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Acquisitions

WeWork closes on 424 Fifth Avenue for $850 million

The co-working company secured financing from
JPMorgan Chase and Starwood Property Trust

(Credit: Lord & Taylor)

Sixteen months after entering into contract to acquire 424 Fifth Avenue (AKA Lord & Taylor Building) for $850 million, WeWork is poised to finally close the deal next week.

Dig Deeper: A fund managed by WeWork + Rhône Group will put up $125 million in equity, while Lord & Taylor’s parent company (HBC) will retain a $125 million equity stake. HBC’s preferred minority equity interest gives them preference on an exit if and when the building sold, according to TRD.

Financing: JPMorgan Chase, Starwood Property Trust, and a third unnamed lender provided a $900 million financing package. It includes an acquisition loan ($600 million) and financing for the subsequent renovation. 

Dubious pitch: Even though the fund is co-managed with the Rhone Group, the pitch calls for WeWork to tenant its own buildings. As both a tenant and landlord, the fund claims it could yield better returns than conventional real estate funds.This arrangement allows WeWork to be on the both sides of the deal.

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