Amol Sarva Blames Newmark Chairman Howard Lutnick for Knotel Bankruptcy

Sarva accused Newmark of buying Knotel’s debt so it can force a takeover of the flexible workspace provider.


Amol Sarva isn’t finished slamming Newmark over its bankruptcy acquisition of Knotel.

In an interview with YouTube show “The Business of Business,” Sarva blamed Newmark Chairman Howard Lutnick, whom he never mentioned by name in the interview, for forcing the flexible workspace provider into bankruptcy and ousting Sarva as CEO.

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“It was just consummate Wall Street-type [behavior],” Sarva, former CEO of Knotel, said in the interview. “It was so disappointing that we were forced to do that.

“Arguably, it was within [Newmark’s] rights,” Sarva added. “It’s capitalism, it’s dog-eat-dog or whatever, [but] you can choose the rules and you can choose how you want to behave in life.”

Knotel was struggling to survive amidst the coronavirus pandemic that emptied out spaces, and left Knotel with mounting debt and a growing number of lawsuits for unpaid rent. Sarva said it was close to refinancing its venture debt to help stay afloat when Lutnick — who’s also a managing director at Cantor Fitzgerald — swooped in and bought the debt.

Lutnick later bought the rest of Knotel’s debt and called Sarva just before New Year’s with an ultimatum.

“They’re like, ‘We own your debt, you’re in default in these following ways. We’re going to foreclose on that debt, you got 24 hours. Otherwise, you’re toast and you’re going to have to shut down your entire business,’” Sarva said. “Or, we can lend you another $20 million right now on the condition that you bankrupt the company, run an auction for it, and let us buy it.”

“I was speechless,” Sarva added. “These guys chose this moment to put almost another $100 million total in … just in order to buy the company and wipe out everyone else.”

A spokesperson for Newmark 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 filed for bankruptcy in January, with Newmark providing about $20 million in financing and making a $70 million stalking-horse bid to acquire the company. The acquisition was approved by a bankruptcy court last month, after no other bidders stepped up, and Knotel named former WeWork executive Michael Gross to replace Sarva and right-size the firm.

In a farewell letter last week, Sarva slammed Newmark for hiring “a group of Adam Neuman[n]-era WeWork bros to lead the company forward.”

Sarva founded Knotel in 2016 with Edward Shenderovich to offer midsize and enterprise companies private workspace with their own branding, which Knotel then manages and has flexible lease terms. It pitched itself as a more stable alternative to WeWork and was crowned a unicorn in 2019.

Newmark invested in Knotel’s $70 million Series B funding round in 2018, and later pushed the company to work with investment bank Cantor Fitzgerald, which has owned the brokerage since 2011, Sarva said.

“It was one of my regrets to do this nepotistic thing,” Sarva said on the YouTube show.

But Knotel had plenty of other problems leading up to the pandemic. Even though Sarva previously said the company was close to profitability, it lost $223 million in 2019 and faced high vacancy rates throughout its portfolio (which Sarva previously told Commercial Observer was par for the course for flex office companies.)

Things got worse during the pandemic, and Knotel cut staff, ditched huge chunks of its portfolio, and is facing dozens of lawsuits from landlords around Manhattan for nearly $12 million in unpaid rent. (Sarva has personally been hit with at least two similar suits.)

In his interview, Sarva took some blame for Knotel’s bankruptcy. He said he didn’t vet investors in the company strongly enough and knew his management style contributed to Newmark’s moves.

“This whole thing went down the way it did partly because of me,” Sarva said in the interview. “These guys were like, ‘Amol’s running the company. I don’t like how he’s running it, he’s screwing up. I’m tired of waiting for him to fix it.’”