A federal bankruptcy judge has ordered U.S. Marshals to arrest Jonathan Burden to force him to show up in court, after the self-proclaimed real estate investor failed to pay $26,800 in sanctions and failed yet again to show up for a hearing, WWLTV.com reported. Burden is accused in at least seven lawsuits of tricking New Orleans area homeowners into signing over their properties to him and, in some of the cases, of filing false documents to seize people’s homes out from under them. He has repeatedly ignored court orders and tied up those cases in civil court, even while the FBI and New Orleans Police Department investigate him over the allegations of criminal fraud. But Thursday was the first time a judge has ordered Burden to be forced into court, with U.S. Bankruptcy Judge Meredith Grabill issuing the order to force Burden to appear at a hearing on Nov. 30. It’s unclear when federal marshals plan to arrest him or if they will hold him in jail until the hearing.
WeWork Inc. never figured out how to make money. Former company CEO Adam Neumann did, Bloomberg News reported. The office-leasing business declared bankruptcy this week, two years after finally going public minus its infamous co-founder. It has $19 billion of liabilities and $15 billion of assets. Longtime investors, including Softbank Group Corp. and the Vision Fund, will add to the enormous losses they’ve already taken on the venture. “It has been challenging for me to watch from the sidelines as WeWork has failed to take advantage of a product that is more relevant today than ever before,” Neumann said in a statement. But a part of Neumann might be thankful he was forced out in 2019 following the company’s disastrous first attempt at an initial public offering. While battering his reputation, the exit left him with plenty of liquidity, and he’s still worth $1.7 billion, according to the Bloomberg Billionaires Index. To be sure, WeWork’s failure hurt Neumann’s wealth. When it went public in a merger with a special purpose acquisition company in 2021, Neumann had a fortune of $2.3 billion, according to the index, with nearly one-third in WeWork shares. They’ve since fallen more than 99%. But the deal also revealed how he managed to extract huge amounts of cash from WeWork in better times. The ex-CEO’s name was mentioned 197 times in a merger filing alongside eye-popping payouts, including a $185 million non-compete agreement, $106 million settlement payment and $578 million received for shares sold by Neumann’s We Holdings to SoftBank.
In its heyday a few years ago, WeWork said that it would reinvent offices. But the company never created a sustainable business or changed how most people worked, the New York Times reported. The business of offering flexible office space on short leases to individuals and businesses, a model that WeWork hoped to make mainstream, remains a niche in commercial real estate despite the billions of dollars the company and others invested in the approach. Flexible office space accounts for less than 2 percent of all office space in the 20 largest U.S. markets, according to Cushman & Wakefield, close to its share before the pandemic. WeWork filed for bankruptcy protection this week in an effort to quickly slim down its portfolio of office spaces. The company wants to give up over 70 leases right away, with possibly more to follow. Other co-working companies may take over some of those locations, but some owners of office buildings said they were not expecting this approach to ever amount to more than a small part of their business. Many employers are paring back their office space because workers aren’t going in five days a week after growing accustomed to working remotely or on a hybrid schedule. Office vacancies are at their highest level in decades, with lots of space available for sublet often at a deep discount from the rents that prevailed before the pandemic. WeWork’s bankruptcy will only make the situation worse by leaving landlords with more space to fill.
A Fort Collins, Colo.-based homebuilder facing a number of lawsuits has filed for chapter 7 bankruptcy, BusinessDen.com reported. Bluestone Homes of Colorado, which lists a Fort Collins P.O. box as its address, filed for bankruptcy Oct. 31. Terence Hoaglund founded Bluestone in 2009. According to its website, it designs and builds energy-efficient homes, with long-term goals of building “net-zero-energy homes.” In court filings, Bluestone Homes listed assets of $171,876 and said it owes $2.4 million to 52 creditors, including contractors and customers who put down deposits. Hoaglund, who signed the filings, claimed he is owed $43,405 for paying company debts on personal credit cards. The filings show revenue has dropped this year compared to years past. From January to the Oct. 31 filing date, Bluestone reported a loss of $528,000 on $780,000 in revenue. That compares to $2.7 million revenue reported last year and $6.4 million reported in 2021.
