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WeWork CEO Went On Historic Home-Buying Spree As Company Imploded

Courtesy of ZeroHedge View original post here.

With WeWork's IPO – perhaps indefinitely – postponed, WeWork founder and former CEO Adam Neumann and his wife Rebekah Paltrow-Neumann now find themselves in a difficult predicament: Using a combination of loans against Neumann's WeWork shares, as well as sales of some of his shares on the secondary market, the couple has accumulated a portfolio of real-estate on both coasts reportedly worth ~90 million, according to WSJ.

But the Neumanns didn't stop after buying the six properties; he and his wife also paid for extensive renovations. Recent reports claimed that the couple has been effectively barred from every respectable coop on Fifth Avenue following the collapse of the IPO and reports about Neumann's eratic behavior and drug use.  Though that shouldn't matter much since the two have a range of homes to choose from, the fact remains: The couple's property-buying binge has been cut short by WeWork's dramatic IPO flameout, and the dramatic decline in the company's valuation, which plummeted from ~$47 billion to as low as $10 billion in just a few weeks.

The historic home-buying spree took place over several years, as WeWork burned through massive amounts of cash thanks to Adam Neumann's "unorthodox" management technique.

The Neumanns' borrowings could create headaches for the bank that has bankrolled the couple at every turn: JP Morgan Chase. The bank, as WSJ reports, extended close to $100 million mortgages and other loans to Neumann. JPM is also one of the lenders behind a $500 million line of credit that allowed him to borrow heavily against his shares in WeWork parent 'The We Company'. Of this credit line, Neumann has already tapped some $380 million, which puts his lenders in a bit of a bind. The banks probably never anticipated that the IPO would flame out in such spectacular fashion. Now, they're stuck praying for a miracle: That WeWork's new managers might be able to improve the company's financial position to such a degree that the company might be able to go public at a valuation north of $20 billion.

A spokesman for the Neumanns warned that the couple isn't under any pressure from the banks to sell their homes (most of which were purchased over the past few years).

"Adam is not under pressure from the banks or the loans to sell his homes," said a spokeswoman for Mr. Neumann in a statement. She added that none of Mr. Neumann’s homes are being actively marketed for sale. Danny Davis of the Corcoran Group, Mr. Neumann’s longtime real estate agent in New York City, declined to comment.

Now, here's a rundown of the homes owned by the Neumanns, starting with their first major property buy: a landmarked Greenwich Village townhouse built in 1847. It features a wood-burning fireplace and private rear garden.

The couple started renovating the property in 2014. According to court filings, in 2017, a contractor sued the couple for non-payment.

Also in lower Manhattan, the couple bought a collection of six units in this Gilded Age building near Gramercy Park. The price tag for the units? $35 million.

In 2016, as WeWork's valuation was soaring, the Neumanns paid $15 million for Linden Farm, a 60-acre estate in Pound Ridge, NY, a wealthy enclave near Mrs. Patrol-Neumann's childhood home. Records show the couple applied to do significant interior renovations.

Continuing with the theme of buying homes in the Greater New York area. The couple also purchased two homes in the Hamptons.

In 2014, they purchased an under-construction home in Amagansett from Hamptons builder Joe Farrell for $3 million. The house is adjacent to homes owned by actress Gwyneth Paltrow and her mother Blythe Danner.

Here's one home.

As WeWork's valuation soared toward its peak, the Neumanns finally branched out to the West Coast. Last year, the couple purchased an 11-acre property in Corte Madera Calif., roughly 15 miles north of San Francisco. The final price? $21.4 million, one of the highest ever paid for a home in the area.

The property is known as "Guitar House". It was once owned by Bill Graham, the rock music promoter. It has a large living room shaped like a guitar. The 13,600 square foot home and surrounding property include a pool, spa, racquetball court and an orchard.

Of course, by owning all of this high-end residential property, the Neumanns are setting themselves up for trouble if WeWork does run into that 'liquidity crunch' that many analysts warn could arrive as soon as next year if the company doesn't arrange another cash infusion. Should WeWork collapse, the impact on the global commercial real-estate market would be catastrophic. That could translate into the residential market, particularly the luxury segment, which is most sensitive to these types of market dynamics. Indeed, it's not too difficult to imagine a nightmare scenario where the banks that dared to lend to the Neumanns are left on the hook for tens of millions of dollars after repossessing properties whose valuations have fallen moderately since they were purchased by the Neumanns.

 

 


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