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Adam Neumann is literally the landlord on most of their best-located places. That's why. WeWork gave his real estate company loans to buy buildings to then rent

Adam Neumann is literally the landlord on most of their best-located places. That's why. WeWork gave his real estate company loans to buy buildings to then rent back to WeWork.

djbusby 3y ago
What? That seems...odd?
- intvocoder 3y ago
  It’s odd, but he convinced Vision Fund to go along with this. It’s a clever grift, if it’s legal.
  - junofan 3y ago
    It’s not self dealing if you really love the building I guess. To be fair it was a matter of time before somebody loaded them up with debt and wiped equity. Might as well do it yourself.
    - JumpCrisscross 3y ago
      > It’s not self dealing if you really love the building It’s not self dealing if everyone is on the same page. Neumann didn’t hide any of this. From SoftBank. From the public.
      - gizmo 3y ago
        If a company tanks right after being listed on the public markets -- that is, right after insiders got an opportunity to dump their shares on less informed investors -- most likely a serious financial crime has taken place. A real business doesn't go from a 47bn market cap to zero in ~2 years. It's not sufficient to make generic disclosures to investors that there are substantial risks and that you have an unproven business model and such. If it looks, talks, and walks like a pump & dump scheme it probably is.
      - kawhah 3y ago
        It's totally still self dealing. It just avoids being fraud.
- libraryatnight 3y ago
  I had to look myself, from wikipedia: "As CEO, Neumann, on multiple occasions purchased buildings and then leased the space back to WeWork.[60] Observers noted this as a potential conflict of interest and one that would not be allowed if WeWork were a public company.[61] During his tenure as CEO of WeWork, Neumann also purchased US$90 million worth of residences, including a 60-acre (24 ha) estate in Westchester County, New York, a 6,000-square-foot (560 m2) condominium near Gramercy Park, two homes in The Hamptons, and a US$21 million mansion in Corte Madera, California.[16] Neumann launched Flow, a residential real estate startup funded by the venture capital firm Andreessen Horowitz, in August 2022." (https://en.wikipedia.org/wiki/Adam_Neumann https://en.wikipedia.org/wiki/Adam_Neumann)" This guy is just a greed engine at full steam!
  - Vipsy 3y ago
    Its astonishing that Adam Newumann was able to raise hundreds of millions for Flow after all he did at WeWork. At this point you wonder, if VCs are also complacent in these scams. Are they together in scamming the LPs?
    - lolbase 3y ago
      a16z viewed Neumann very positively, to the point that they asked potential CEOs what they thought of Neumann, and the "correct" answer was to be empathetic that he took a huge swing of the bat.
      - Cookingboy 3y ago
        If that's true, then it's kinda gross tbh. What's their advice to Neumann this time? "I hope you are more discreet this time so your scam lasts long enough for us to exit"???
        lolbase 3y ago
        This article elaborates on it: https://www.businessinsider.com/interview-venture-capital-job-andreessen-horowitz-avoid-overconfidence-respect-entrepreneur https://www.businessinsider.com/interview-venture-capital-jo... > A candidate who displayed empathy for the entrepreneur would answer the question about Neumann with something like the following, Horowitz said: "He did an unbelievable thing in that he built something that almost nobody has done, which is he built a consumer brand in commercial real estate." The person might add, "He told that story so beautifully that he was able to raise a gigantic amount of money and fund this incredible growing operation."
- ssnistfajen 3y ago
  This was a big part of the controversy that scuttled their 2019 IPO plan and ousted Neumann from WeWork leadership, along with the toxic workplace accusations and other...volatile things associated with Neumann.
  - smegsicle 3y ago
    [flagged]
CGamesPlay 3y ago
If this is true, will WeWork's creditors be suing him?
- vishnugupta 3y ago
  It's not as if he was doing it under the wraps or something. He did it in full public glare so creditors (and equity investors) knew exactly what they were getting into.
  - dmix 3y ago
    If that's the case and he isn't under legal risk then he hit a damn gray hat gold mine. A fool and his money. Idk if it was worth his reputation and company being completely destroyed but many people have risked their (literal) freedom for much much less.
    - vishnugupta 3y ago
      Yeah; he seems to have done well for himself. https://www.businessinsider.in/wework-ceo-adam-neumann-has-reportedly-made-millions-of-dollars-by-leasing-office-space-to-his-own-company/articleshow/67564850.cms https://www.businessinsider.in/wework-ceo-adam-neumann-has-r...
    - xen0 3y ago
      I don't think his reputation is so tarnished that he can't get other investors to continue to give him money.
- quickthrower2 3y ago
  How does this work. So he owes money under some terms to Wework. Probably that secured debt can be sold off? And the proceeds of that they get? Unless it was a 0% fixed interest only for 100 years or something crazy. Feels like a better scenario than that money spent on parties or a datadog bill.
rainbowzootsuit 3y ago
This is similar to what Eddie Lampert did to Sears' stores. > 200 Sears locations were sold to a REIT and leased back to the retailer. https://therealdeal.com/national/2021/10/21/the-man-who-raided-sears-for-its-real-estate-riches/ https://therealdeal.com/national/2021/10/21/the-man-who-raid...
- Scoundreller 3y ago
  Seritage is funny since the REIT is public, but Warren Buffett's Berkshire owns much (most? all?) of the secured debt. BH will get paid first at a good rate at relatively low risk, while public investors really take a (highly leveraged) chance (and have been getting hosed after initially being drawn in by a high yield). I understand they're currently liquidating it, TBD if the common stock investors see anything left after BH gets paid back (and then preferred stock holders, currently trading pretty close to par) edit: REIT has been converted into a C-Corp, possibly to carry-forward losses better as it becomes not-a-Sears-property owner? https://therealdeal.com/new-york/2022/07/08/seritage-growth-properties-looks-to-sell-off-all-assets/ https://therealdeal.com/new-york/2022/07/08/seritage-growth-...
- refurb 3y ago
  It’s not that odd. It frees up a ton of cash.
- chollida1 3y ago
  That's not really comparable at all. Most retailers, banks, and companies realized that owning realestate is not part of their core competency. Canadian tire rolled their realestate into a REIT and then rents the locations back. There's no double dealing or anything nefarious about it. Heck there is a huge company called Brookfield that has made a living out of buying commercial realestate from companies and renting it back to them while spining the realestate out into a REIT. That's just smart business for the company who gets money upfront and a stable knowing rental price.
  - angus-prune 3y ago
    I agree it's common and not underhanded. But it's not always smart business. Most commercial tenants are still resonsibile for maintenance, which is the primary ongoing expertise. It can be a useful way to free up capital, but only useful if it's used to expand the business and deliver a greater return. Too often it's used to artificially increase the share price or pay out dividend. In these cases the company commits to never ending rent payments for no actual benefit. There are whole bunch of businesses who have bucked this MBA trend, kept their freeholds and have ended up with a more resilient business better able to weather a change of economic circumstances.
AdamN 3y ago
He also asserted ownership of the trademark on 'We' and licensed it to the company for 'We Work' :-)
- nvm0n2 3y ago
  Adam is that you? :)
  - AdamN 3y ago
    Different Adam ...
- angus-prune 3y ago
  Iirc, following the entirely justified backlash he had to back down from that and surrendered the trademark to the wework.
deleted 3y ago
[deleted]

