Knotel Hit With Another Suit for Unpaid Rent, This Time at 5 Hanover

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Knotel’s legal troubles with New York City landlords continue to grow as the flexible workspace provider was hit with another lawsuit for unpaid rent on Monday, bringing the total it allegedly owes owners to nearly $2.8 million, court records show.

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In the latest suit, CIM Group accused Knotel of skipping out on rent for its 28,820-square-foot space at 5 Hanover Square since April, according to the lawsuit. 

CIM Group said it sent numerous default notices to Knotel for the back rent — which reached $554,796.47 in August — but Knotel only made one payment of nearly $213,733.50 this month, the suit claims. The landlord is seeking $341,062.97 in the complaint.

A spokesman for Knotel declined to comment. Representatives from CIM Group did not respond to a request for comment.

(Disclosure: Observer Capital, led by Observer Media Chairman and Publisher Joseph Meyer, is a Knotel investor.)

Knotel first inked a lease for the Financial District office at 5 Hanover in 2018, when the flexible workspace provider was gobbling up space all across the city, as Commercial Observer previously reported. 

However, coworking providers’ leasing activity slowed at the end of last year — with a CBRE report finding Knotel signed 80 percent fewer deals in the fourth quarter of 2019 compared to the third quarter — then ground to a halt as the coronavirus pandemic hit.

CEO Amol Sarva has said flexibility will be on more companies’ minds post-COVID-19 and the company is on track to become profitable by the end of this year, with Knotel looking to raise $100 million to help it achieve that. But the company — which was crowned a unicorn last year — has felt some pain during the pandemic.

Knotel laid off 30 percent of its 400 employees and furloughed another 20 percent in March, and is in talks to give back 20 percent of its 5 million-square-foot portfolio. Meanwhile, it’s facing a barrage of lawsuits over unpaid rent from landlords across Manhattan, The Real Deal reported.

Since June, Knotel has been hit with at least eight lawsuits from landlords that allege the company owes nearly $2.8 million in back rent, according to court documents.

Knotel’s first suit came on June 22 when the owners of 25 West 26th Street filed a complaint for $169,040 in back rent at the location, as CO previously reported.

Its also facing suits from GFP Real Estate for $740,727 in rent at 40 Exchange Place; one from Hanover Estates for $350,793 at 41 West 25th Street; two from MJ Orbach for nearly $342,000 at 250 West 30th Street and 260 West 39th Street; and one from UNG Realty for $196,793 at 580 Eighth Avenue, TRD reported.

The largest claim against Knotel came on Aug. 8. Brooks Brothers CEO Claudio del Vecchio filed a suit for $625,730 in back rent along with $2.35 million in construction costs for the space at 11 East 44th Street that Knotel leased last year, Crain’s New York Business reported.

And Knotel isn’t just facing legal action from landlords over nonpayment. On Aug. 13, recruitment firm Third Republic filed a suit against Knotel claiming the company owes $124,540 for work it did for Knotel last year, according to court documents.

Last month, Sarva said that Knotel’s revenue dropped by 20 percent in the second quarter of 2020, TRD reported. Leaked financials obtained by Business Insider showed the company lost $223 million in 2019.