Sunday Summary: WeWork’s $9 Billion IPO and Citigroup’s Hybrid Model


When WeWork (WE) was preparing its initial, initial public offering, it was considered the most valuable startup in the world.

In 2019, it had a valuation of $47 billion. It was the largest, private office tenant in New York City. It was investing in social networking companies, and opening up schools and co-living projects.

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Well, this week, they announced that they’re trying again at considerably more modest numbers. WeWork reached a deal to merge with the special purpose acquisition company (SPAC) BowX Acquisition Corp. for $1.3 billion in much-needed cash that would make WeWork a publicly traded company and worth $9 billion.

Where did it all go wrong?

Many would lay the blame at the feet of former CEO Adam Neumann, who stepped down after that calamitous IPO attempt (as well as brash, undefendable behavior that started appearing in the press).

I think Adam stepped into a tradition, a great New York tradition, of hustling,” said Jed Rothstein, director of the Hulu documentary, “WeWork: Or the Making and Breaking of a $47 Billion Unicorn,” in an interview with Commercial Observer. “Did he believe all the promises he made to some of his young workers that they were going to be millionaires? …  Did he believe some of his grand pronouncements about curing the world of orphans, and some of these enormous global problems that he said they were going to tackle? I don’t know.”

Nobody does. Nonetheless, a $9 billion firm (even if that’s only a fifth of what the market thought it was worth two years ago) is still pretty damn important. And WeWork had an unusually newsworthy week, IPOs and painful documentaries aside.

For instance, we found out that they lost $3.2 billion in 2020. (Which was actually better than they did in 2019. Go figure.)

We learned that they were ditching a 47,581-square-foot space at 925 North La Brea Avenue in L.A.

Finally, it was revealed that they’re partnering with the city of Washington, D.C., to offer free and discounted memberships through a program they’re calling D.C. x WeWork.


A weird week all around

Disjointed good news/bad news blew through CO’s newsfeed for the last seven days.

Extell Development, Gary Barnett’s storied, unparalleled condo development firm, reported a loss of $206 million in 2020, according to filings on the Tel Aviv Stock Exchange. This was especially bittersweet because Barnett’s masterpiece, Central Park Tower, a 179-unit luxury palace, recently started closings. But there’s no universe where this isn’t awful news.

Another development that might have left real estate investors nervously gnawing on their fingernails was CEO Jane Fraser’s interoffice memo that Citigroup was going hybrid, allowing employees to work up to two days a week remotely. (Landlords might just have to take the Ted Moudis and Jamie Feuerborn tutorial that CO got this week to seduce tenants back to buildings.)

And we learned a horrible (if not, entirely unsurprising) statistic from a survey of 400 restaurant owners put out by the New York City Hospitality Alliance: 75 percent saw revenue decline by more than 50 percent in 2020.

But, there was unassailable good news to report as well.

Mayor Bill de Blasio announced that Broadway would be reopening in September!

“We are going to move heaven and earth to ensure that Broadway can reopen,” de Blasio said on March 25, flanked by actors André De Shields and Telly Leung. Plus, de Blasio announced at the same press conference that Open Streets would be allowed to continue! Dinner outside and a musical come the fall? That’s something we could all cheer for.

And while Citigroup (C) might be throwing a scare into real estate owners, Morgan Stanley (MS) should have eased some jangled nerves: It’s planning a full return to its Midtown headquarters. No hybrid model for them!

Did somebody say “deals”?

We’re glad you mentioned it. Yes, there were deals to report, too!

In the Boston area, Blackstone (BX) provided nearly half a billion dollars ($491 million to be exact) to Davis Companies and Principal for the acquisition and conversion of Charles Park One & Two, a two-building office complex in East Cambridge that the companies are planning on turning into a life sciences project.

In Beverly Hills, LaSalle Investment Management bought a five-story medical office from UBS Realty Investors for $74.4 million.

In Miami, Galbut Family Office Investments and Terra nabbed a $345 million loan from Blackstone Group and Apollo Global Management (APO) to break ground on a 48-story residential tower, making it one of the largest loans in Miami since the pandemic began.

And, in one more blockbuster deal, Slate Asset Management announced that it acquired Annaly Capital Management’s commercial real estate business (ACREG) for $2.3 billion.

See you next week!