Newmark has agreed to buy the assets of Knotel as part of the flex space provider’s reorganization plan, the companies announced on Sunday.
Knotel has filed for Chapter 11 bankruptcy in Delaware. Newmark has agreed to provide $20 million in debtor-in-possession financing and to purchase Knotel’s assets through an affiliate, pending court approval. The cash infusion will support wage payments and employee benefit programs. Newmark had already owned Knotel’s first- and second-lien secured debt.
In a statement, Knotel co-founder & CEO Amol Sarva acknowledged that the extraordinarily challenging environment created by the pandemic has affected leasing velocity and renewals in New York City, San Francisco and other markets. He added that the company’s leadership is optimistic that the restructuring will enable the company to refocus its mission of providing flex office space in U.S. and international locations.
The shared space provider’s struggles became apparent early on during the pandemic. At the end of March last year, the company laid off 30 percent of its workforce—some 500 employees at that time—and furloughed an additional 20 percent.
Founded in 2016, Knotel operates coworking space in many of the country’s largest metros, including Manhattan, Atlanta, Boston, Los Angeles, San Francisco and Washington, D.C. The firm also operates in major European cities, from Amsterdam to Berlin. The company announced it will shutter multiple U.S. locations as part of its reorganization plan. International operations were not part of the filing.
Last year’s shift to remote work struck a major blow against the office sector. Coworking space has been particularly vulnerable to the effects of the pandemic, as operators’ flexibility turned from its greatest strength to its biggest weakness. While demand has taken a hit, however, a CBRE report from December found that shared space will have a vital role in the office sector’s recovery. With many businesses hesitant to sign standard, 10-year leases, the flexibility offered by coworking operators looks to have longer-term appeal.