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WeWork Gets Its Funding But Adam Neumann Still Has Objections

Defining the future of real estate

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Franco Faraudo
April 30, 2024

Propmodo Daily

By Franco Faraudo · Apr. 30, 2024

Greetings!

Today’s newsletter is brought to you by Prophia, an AI-powered data management and intelligence platform for the commercial real estate industry. In a major play for Seattle's hot real estate market, Palisade Group and Sabal Investment Holdings recently snagged two prime office buildings. Learn how Prophia's cutting-edge tech helped streamline the deal process.

WeWork's bankruptcy may finally be nearing an end. In today's email, we explore a new agreement between executives and senior creditors that would bring fresh capital and make a familiar company the controlling owner. But the issue isn't settled. Remaining creditors must vote on the terms, and Adam Neumann has filed a formal complaint alleging unfair treatment of his offer to buy the company.

This week on Propmodo Technology, sponsored by location intelligence platform Placer.ai, we're exploring retail property technology. We'll investigate how innovative tech helps landlords optimize their tenant mix, examine the enduring importance of physical stores in retail's future, and learn how Macerich leverages technology to empower small business owners.

Now, let's dig in!

WeWork Gets Its Funding but Adam Neumann Still Has Objections

WeWork has reached an agreement with its senior lenders. Under the plan, the lenders will provide $450 million in financing to help the company exit its costly bankruptcy proceedings. The agreement would make Cupar Grimmond LLC the majority owner. It has been revealed that Cupar Grimmond is an investment arm of the software provider Yardi. The agreement would also increase SoftBank's ownership of the company due to a loan convertible to equity.

Even before this announcement, Adam Neumann and his team had objected to the court, alleging a lack of good faith in negotiations. In a formal objection filed last Friday, Neumann claimed that his offer was not properly disclosed to creditors. The objection takes aim at "The Baird Declaration," filed last week by PTJ Partners restructuring firm head, James Baird. Neumann's objection claims that "The Baird Declaration contains numerous false and misleading statements about the Debtors' engagement (or lack thereof) with myself and the Flow Group."

Specifically, the complaint accuses Baird of failing to declare the true nature of the offer. The document states, "The Baird Declaration states that the Initial Flow DIP Proposal ‘sought to prime the Debtors’ existing secured lenders’ and was therefore rejected by WeWork’s board of directors."

The complaint continues, "But the Baird Declaration fails to mention that the Initial Flow DIP Proposal explicitly indicated that the Flow Group was willing to allow lenders under the existing DIP facility to participate in the Flow Group’s DIP on a pari passu basis, including by allowing such parties to ‘roll up’ a portion of their 1L Notes into the DIP."

In simpler terms, WeWork's counsel alleges they rejected Neumann's offer because it would supersede the loans WeWork already owes. Neumann disputes this, saying they offered to pool all existing debt into the new loan, giving current lenders the same rights as the new ownership.

Baird has declared that he is unaware of any other offers proposed by Neumann's new company, Flow. The complaint disputes this, stating: "Because the Flow Group Offer was submitted directly to Mr. Baird, Mr. Baird’s declaration that he is ‘not aware’ of any other proposals from the Flow Group can only mean he never even bothered to review the Flow Group Offer or he did not review his declaration before authorizing his name to be attached to it."

The agreement is still pending. Creditors will vote on the plan next month. The bankruptcy judge has said he would honor their vote. Neumann will now need to change tactics, appealing directly to creditors who hold WeWork's fate in their hands. This may be difficult; many creditors are landlords owed back rent by WeWork and likely remain unhappy with the way Neumann ran the business.

For now, it appears WeWork will be owned by Yardi (a topic for another article). But Adam is not one to give up easily. Based on his efforts to have his offer considered, this likely won't be the last we hear from him.

Prophia AI Assists Palisade Group's $48M Seattle Office Campus Acquisition

In a strategic move aimed at strengthening their position in Seattle's vibrant commercial real estate market, Palisade Group and Sabal Investment Holdings have recently acquired two prime office buildings located in the bustling South Lake Union submarket. With a combined price tag of $47.5 million, this milestone transaction signifies a significant growth opportunity for both firms, highlighting their commitment to unlocking value in key urban areas.

As Hobey reflects on the acquisition's success, he emphasizes Prophia's role in providing crucial support throughout the due diligence process. "Prophia played a vital role in helping us structure, organize, and analyze the lease data, enabling us to make informed decisions and structure a deal that aligned with our strategic objectives," says Hobey. "Moving forward, we're confident that Prophia's innovative technology and intuitive interface will continue to drive superior outcomes for our firm and our investors."

Insider Insights

🪦 Another settler: Douglas Elliman has agreed to settle one of the commission lawsuits for $7.75 million plus two other $5 million payments later, conditional upon whether or not the company has sufficient funds to make the payments.

🔍 iRegulators: As large investment companies buy up more rental homes, a growing number of Americans are calling for the practice to be regulated.

Overheard

Propmodo Technology: Retail Property

The Tech Helping Retail Landlords Find the Right Tenant Mix

The retail real estate industry is transforming, with landlords and tenants alike relying heavily on data and technology for success. Landlords use foot traffic analysis and other tools to carefully select tenants that will create synergy and drive sales. New platforms help match brands with suitable spaces, while technologies like facial recognition offer deeper customer insights (although they raise privacy concerns). As malls evolve, data is guiding decisions on tenant mix and even anchor tenant choices as landlords seek to maximize success in a competitive market.

READ ONLINE: https://propmodo.com/the-tech-helping-retail-landlords-find-the-right-tenant-mix/

How Brick and Mortar Commerce Fits into the Future of Retail 

READ ONLINE: https://propmodo.com/how-brick-and-mortar-commerce-fits-into-the-future-of-retail/

Macerich Builds Listing Platform to Appeal to 'Mom and Pop' Business Owners

READ ONLINE: https://propmodo.com/macerich-builds-listing-platform-to-appeal-to-mom-and-pop-business-owners/

Reach over 70,000 commercial real estate professionals when you collaborate with Propmodo. For info, email [email protected].

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The office market is in flux, with some cities suffering far more than others. Join our discussion with Caroline Wu, Director of Research at Placer.ai, to learn which cities are hardest hit, how it impacts other property types, what strategies help downtowns recover, the success of office conversions, and where the office market may be headed.

REGISTER: https://propmodo.com/which-cities-are-still-thriving-even-with-low-office-occupancy/

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