WeWork will make its first U.S. bankruptcy court appearance today, seeking to advance a restructuring proposal that could cut $3 billion in debt and shrink the company's real estate footprint, Reuters reported. The Softbank-backed office space-sharing company filed for bankruptcy protection in Newark, N.J., bankruptcy court on Monday, seeking to address more than $4 billion in debt and unsustainable rent costs. WeWork, once valued at $47 billion, expanded at breakneck speed but racked up steep losses on its long-term lease obligations after a post-COVID plunge in demand for office space. After an earlier effort to restructure its debts failed to stave off bankruptcy, WeWork reached a restructuring agreement with over 90% of its bondholders to convert $3 billion of debt into equity in the company. Softbank, which currently owns about 70% of the company, would retain an equity stake under the proposed restructuring. WeWork managed to renegotiate 590 leases before filing for bankruptcy, saving about $12.7 billion in future rent payments. But it says it has more work to do to get rent costs under control. The company has identified 69 leases it intends to break in the initial days of its bankruptcy, including 41 in New York City, and it could seek to reject additional leases later in its bankruptcy. WeWork said it is seeking to renegotiate terms on other leases with 400 landlords. Read more.
In related news, WeWork's $3 billion debt for equity swap deal with its creditors marks the latest effort by top shareholder SoftBank to revive the troubled office-space provider and recoup some of the billions it has invested, Reuters reported. Whether the bet succeeds now depends on WeWork renegotiating the costly long-term leases it signed during the boom years and is now unable to pay, forcing it to file for bankruptcy on Monday. WeWork's long-term lease obligations of $13.3 billion accounted for more than 70% of its total debt as of end-June. Those deals, many agreed during a period of breakneck growth under founder Adam Neumann, became a crippling burden as the post-COVID shift towards working from home led to a plunge in demand for office space. Neumann quit as CEO in 2019, bowing to pressure from some investors. WeWork renegotiated some of its leases to reduce its obligations by more than $2 billion since the end of 2022. Read more.
Private lenders, in pole position as high interest rates leave them as the sole option for many in the commercial real estate market (CRE), are turning more selective and worsening a liquidity gridlock in a sector facing trillions of dollars of maturing debt, Reuters reported. In recent months, banks looked to rework terms on maturing CRE debt to stave off loan defaults, but they required additional infusion of equity capital allowing private lenders an opportunity to provide rescue financing through mezzanine debt, preferred equity or fresh common equity, industry sources said. Initially those workouts were focused on the office sector, but now are spreading to multi-family, industrial and hotels. And those workouts are becoming mathematically untenable even for private lenders. This is happening as rental income, across sectors, is not keeping up with the increase in debt servicing costs, said several industry players. "Debt is available, but not in the same amount as before and it is also meaningfully more expensive. That leaves a few choices, and none of them are ideal," said Mike Comparato, president of Franklin BSP Realty Trust. Borrowing costs for the CRE market have risen more than income, a situation prompted by the steepest jump in interest rates in decades. Exacerbating factors include tighter lending standards after the March regional bank failures and falling office occupancies post-COVID.
WeWork, the beleaguered coworking space company, has filed for bankruptcy, marking a stunning downfall for what was once the world’s most valuable startup, CNN Business reported. The chapter 11 announcement was widely expected after the company said last month that it was struggling to pay back its debt. The COVID-19 pandemic rocked WeWork as people started working from home instead of commuting into office spaces. The company’s stock lost more than 99% of its value, and the SoftBank-backed venture, which was privately valued at around $47 billion at its peak, was worth $45 million before its bankruptcy filing. WeWork said it would remain open and operational as it renegotiates its leases and debt obligations. The company said that investors holding 92% of the company’s secured debt have agreed to adjust the terms of their loans to help the company remain in business. Once a much-celebrated tech unicorn that promised to revolutionize the future of office work, a perfect storm of factors caused WeWork to start to come undone in the wake of a botched attempt to go public back in 2019. At the time, IPO paperwork revealed larger-than-expected losses and potential conflicts of interest with the company’s cofounder and then-CEO Adam Neumann, who was ousted in 2019 following pressure from investors. WeWork eventually went public roughly two years later at a much-reduced valuation of some $9 billion. By 2021, market sentiment, and the easy access to capital that helped prop up much of the startup world before the pandemic, had started to shift. Although WeWork billed itself as a tech company, some critics noted its core business was not in tech but was really in real estate. Even after going public, the company has struggled to turn the ship around.
