Yardi To Become WeWork's Majority Owner In $450M Bankruptcy Exit Plan

Attorneys for WeWork revealed in a Monday morning bankruptcy hearing that under its plan to exit bankruptcy, property management software provider Yardi Systems would become the majority owner of the coworking titan. 

Under the terms of WeWork's proposed financing deal to exit bankruptcy, the company's senior lenders agreed to inject WeWork with $50M to keep it running until it expects to emerge from bankruptcy May 31, then an additional $400M to cover the cost to exit restructuring.

Yardi will take a 60% stake in a private WeWork after agreeing to contribute $337M of the $450M the company needs to exit bankruptcy. It will do so through its Cupar Grimmond affiliate, a largely unknown entity that controlled around 35 million shares in WeWork prior to its Chapter 11 filing. 

Kirkland & Ellis partner Steven Serajeddini, who presented WeWork's bankruptcy exit plan in court Monday, confirmed that Cupar Grimmond is controlled by Yardi, which is also a technology provider for WeWork. 

Yardi didn't immediately respond to Bisnow’s request for comment.

SoftBank, WeWork's largest lender and investor prior to the Chapter 11 proceedings, would have roughly 16.5% of the equity upon emergence from bankruptcy, which could go up to 36% if the firm doesn't hit certain financial benchmarks, lawyers said during the hearing.

A group of WeWork's other lenders would control the remaining equity in the firm. Other lenders would contribute roughly $112M in new money to keep WeWork alive.

“The unexpected size of the new money need frankly threw everybody for a bit of a loop,” Eli Vonnegut, attorney for the non-SoftBank and Yardi senior lenders, said at the hearing. “What we have now, your honor, is we believe very valuable: a fast and reliable path out of bankruptcy for this company.”

WeWork also came to agreements with landlords as the company established an $8.5M pot of settlement payments for a group of unsecured creditors.

The ability for some landlords to get paid after all resulted in a contrast from previously contentious discussions between WeWork and property owners. Lawyers for landlords and WeWork spent the weekend negotiating and resolving outstanding objections.

One of the biggest unresolved matters in the company's bankruptcy plan was the fate of its headquarters and one of its largest locations. But in a filing just hours before the hearing, WeWork rejected its lease at Tower 49 in Midtown Manhattan, where it occupies 300K SF for its HQ and a coworking space with 2,800 members.

In the hearing, Judge John Sherwood pushed the WeWork plan with Yardi forward and denied exiled co-founder Adam Neumann’s request that WeWork consider his bid more seriously.

Neumann’s attorneys asked the court for 12 days of due diligence between WeWork and Neumann’s Flow Group. They claimed that the company should have entertained its bid, but Sherwood said Neumann's offer of $650M wouldn't resolve the $4B in debt that SoftBank, Yardi and others agreed to wipe out as part of the exit financing deal.

“I have to believe that the financial stakeholders here have considered their economic interests,” Sherwood said during the hearing. “We have to keep this thing on the schedule that has been fixed by the debtors.”

However, attorneys for Flow aren't yet backing down. Flow claims that WeWork failed to consider its offer, which would violate bankruptcy law requiring debtors to try to maximize the value of their estate.

But if Neumann wants to continue his quest to retake control of the company he founded, he would have to convince lenders to negotiate and Sherwood to reject WeWork's reorganization proposal.

“After misleading the court for weeks, WeWork finally admitted it is trying to sell the company to a group led by Yardi for far less than we are continuing to propose, so we anticipate there will be robust objections to confirming this plan," Susheel Kirpalani, an attorney for Flow, said in a statement.

The final plan to exit bankruptcy is expected to be decided at a confirmation hearing scheduled for May 30. If approved, the company could exit bankruptcy the following day — emerging at less than half the size it was at its pre-pandemic peak. 

“Over the past six months, we have worked extremely hard to develop a plan for a reorganized WeWork that is better capitalized, more operationally efficient, and positioned for continued investment in our products and services and a return to long term growth,” WeWork CEO David Tolley said in a statement after the hearing Monday.

Based on the company's financial projections filed last week, WeWork would have 337 global locations moving forward, including 178 across 38 cities in the U.S. and Canada. It estimates it will be profitable next year, which would be a first for the company.

Neumann cast doubt on those projections in a filing last week, predicting it would be out of cash by 2027.

CORRECTION, APRIL 30, 11:15 A.M. ET: SoftBank is not providing any new money for WeWork to exit bankruptcy, as a previous version of this story indicated. This story has been updated.