up for more competitive lease signings.

➥ THE TAKEAWAY

Rental resilience: Despite differing demand trends between luxury and lower-end apartments in LA, the overall rental market has shown resilience. Rebound rents, especially for high-end properties, underscore the dynamic nature of the city’s changing housing market. As renters prioritize quality living spaces, landlords and developers may need to adapt to evolving demand patterns to stay competitive.

📈 CHART OF THE DAY

In over half of America’s 50 largest metropolitan areas, there has been a sharp decline in the issuance of multifamily building permits, plummeting by at least 35% from their peak. Developers are encountering significant obstacles, including the steep cost of borrowing, reduced availability of equity and debt financing, declining rents for new leases, and persistently high construction expenses.