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Nirit Cohen – WorkFutures
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Jonathan Price – CRE & Flex Expert
A U.S. bankruptcy judge has officially approved WeWork’s Chapter 11 bankruptcy exit plan.
Reuters reports the court approval, which follows months of negotiations. The plan allows the shared office space provider to eliminate billions in debt and transfer the company’s equity to a group of minority lenders and its new majority owner: real estate technology firm Yardi Systems.
This provides Anant Yardi, CEO of Yardi systems, a unique position for his firm to begin leaving a mark not just in the realm of urban real estate, but in the increasingly in-demand world of coworking.
WeWork, once valued at $47 billion at its peak, has seen its valuation plummet to a post-bankruptcy equity estimated to be worth $750 million.
It’s reported that the North American bankruptcy proceedings have wiped out $4 billion in loans and bonds, with creditors, including Yardi Systems, contributing to $450 million in new cash.
Yardi Systems agreed to contribute $337 million through its affiliate Cupar Grimmond LLC. — which covers the majority of the coworking giant’s $450 million bankruptcy exit plan.
Other lenders include King Street and previous majority owner Japan-based conglomerate SoftBank, which will hold minority stakes in WeWork moving forward.
Bloomberg reports that SoftBank’s equity will be reduced to approximately 16.5%. However, the firm’s stake has the potential to increase to 36% if certain financial benchmarks are not met under the new plan.
The official court approval follows news of WeWork’s ex-CEO and cofounder Adam Neumann abandoning his very public attempt to repurchase the coworking giant.
Neumann told The New York Times’ DealBook earlier this week that WeWork “looks to be emerging from bankruptcy with a plan that appears unrealistic and unlikely to succeed.”
Neumann previously submitted a bid of over $500 million to regain control of the troubled flexible workspace provider through his new real estate venture Flow — backed by investment firm Anderson Horowitz.
Despite Neumann’s concerns, Yardi is reported to be more optimistic. The Financial Times reports WeWork’s goal is to double its annual revenue to $2.5 billion by 2028.
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Moreover, Yardi is reported to have plans to expand WeWork’s appeal to small businesses and integrate technology used for real-time bookings, similar to hotel management systems.
Prior to Thursday’s court hearing, WeWork announced that it plans to assume 89 additional leases across North American markets including Chicago, San Francisco, Seattle, Vancouver, and Washington D.C. — and that the expected assumptions “complete WeWork’s real estate portfolio review in most of its markets across the United States and Canada.”
BisNow also reported that WeWork is moving its corporate headquarters to Union Square in Manhattan at 18 W. 18th St. Previously, the firm was headquartered at Tower 49 at 12 E. 49th St. in Midtown Manhattan.
WeWork closed 160 of its 450 locations during bankruptcy.
Yardi envisions a network of affiliated coworking operators to broaden WeWork’s reach. While this venture is new territory for his software company, the strategic approach could make the difference between a successful revitalization and an unsuccessful one.
