Commercial real estate services firm Newmark Group recently moved one step closer to acquiring flexible workspace provider Knotel, which recently filed for bankruptcy. A Delaware bankruptcy court approved the acquisition and the company expects the sale to, “close shortly.” Newmark provided Knotel with $20 million in financing after the co-working space company filed for bankruptcy in late January. The firm then made a $70 million bid to acquire the company.
“Flexible workspace has been one of the fastest-growing areas of commercial real estate, and we expect this adaptive model will play an important role in the future of our industry,” Newmark Chief Executive Officer Barry Gosin said in a statement. “As a global commercial real estate leader, Newmark believes that our nimble integrated platform, combined with Knotel’s capabilities, will provide superior management and consulting services to corporations and owners around the world. We look forward to completing our purchase of Knotel and welcoming so many of their talented professionals to Newmark.”
Although Newmark didn’t say how many Knotel locations will remain open following the sale, the firm said in a filing with the New York State Department of Labor that it plans to still employ “many if not most” of Knotel’s 106 employees in New York City, Commercial Observer reports.
Newmark’s interest in acquiring Knotel came at an ideal time the co-working space provider. Prior to its bankruptcy filing, leaked financial records showed the company had $225 million of net losses in 2019. The COVID-19 pandemic only made Knotel’s financial woes that much worse. It lost approximately $49 million during the first half of 2020 and owed vendors $84 million, Business Insider reports. Meanwhile, the company went through two rounds of layoffs and started returning big pieces of its portfolio to landlords. Knotel also faces lawsuits from landlords over unpaid rent.
An Inspired Acquisition Choice
The acquisition still makes sense, despite Knotel’s financial troubles, experts told Commercial Observer. Newmark can recoup some of its prior investment into Knotel and it now has a co-working space platform that’s likely to be in much higher demand as the COVID-19 pandemic subsides.
“It’s now becoming very common for the big landlords to have their own co-working facilities,” Wharton Property Advisors President and CEO Ruth Colp-Haber told Commercial Observer. “There’s just a lot of need for easy and short-term space, and Newmark, they’re talking to tenants and they hear it.”
Joe Dyton can be reached at joed@fifthgenmedia.com.
