Adam Neumann still raking in millions by leasing office space to WeWork: report
The move have has continued to prompt conflict of interest concerns among investors
The We Company’s CEO Adam Neumann is still personally buying buildings that are leased to the company’s co-working arm, WeWork, stoking conflict of interest concerns among some of the company’s investors.
The setup has reaped Neumann millions in landlord payments from his own company, according to the Wall Street Journal.
The Real Deal reported the first deal of this type last March, in which Neumann partnered with fashion designer Elie Tahari to buy a stake in 88 University Place, before leasing it to WeWork. IBM eventually signed with the flexible office space company to take eight floors within the building.
More recently, Neumann has invested in multiple properties in San Jose, California, on a site where WeWork holds future plans for a campus, which will include a residential section for its WeLive business, the Journal reported.
It is an unusual position for an executive at such a large company to serve on both the landlord and tenant sides of these deals. The Journal reported that multiple investors held concerns for a conflict of interest about the arrangement, due to the potential that the company’s CEO could act in self-interest, rather than that of the company.
The board has previously stopped at least one such deal. In 2013, the CEO sought to buy a 5 percent stake in 210-220 North Green Street in Chicago, where WeWork was negotiating a lease. Citing a conflict of interest, the company’s board blocked the move, and WeWork instead paid for the stake, according to the Journal’s report.
In a debt offering prospectus issued last year, WeWork said that Neumann had stakes in several buildings in which it paid leases to, according to the Journal report. Between 2016 and 2017, the company said that it paid $12 million rent to buildings “partially owned by officers” of WeWork, with $110 million remaining on the life of these leases.
WeWork has said that these deals are disclosed to investors after being approved by the board and an independent committee.
Neumann, whose personal fortune is pegged at $4.1 billion by Forbes, is the largest shareholder in WeWork, which last week was valued at $47 billion by its largest investor, SoftBank Group. The Japanese conglomerate committed another $2 billion to the company after walking back an initial $16 billion planned investment, an announcement which was followed by a WeWork rebranding itself as The We Company.
The CEO has made other private investments that have been earmarked for WeWork use, including a $65 million purchase of a development site in Chelsea, in which he and partners were said to have considered building a WeLive from the ground up. [WSJ] — David Jeans
Source: The Real Deal Los Angeles