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WeWork Turns To SoftBank, Yardi To Fend Off Takeover Bid From Adam Neumann

WeWork has been projecting confidence that it will emerge from bankruptcy by the end of May, but a battle for control of the company is brewing behind the scenes. 

Yardi Systems was revealed by the FT to be behind an entity that controls around 35 million WeWork shares.

The coworking firm needs as much as $400M in new capital to viably exit bankruptcy, The Financial Times reports. WeWork has been in negotiations about raising the funds with SoftBank, the Japanese conglomerate that was its largest lender and investor prior to the bankruptcy. 

It has also been looking to raise capital from Yardi Systems, which the FT unmasked as the firm behind Cupar Grimmond, an entity that has no public presence but controlled around 35 million shares in WeWork prior to its Chapter 11 filing. 

If WeWork is unable to secure the funding, it would have to pivot away from exiting bankruptcy as an independent entity and toward a sale, the FT reported, citing unnamed sources. 

Waiting in the wings is Flow, the apartment startup founded by Adam Neumann, WeWork's former CEO. Flow has gone public with its takeover attempt, offering to beat out competing offers and criticizing WeWork for ignoring its overtures. 

“Flow and its financial partners are prepared to offer 10% more than any other offer that WeWork has received with a timeline to complete diligence in just two weeks,” Alex Spiro, an attorney for Flow, said in a statement to Bisnow. “But WeWork won’t even finalize an NDA.”

Flow officially launched last week at two South Florida properties. Attorneys for Flow have filed paperwork to jostle into WeWork’s bankruptcy case. A Flow spokesperson told the FT it has multiple institutional backers, while the publication reported that Rithm Capital and the real estate business of Leonard Blavatnik’s Access Industries have been in talks to back Flow's bid.

In his statement to Bisnow, Spiro accused WeWork of “seeking to rush an insider deal with a current technology and billing provider who many landlords feel is uniquely conflicted based on its insider information about WeWork's ongoing performance, and also extensive private information about other landlords nationwide.” 

Yardi, a real estate technology firm, has partnered with WeWork on various projects. A spokesperson for the firm didn’t respond to Bisnow’s request for comment.  

A WeWork spokesperson said Thursday that the firm remains committed to emerging from bankruptcy at the end of May and acknowledged it has made efforts to raise cash through debtor-in-possession financing. 

“We are committed to emerging from Chapter 11 next month as a strong and sustainable company, and that is where our undivided attention lies,” the spokesperson said in an email. “Any new financial investment would serve to further strengthen the company as we exit from bankruptcy.”

The spokesperson told Bisnow earlier this month that it had reached an agreement to write down debt with SoftBank, which holds 92% of the firm’s secured notes, and Cupar Grimmond, which was described as the primary holder of WeWork’s Series III first-lien notes.  

WeWork announced April 2 it had determined its path forward at 90% of its approximately 500 global locations. The firm is slated to keep at least 300 locations open while shuttering another 150 spaces. The future of around 50 locations remains in flux.  

The coworking firm continues to bleed cash. It filed February financial statements at the end of March with the U.S. Bankruptcy Court for the District of New Jersey that showed its cash on hand had dwindled to $89.6M, down from $113.3M a month earlier.

WeWork lost $122M in February, a narrowing from its January loss of $153.7M.