WeWork Might Be In Hot Water With Its $850M Fifth Avenue Trophy

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The Lord & Taylor Building on Fifth Avenue in New York

This summer, it seemed WeWork was about to land a massive lease with Amazon at the Lord & Taylor Building. But that deal is reportedly dead in the water, and WeWork could have a big problem on its hands.

Talks between the e-commerce giant and the embattled coworking company have fallen apart, the New York Post reports. Amazon is now favoring a 400K SF lease at SL Green’s 460 West 34th St. development, a deal that is close to final.

A source told the Post that the building, at 424 Fifth Ave., has “become the real bloodsucker of WeWork.” Multiple people told the newspaper it is now very unlikely Amazon will move to the former Lord & Taylor building at 424 Fifth Ave. WeWork told the Post it was “fully committed” to meeting obligations at the building, which is shaping up to be a major pain point for the company.

WeWork shelved its IPO plans and is moving into damage control. Last month, co-founder and CEO Adam Neumann was ousted and the company is said to be planning widespread layoffs.

WeWork Property Investors — a joint venture between WeWork and Rhône Group — paid $850M to Hudson Bay Co. in February for the building. The arrangement drew scrutiny as possible self-dealing, and it was reportedly rolled into WeWork’s larger ARK investment fund in March. JPMorgan Chase, Starwood Property Trust and another lender combined to provide a reported $600M loan for the purchase.

WeWork signed a lease with WeWork Property Investors after the purchase for the entirety of the 660K SF building, paying $105 per SF, which is well above the $80 per SF usually paid in the area, per the Post. It was first going to use the location for its new headquarters, though that idea was thrown into question after the Amazon rumors surfaced.

WeWork’s woes are being felt across the city, as the commercial real estate industry comes to terms with what it means for New York City’s largest private tenant to deal with such a public fall from grace.

Real estate players say the impact on the leasing market may be more psychological than fundamental, as WeWork has just 1% of the flexible office market. However, in an online poll of more than 500 Bisnow readers published this week, 54% of respondents said they expect WeWork to file for bankruptcy. https://www.bisnow.com/new-york/news/coworking/wework-lord-taylor-101163