Adam Neumann is literally the landlord on most of their best-located places. That's why. WeWork gave his real estate company loans to buy buildings to then rent back to WeWork.

djbusby 3y ago

What? That seems...odd?

intvocoder 3y ago
It’s odd, but he convinced Vision Fund to go along with this. It’s a clever grift, if it’s legal.
- junofan 3y ago
  It’s not self dealing if you really love the building I guess. To be fair it was a matter of time before somebody loaded them up with debt and wiped equity. Might as well do it yourself.
  - JumpCrisscross 3y ago
    > It’s not self dealing if you really love the building It’s not self dealing if everyone is on the same page. Neumann didn’t hide any of this. From SoftBank. From the public.
    - gizmo 3y ago
      If a company tanks right after being listed on the public markets -- that is, right after insiders got an opportunity to dump their shares on less informed investors -- most likely a serious financial crime has taken place. A real business doesn't go from a 47bn market cap to zero in ~2 years. It's not sufficient to make generic disclosures to investors that there are substantial risks and that you have an unproven business model and such. If it looks, talks, and walks like a pump & dump scheme it probably is.
    - kawhah 3y ago
      It's totally still self dealing. It just avoids being fraud.
libraryatnight 3y ago
I had to look myself, from wikipedia: "As CEO, Neumann, on multiple occasions purchased buildings and then leased the space back to WeWork.[60] Observers noted this as a potential conflict of interest and one that would not be allowed if WeWork were a public company.[61] During his tenure as CEO of WeWork, Neumann also purchased US$90 million worth of residences, including a 60-acre (24 ha) estate in Westchester County, New York, a 6,000-square-foot (560 m2) condominium near Gramercy Park, two homes in The Hamptons, and a US$21 million mansion in Corte Madera, California.[16] Neumann launched Flow, a residential real estate startup funded by the venture capital firm Andreessen Horowitz, in August 2022." (https://en.wikipedia.org/wiki/Adam_Neumann https://en.wikipedia.org/wiki/Adam_Neumann)" This guy is just a greed engine at full steam!
- Vipsy 3y ago
  Its astonishing that Adam Newumann was able to raise hundreds of millions for Flow after all he did at WeWork. At this point you wonder, if VCs are also complacent in these scams. Are they together in scamming the LPs?
  - lolbase 3y ago
    a16z viewed Neumann very positively, to the point that they asked potential CEOs what they thought of Neumann, and the "correct" answer was to be empathetic that he took a huge swing of the bat.
    - Cookingboy 3y ago
      If that's true, then it's kinda gross tbh. What's their advice to Neumann this time? "I hope you are more discreet this time so your scam lasts long enough for us to exit"???
      - lolbase 3y ago
        This article elaborates on it: https://www.businessinsider.com/interview-venture-capital-job-andreessen-horowitz-avoid-overconfidence-respect-entrepreneur https://www.businessinsider.com/interview-venture-capital-jo... > A candidate who displayed empathy for the entrepreneur would answer the question about Neumann with something like the following, Horowitz said: "He did an unbelievable thing in that he built something that almost nobody has done, which is he built a consumer brand in commercial real estate." The person might add, "He told that story so beautifully that he was able to raise a gigantic amount of money and fund this incredible growing operation."
ssnistfajen 3y ago
This was a big part of the controversy that scuttled their 2019 IPO plan and ousted Neumann from WeWork leadership, along with the toxic workplace accusations and other...volatile things associated with Neumann.
- smegsicle 3y ago
  [flagged]

