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WeWork goes to war with Joe Chetrit

WeWork CEO Sandeep Mathrani (Credit: WeWork)

WeWork has filed a lawsuit against the Chetrit Group after the developer threatened to draw down on a multimillion-dollar letter of credit at the co-working company’s space at 404 Fifth Avenue, according to The Real Deal.

  • Dig Deeper: WeWork claims that its lease requires the landlord to first provide it with a notice of default. Even if those conditions were met, the state’s eviction moratorium precludes the default notice from being served.
  • Getting personal: The troubled co-working firm also says in its complaint that Chetrit is “likely to resort to self-help” with regards the draw-down.
  • Worth Noting: Chetrit has not formally sought to draw down on the letter of credit, but the suit claims the landlord threatened to do so in a telephone conversation on Dec. 16. According to the complaint, WeWork provided the landlord with a $2.4 million letter of credit on Aug. 14, issued by Goldman Sachs International Bank, in addition to a personal guarantee, TRD noted.
  • Flashback: WeWork signed a 13-year lease at the property in 2015, and spent roughly $10.2 million to build out the space. Lucas Ferrara of Newman Ferrara is representing WeWork’s affiliate, 404 Fifth Tenant LLC. Most co-working leases are signed as individual LLC’s, which allows a firm to file individual locations for bankruptcy without destroying the company itself.
  • WeWork is not alone: Regus, which went through a bankruptcy restructuring in 2003 after the dot-com recession, uses the same legal strategy. The co-working firm has put nearly 90 locations into Chapter 11 in the past couple of months. [TRD]

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