WeWork Sued For $37M After Landlord Says It Skipped Rent, 'Surreptitiously' Moved Members Elsewhere
A Chelsea landlord is accusing WeWork of covertly trying to move tenants out of one of its buildings while skipping out on hundreds of thousands in back rent.
Walter & Samuels filed suit against the coworking company in New York State Supreme Court Friday, alleging it has defaulted on its lease at 214 West 29th St., The Real Deal reports. Walter & Samuels claims it spent millions building out space for WeWork and now has the right to take over leasing to subtenants because WeWork has defaulted on its lease. It is accusing WeWork of instead trying to move tenants to another one of its locations.
In all, Walter & Samuels claims its damages to be “in excess” of $37M. It also argues that it had to take rent for January and February out of a deposit account because WeWork has yet to refill it.
The company signed a deal for 100K SF across the second through the eighth floors three years ago, per the lawsuit, with the landlord spending almost $12M meeting WeWork’s “exacting specifications."
WeWork no longer lists the building among its New York City spaces, but 214 West 29th wasn't among the six Manhattan locations it disclosed it would be closing earlier this year. A spokesperson for the company lamented the suit, a rarity for the company as it has exited locations all over the world.
"It is our belief that this litigation is meritless given the fact that there is no default on our lease whatsoever — we are current on all rent and all other obligations under the lease," a WeWork spokesperson said in an email. "We have amicably and successfully worked with more than 150 landlord partners around the world throughout our portfolio optimization process over the last year, and find it unfortunate that Walter & Samuels has regressed to such frivolous tactics."
Walter & Samuels says it redesigned a significant portion of the space from traditional office to “gleaming full-floor open spaces with polished concrete floors,” per court documents — and only took on these “enormous” costs under the proviso that if WeWork did default, the landlord would have the right to take over the subleases.
When the fourth floor was ready and delivered to WeWork last June, per the complaint, WeWork tried to force the landlord to take it back instead of making good on its obligations, according the suit, a request Walter & Samuels refused.
The landlord said it presented some alternatives to WeWork, like subletting some of the space, but claims WeWork wouldn’t accept and instead threatened to leave the building altogether. While the company did pay $464K for March rent, one of WeWork’s members there told Walter & Samuels that clients were being pushed to move into another WeWork space, according to the suit.
“WeWork’s surreptitious attempts to move all subtenants” out of the building “threatened to deprive” the landlord of its security, the complaint states.
Coworking firms across the board have been hit hard by the pandemic; Knotel filed for bankruptcy earlier this year while WeWork has been shrinking its portfolio nationally as part of its plan to reach profitability.
It said it would shut down its “Charging Bull” location at 25 Broadway in February, Bisnow previously reported, after announcing plans to close down 261 Madison Ave., 404 Fifth Ave., 428 Broadway, 1 Little West 12th St. and 205 East 42nd St.
The coworking giant — which announced in late March its plans to merge with BowX Acquisition Corp., a special-purpose acquisition company, and go public — has also formed partnerships with chambers of commerce in New York City to offer discounts to small businesses signing up for space.