CGamesPlay 3y ago

If this is true, will WeWork's creditors be suing him?

vishnugupta 3y ago
It's not as if he was doing it under the wraps or something. He did it in full public glare so creditors (and equity investors) knew exactly what they were getting into.
- dmix 3y ago
  If that's the case and he isn't under legal risk then he hit a damn gray hat gold mine. A fool and his money. Idk if it was worth his reputation and company being completely destroyed but many people have risked their (literal) freedom for much much less.
  - vishnugupta 3y ago
    Yeah; he seems to have done well for himself. https://www.businessinsider.in/wework-ceo-adam-neumann-has-reportedly-made-millions-of-dollars-by-leasing-office-space-to-his-own-company/articleshow/67564850.cms https://www.businessinsider.in/wework-ceo-adam-neumann-has-r...
  - xen0 3y ago
    I don't think his reputation is so tarnished that he can't get other investors to continue to give him money.
quickthrower2 3y ago
How does this work. So he owes money under some terms to Wework. Probably that secured debt can be sold off? And the proceeds of that they get? Unless it was a 0% fixed interest only for 100 years or something crazy. Feels like a better scenario than that money spent on parties or a datadog bill.

rainbowzootsuit 3y ago

This is similar to what Eddie Lampert did to Sears' stores. > 200 Sears locations were sold to a REIT and leased back to the retailer. https://therealdeal.com/national/2021/10/21/the-man-who-raided-sears-for-its-real-estate-riches/ https://therealdeal.com/national/2021/10/21/the-man-who-raid...

Scoundreller 3y ago
Seritage is funny since the REIT is public, but Warren Buffett's Berkshire owns much (most? all?) of the secured debt. BH will get paid first at a good rate at relatively low risk, while public investors really take a (highly leveraged) chance (and have been getting hosed after initially being drawn in by a high yield). I understand they're currently liquidating it, TBD if the common stock investors see anything left after BH gets paid back (and then preferred stock holders, currently trading pretty close to par) edit: REIT has been converted into a C-Corp, possibly to carry-forward losses better as it becomes not-a-Sears-property owner? https://therealdeal.com/new-york/2022/07/08/seritage-growth-properties-looks-to-sell-off-all-assets/ https://therealdeal.com/new-york/2022/07/08/seritage-growth-...
refurb 3y ago
It’s not that odd. It frees up a ton of cash.
chollida1 3y ago
That's not really comparable at all. Most retailers, banks, and companies realized that owning realestate is not part of their core competency. Canadian tire rolled their realestate into a REIT and then rents the locations back. There's no double dealing or anything nefarious about it. Heck there is a huge company called Brookfield that has made a living out of buying commercial realestate from companies and renting it back to them while spining the realestate out into a REIT. That's just smart business for the company who gets money upfront and a stable knowing rental price.
- angus-prune 3y ago
  I agree it's common and not underhanded. But it's not always smart business. Most commercial tenants are still resonsibile for maintenance, which is the primary ongoing expertise. It can be a useful way to free up capital, but only useful if it's used to expand the business and deliver a greater return. Too often it's used to artificially increase the share price or pay out dividend. In these cases the company commits to never ending rent payments for no actual benefit. There are whole bunch of businesses who have bucked this MBA trend, kept their freeholds and have ended up with a more resilient business better able to weather a change of economic circumstances.

AdamN 3y ago

He also asserted ownership of the trademark on 'We' and licensed it to the company for 'We Work' :-)

nvm0n2 3y ago
Adam is that you? :)
- AdamN 3y ago
  Different Adam ...
angus-prune 3y ago
Iirc, following the entirely justified backlash he had to back down from that and surrendered the trademark to the wework.

deleted 3y ago

[deleted]