WeWork faces $30M lawsuit as DivcoWest demands full payment amid bankruptcy threat

17:35 18.09.2023 - New York Post, Mary K. Jacob

In a high-stakes showdown between co-working giant WeWork and powerhouse landlord DivcoWest, the battle for millions is set to unfold on the streets of Manhattan.

As WeWork teeters on the brink of bankruptcy, DivcoWest has thrown down the hammer, demanding a whopping $30 million in a lawsuit filed in Manhattan on Thursday, according to The Real Deal. That sum could leave the co-working juggernaut reeling.

The Post has reached out to reps for DivcoWest and WeWork for comment.

DivcoWest, the San Francisco-based real estate titan, alleges breach of contract and demands payment in full.

The skirmish centers on WeWork's abrupt abandonment of its 311 W. 43rd St. location.

The opening salvo in this legal fracas came when WeWork failed to pony up its December rent.

DivcoWest, smelling blood in the water, swiftly terminated the lease.

But that wasn't enough for DivcoWest, which contends that WeWork owes rent for the entire duration of the original agreement - stretching all the way to 2032.

WeWork fired back, claiming it had vacated the premises. However, DivcoWest asserts that the tenant never provided formal notice of its departure. Moreover, WeWork's failure to remove its property from the space doesn't align with the actions of a company surrendering its lease, as argued by DivcoWest in its lawsuit.

The lease signed by WeWork explicitly "prohibits early surrender or ‘abandonment of this lease' without landlord's written consent, which [the] landlord had never provided," as stated in the lawsuit.

WeWork was already in the hole by $1.9 million when it halted its rent payments.

This prime location sits between Eighth and Ninth avenues, and DivcoWest is not about to let WeWork slip through the cracks.

DivcoWest, helmed by CEO and founder Stuart Shiff, made waves when it acquired the 14-story building for $131 million from Billy Macklowe in 2018.

To make the purchase, DivcoWest secured a hefty $91 million loan from Citizens Bank. WeWork had inked the lease two years prior, claiming around 64,000 square feet.

This dispute is just one of many signs that WeWork is in dire straits.

The company is currently engaged in a last-ditch effort to slash costs, signaling to landlords its intention to renegotiate "nearly all" of its leases.

With WeWork already expressing "substantial doubt" about its continued operation as of August, even if DivcoWest secures a judgment in its favor, the co-working behemoth could find itself at the back of a very long line of creditors should bankruptcy proceedings be initiated.

/ Monday, September 18, 2023, 5:35 PM /

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