For years, landlords around the world clamored to get WeWork into their office buildings. Now, WeWork is perhaps days away from a bankruptcy filing — and its demise could not come at a worse time for office landlords, The New York Times reported. With fewer employees going into the office since the pandemic, companies have slashed the amount of space they lease, causing one of the worst crunches in decades in commercial real estate. Many landlords have accepted lower rents from WeWork to keep it afloat, but its bankruptcy would be an enormous blow. The pain would be centered on landlords that have leased a large proportion of their space to the company, particularly in New York, and are struggling to make payments on the debt tied to their buildings. Some landlords might quickly accept lower rents from WeWork as part of a bankruptcy reorganization and keep doing business with any new entity that emerges, but others might have to fight in court to get anything. WeWork, despite its efforts to cut costs, still had an empire of 777 locations in 39 countries at the end of June, compared with 764 locations in 38 countries nearly two years earlier. On Friday, its website listed 47 locations in New York, where at the end of March it leased 6.9 million square feet of office space, equivalent to more than 60 percent of all co-working space. Speculation of a possible bankruptcy filing intensified in August when WeWork warned that it might not be in business much longer. Its shares have fallen 90 percent since then. Last month, WeWork said it would miss interest payments totaling $95 million. After a 30-day grace period, the company reached a deal with creditors for a seven-day forbearance, which expires Tuesday. (Subscription required to view article.)
A federal jury dealt the biggest blow to the American home-buying industry in perhaps a century when it found that the powerful National Association of Realtors and several large brokerages had conspired to keep agent commissions artificially high, The New York Times reported. Brokers, analysts and consumer advocates called the decision — which awarded plaintiffs nearly $1.8 billion in damages — a game-changer. More antitrust lawsuits against the association and brokerages are awaiting trial, while federal regulators are also looking to intervene. Here’s what changes might be in store for the home brokerage industry, which pulls in an estimated $100 billion in commissions each year. Real estate experts say the current system won’t stand. Right now, home sellers essentially pay fees for both their own agent and the buyers’ agent, with a typical commission around 5 to 6 percent, split between the two brokers. Experts identified a range of potential shifts, including making commission sharing optional, so that sellers’ agents who don’t want to pay buyers’ agent fees can still list on databases. Start-ups are trying different business models. The brokerage industry could contract. Such a drop could have disastrous consequences for the National Association of Realtors, which collects about $150 from each member annually. According to the nonprofit’s most recent annual tax filing, it earned $79 million in net income on $327 million in revenue. The group has said it will appeal the court ruling. (Subscription required to view article.)
Homebuyers are backing out of deals at the highest rate in nearly a year, a new study found. The culprit: higher mortgage rates, Yahoo Finance reported. Roughly 53,000 U.S. home purchase agreements fell through in September, according to Redfin, equal to 16.3% of homes that went under contract that month. That’s the highest percentage of canceled contracts since October 2022, when mortgage rates surpassed 7% for the first time in two decades. The share is also up from 15.2% a month earlier and 15.8% a year earlier. Pandemic boomtowns where home prices skyrocketed due to the influx of remote workers were hit the hardest by buyers with cold feet, with some areas in Florida seeing contract cancellation rates of over 20%. The reaction from buyers comes as mortgage rates remained at 23-year highs between August and September, convincing rate-sensitive folks to call it quits on their home-purchase plans. Even more cancellations may be on the horizon, as rates hover near 8%.
