This week, a landlord known only as “120 East 16th Street Co. LLC” sued WeWork, claiming that the company used a shell entity to circumvent its liabilities.
According to the complaint filed with the New York Supreme Court, WeWork evidently transferred liability for the lease from its parent company WeWork Incorporated Inc. (WWCI) to WeWork Companies LLC (WWC LLC).
In the filing, the landlord said that the company’s restructuring violated the terms of its lease with WeWork from October 2016.
“…on or about June 23, 2019, the Landlord received a belated notice without any detail to the effect that [WeWork Incorporated Inc.] had already undergone an undefined ‘holding company reorganization’ under which a new entity known as WeWork Companies LLC (“WWC LLC”) became the corporate holding company [of the lease].”
The landlord alleges that this violates the “Net Worth Clause” within the lease that says if WeWork were to replace WWCI with another company as guarantor, the new firm would have to have a networth of at least $150 million.
120 East 16th Street Co. LLC showed skepticism that this shell company has the cash due to “recent financial reports in the media.”