DivcoWest is suing WeWork, seeking at least $30 million in damages
Real estate developer and landlord DivcoWest has sued WeWork and is seeking at least $30 million in damages, saying the global flexible workspace provider defaulted on rent, breached its lease, and vacated a New York office near Times Square without written approval.
In a lawsuit filed last week in New York State Supreme Court in Manhattan, San Francisco-based DivcoWest, known for a portfolio of businesses in major U.S. cities that includes its home market as well as Boston, Los Angeles and Washington, D.C., said WeWork first failed to pay $399,514.63. Fixed monthly rent and $74,378.01 in additional rent, for a total of $473,892.64 that was due on December 1 for rent at 311 West 43rd Street In downtown Manhattan. WeWork had about 72,000 square feet in the building, according to the lawsuit.
WeWork has warned that its lease obligations represent its biggest turnaround hurdle and said so last month ‘There is great doubt’ On its ability to continue as a going concern. The New York-based company said this month that it plans to exit underperforming locations Almost renegotiated All lease contracts.
Critics have expressed skepticism that these moves may not be enough to solve WeWork’s financial challenges.
A DivcoWest spokesman declined to comment beyond what was stated in the lawsuit. A WeWork spokesperson did not immediately respond to CoStar News’ request for comment.
DivcoWest bought the 186,000-square-foot building, which opened in 1903 and was renovated in 2016, for $131.3 million in 2018, CoStar data show.
WeWork first leased the building’s entire leasable space in October 2016, extending from floors 10 to 14, including the building’s penthouses, in a lease that was scheduled to expire in September 2032, the lawsuit said.
DivcoWest told WeWork in March, according to the lawsuit, that damages from the early termination of the lease would amount to about $30 million over the term of the original agreement.
While WeWork notified DivcoWest the following month that it had vacated the property and had not occupied it since at least December, DivcoWest said the lease terms prohibited WeWork from “early surrendering” or “abandoning” without its written consent, the lawsuit said.
Besides the roughly $30 million in severance pay, DivcoWest, which manages roughly $18 billion in assets, said it was also seeking other compensation such as remediation costs.
She gave the example of a water tank leak in the area of 43rd St. WeWork that resulted in “severe water damage that necessitated the removal of flooring and other finishes in the affected areas,” according to the lawsuit.