Knotel Files For Bankruptcy, To Be Taken Over By Newmark
Knotel, which leveraged the craze for coworking to reach unicorn status just 18 months ago, has filed for bankruptcy.
The New York-based startup said it will be taken over by Newmark, with the real estate firm providing $20M in debtor-in-possession financing to allow Knotel to keep running through the bankruptcy proceedings, per a statement.
“The pandemic created a uniquely challenging operating environment, with significant impacts on leasing velocity and the rate of renewals in key markets, particularly New York and San Francisco,” co-founder Amol Sarva said in a release Sunday. “We must address this now to position our business for sustainable growth and a successful future.”
It listed both estimated liabilities and assets between $1B and $10B, per Bloomberg. Newmark CEO Barry Gosin said his company was providing capital to “rightsize its business." Knotel has also decided to exit multiple locations in the U.S.
In March, Knotel laid off 127 of its 400 employees globally and furloughed 68, with Sarva saying “business as usual” was over. The company planned to switch its focus to serving customers and finding ways to bring resources to support emergency services.
But the company was soon accused of skipping on rent payments and sued by landlords who claimed they were owed money. Late last year, Knotel was said to be trying to significantly reduce its global footprint, bringing its leases in Canada and the U.S. from 3.4M SF to 500K SF, Business Insider reported at the time.
In August 2019, Knotel announced the closure of a $400M funding round that brought its valuation over $1B. Wafra, a subsidiary of sovereign wealth fund Kuwait Investment Authority, led the fundraising. Newmark was also part of that round.
A year earlier, Sarva had publicly claimed the company would be bigger than its rival, WeWork, within 15 months.
But as it turns out, both firms — and scores of others in the sector — have been hit hard by the coronavirus pandemic. Coworking firm Breather closed all 400 of its locations; in announcing the shutdown, CEO Bryan Murphy said of the standard coworking model of subleasing space "I’m not sure it ever made sense.”
WeWork has been dumping leases in Manhattan and D.C., Serendipity Labs has attempted to restructure through bankruptcy and Convene has drastically reduced its workforce. Last month, German co-living company Quarters filed for Chapter 7 bankruptcy.