The real estate Knotel Inc. filed for bankruptcy for its U.S. business on Saturday, agreeing that the company would be sued by real estate firm Newmark Group Inc. be taken over.
Knotel said on Sunday that he had filed for bankruptcy to reorganize its firm footprint and make the sale possible.
The move is the latest sign that the Covid-19 pandemic has improved the once-growing collaborative industry.
Founded in 2016, the New York-based Knotel has raised hundreds of millions of dollars from investors. It expanded rapidly over the years and was one of the more aggressive competitors in the collaborative and flexible office space and became one of WeWork’s fiercest competitors.
In August 2019, Knotel said it had reached a valuation of more than $ 1 billion thanks to a round of financing led by Wafra Inc., a subsidiary of a Kuwaiti sovereign wealth fund. But his income dropped significantly during the pandemic, and Knotel faced lawsuits over unpaid rent from landlords.
“The pandemic has created a uniquely challenging operating environment, with a significant impact on rental rates and the rate of renewal in key markets, particularly 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 debt financing to keep the business afloat during the bankruptcy process, Knotel said.
Like other companies with flexible offices, Knotel leases long-term office space and leases it effectively to companies through short-term transactions. This becomes a problem when the demand for office space decreases because customers can easily get out of their contracts but the company still stays for rent.
Flexible office businesses have struggled to retain customers at a time when most U.S. office users are working remotely and many do not plan to return to the office anytime soon.
Knotel is not the only company that is flexible for headwinds. A number of entities attached to the offices of IWG PLC’s offices have filed for bankruptcy and the company is closing down numerous locations in an effort to save costs. However, despite aggressive austerity measures, WeWork is losing money, but has more than $ 3 billion in cash on its balance sheet since the third quarter, thanks to a massive investment by SoftBank Group. Corp.
The company is in the process of becoming public by merging with a specialty sourcing company.
Write to Konrad Putzier at [email protected]
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On February 1, 2021, the print edition will appear as ‘Co-Work Firm Knotel Files for Bankruptcy’.