The real estate start-up Knotel Inc. filed for bankruptcy in Chapter 11 of its U.S. business on Saturday, agreeing that the company be taken over by real estate services firm Newmark Group Inc.
Knotel said Sunday he filed for bankruptcy to reorganize his real estate footprint and allow the sale.
The moves are the latest sign that the Covid-19 pandemic has endangered the collaborative industry that grew.
New York-based Knotel, founded in 2016, raised hundreds of millions of dollars from investors. It expanded rapidly over the years and was one of the most aggressive competitors in the flexible and collaborative office industry, becoming one of WeWork’s fiercest rivals.
In August 2019, Knotel said it had reached a valuation of more than $ 1 billion thanks to a round of funding led by Wafra Inc., a subsidiary of a Kuwaiti sovereign wealth fund. But its income fell significantly during the pandemic, and Knotel has faced lawsuits for unpaid rent from landlords.
“The pandemic created a challenging operating environment alone, with significant impacts on leasing speed and the rate of renewals in key markets, particularly in New York and San Francisco,” co-founder Amol Sarva said in a statement. “We need to address it now to position our business for sustainable growth and a successful future.”
Newmark is providing Knotel with $ 20 million in financing for debtors in possession to allow it to continue operations during the bankruptcy process, Knotel said.
Like other flexible office companies, Knotel rents long-term office space and effectively subleases them to companies through short-term offers. This becomes a problem when the demand for office space decreases, because customers can easily get out of their contracts, but the company remains tied up.
Flexible office companies have struggled to retain customers at a time when most U.S. office users work remotely and many have no plans to return to the office soon.
Knotel isn’t the only flexible office company facing headwinds. Several entities linked to the offices of IWG PLC have filed for bankruptcy and the company is closing numerous locations in order to reduce costs. WeWork, meanwhile, continues to lose money despite aggressive cost-cutting measures, but had more than $ 3 billion in cash on its balance sheet as of the third quarter, thanks to a massive investment from the SoftBank group. Corp.
The company is in talks to make public its merger with a special-purpose acquisition company.
Write to Konrad Putzier to [email protected]
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It appeared in the February 1, 2021 print edition as “Knotel’s Record for Bankruptcy of the Collaborating Company.”