Knotel Inc. Real Estate Startup said Saturday chapter 11 for its US business, agreeing that the company be taken over by real estate services Newmark Group Inc.
Knotel said on Sunday that it had filed for bankruptcy to reorganize its real estate footprint and allow the sale to take place.
The moves are the latest sign that the Covid-19 pandemic has worsened the industry with the boom.
Knotel of New York, founded in 2016, has raised hundreds of millions of dollars from investors. It has expanded rapidly over the years and has been one of the most aggressive competitors in the flexible and collaborative office sector, becoming one of WeWork’s fiercest rivals.
In August 2019, Knotel said it had reached a valuation of over $ 1 billion due to a round of funding led by Wafra Inc., an affiliate of a Kuwaiti sovereign wealth fund. But its revenues declined significantly during the pandemic, and Knotel faced lawsuits over unpaid rent from landlords.
“The pandemic has created an extremely challenging operating environment, with significant impacts on leasing speed and renewal rates in key markets, especially New York and San Francisco,” co-founder Amol Sarva said in a statement. “We need to address this now to position our business for sustainable growth and a successful future.”
Newmark is offering Knotel $ 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 leases it to companies through short-term transactions. This becomes a problem when the demand for office space decreases, as customers can easily get out of their contracts, but the company continues to be leased.
Flexible office companies have struggled to retain customers at a time when most US office users are working remotely and many do not intend to return to the office soon.
Knotel is not the only flexible office company facing headwinds. A number of entities related to the IWG PLC offices have filed for bankruptcy, and the company is closing many locations in an attempt to reduce costs. Meanwhile, WeWork continues to lose money, despite aggressive cost-cutting measures, but recorded more than $ 3 billion in cash in its third-quarter balance sheet, thanks to a massive investment from SoftBank Group. Body.
The company is in talks to go public by merging with a special purpose procurement company.
Write to Konrad Putzier at [email protected]
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It appeared in the printed edition from February 1, 2021 under the name “Knotel Files for Bankruptcy”.