Tag: Commercial/Industrial Real Estate

WeWork’s stock has continued the strange trend of the bankruptcy bounce

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In a strange flashback to the demise of Bed Bath & Beyond Inc., WeWork Inc.’s stock soared on its over-the-counter debut this week, just days after the office sharing company filed for chapter 11 bankruptcy protection.

WeWork
WEWKQ,
+23.02%
filed for Chapter 11 in New Jersey on Monday and the beleaguered company’s stock was halted before the open that day. The New York Stock Exchange started the delisting process for WeWork that same day.

Trading resumed over the counter on Wednesday, with WeWork shares ending their first session as an OTC stock up 91.5%.

WeWork Chapter 11 a meme stock reality check: ‘No one should ever buy a stock that is rumored to be headed to bankruptcy’

A similar scenario happened when shares of Bed Bath & Beyond began trading over the counter in May after the Nasdaq started the delisting process for the bankrupt home-goods retailer and sometime meme-stock darling. Despite Bed Bath & Beyond’s well-documented woes, the stock ended its first session as an OTC stock up 30.4%. Bed Bath & Beyond’s shares were canceled in September.

In June Overstock.com acquired Bed Bath & Beyond’s intellectual property, and began operating as Bed Bath & Beyond, before changing its corporate name to Beyond Inc.
BYON,
+2.06%.

Like Bed Bath & Beyond, WeWork has continued to attract investor attention even as the company’s problems mounted. In mid-September WeWork’s stock saw a record run-up amid meme stock chatter, just weeks after WeWork warned that it may not be able to stay in business.

Related: WeWork files for bankruptcy, capping a stunning downfall

Users on social media noted the activity in WeWork’s share price this week, with Twitter user @asunapg warning Thursday that the OTC markets are “much more volatile and often a death trap for a lot of companies.”

“Here we go again” tweeted @B2Investor Friday, with popcorn and clown emojis.

WeWork’s stock ended Thursday’s session down 21.3% and the stock is down 12.7% Friday, compared with the S&P 500 index’s
SPX
gain of 1.3%.

Related: Why investors gamble on shares of bankrupt companies — Bed Bath & Beyond, for example

Tom Bruni, head of content at StockTwits, a social platform for investors and traders, told MarketWatch that, from what he is seeing, there doesn’t seem to be broad interest in the stock.

“Unlike Bed Bath & Beyond and others where it seemed possible to restructure and continue operating, the current situation for WeWork is mainly a math equation,” he told MarketWatch. “It’s looking most likely that it’ll be bought out, the question is at what price and how much cash (if anything) does that leave for common shareholders to receive? The consensus right now is that all value from its 52 million shares of common stock will be wiped out.”

Set against this backdrop, short covering could be driving the stock price up in the short term, according to Bruni. “Many market participants don’t want to risk being squeezed by unexpected good news, so they’d rather take their gains than ride it all the way down to zero,” he said. “Should that high short interest start to create sustainable upside momentum (more than a few days), then we’d likely see other traders get involved on the long side.”

“But for now, with earnings season in full swing, there’s plenty of volatility and news elsewhere for investors/traders to focus on,” he added.

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November 10, 2023
‘San Francisco is not dead’: Not everyone is shunning the city’s reeling office market

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Barry DiRaimondo, chief of SteelWave, a West Coast property developer that in the past half-century has partnering with many of the biggest names in commercial real estate, is looking for diamonds in the rough, distressed office properties located in the American city that many have given up on.

Others may be shunning San Francisco while it’s down on its luck, but DiRaimondo sees better days ahead, despite the city’s threat of a growing deficit, its fentanyl crisis, homelessness and a reluctant return of office workers to its financial core.

“Not much is coming up right now,” DiRaimondo said of buying opportunities, while speaking from his office in the heart of San Francisco’s financial district. But he was eager to point out several nearby buildings that could be candidates to buy, at the right price.

“I think over the next 12 to 18 months, you’re going to see a tsunami,” of distressed office properties, DiRaimondo said.

Like in many big cities, a wave of office buildings bought at peak prices before the pandemic now have a pile of debt coming due, at much higher rates. But San Francisco’s financial core only recently has begun to show flickers of hope in its weak recovery post-COVID.

“Whether it’s San Francisco, Oakland or anywhere here, and your debt is rolling, you’re having a conversation with your lender,” DiRaimondo said. “There’s either a restructuring going on or a foreclosure going on.”

A number of high-profile property owners this year surrendered local properties to lenders, including Westfield’s namesake shopping center downtown and a string of well-known hotels, a blow to the city’s comeback efforts.

Still, DiRaimondo expects the bulk of property ownership transfers in this boom-and-bust cycle to take place quietly, behind the scenes, often through a building’s debt changing hands. It’s a familiar playbook for veteran real-estate developers like SteelWave and its partners, especially when San Francisco office property values tumble and new loans remains expensive and hard to come by.

“Office is a nasty word, right now. Especially tech office,” he said. “We are doing something that’s a bit different.”

Booms, busts

San Francisco’s history as a boom-and-bust town perhaps is best suited for real-estate developers able to take a bunch of lemons and make lemonade.

That has been SteelWave’s signature move in the notoriously rough-and-tumble commercial real-estate industry, through its ups and downs. It has bought over $17.5 billion in properties and developments in the past five decades, first under the Legacy Partners Commercial brand before it was renamed in 2015.

It has partnered with some of the biggest names in commercial real estate, including with Angelo Gordon & Co. in 2021 on two Silicon Valley office buildings, but also distressed debt titans that include Rialto Capital, and with Chenco, one of the largest Chinese-owned U.S. real-estate investment firms.

Its stronghold is the Bay Area and DiRaimondo is now looking to raise a $500 million fund to buy distressed buildings, including in downtown San Francisco, a place major Wall Street lenders have been backing away from for months.

“It’s hard to raise equity to buy this stuff right now,” he said, but argues his strategy, which includes expanding its reach to potential investors in the U.A.E., Israel and parts of Europe, will pan out.

SteelWave’s model of buying a property includes a final tally of costs often three to four times the initial purchase price, due to extensive overhauls.

“Typically, what we do is buy something, tear it apart, put it back together, lease it, sell it,” DiRaimondo said.

It’s niche in the distressed world that’s already produced overhauls of buildings from Seattle to Colorado to Los Angeles, places the tech industry wants to lease.

In the southern California town of Costa Mesa, that meant partnering with Invesco to turn an old newsroom and printing press for the Los Angeles Times into a creative work campus. An opinion piece in 2022 from the newspaper described the revamp as turning, “the glum newspaper architecture into something inviting.”

Forget being a ‘rent bandit’

“In New York, people rushed back and refilled the apartments, streets, and subways. Restaurants and stores flooded with customers again,” a team from Moody’s analytics wrote in a recent “tale of two cities” report. “San Francisco, on the other end, battled safety concerns, homelessness, and population exodus which existed before but only became more obvious with barren neighborhoods.”

SteelWave thinks the old days of landlords raking in top-dollar commercial rents in San Francisco, while adding little back to office buildings, are a thing of the past.

“You have to have owners who want to create cool work environments to attract people back into the city,” DiRaimondo said of downtown San Francisco’s long slog back from the brink.

That means buying properties at low prices, but also risking putting money down for major improvements. He isn’t a distressed investors looking to become a “rent bandit,” he says, because the strategy will fail to get quality tenants.

Like the Moody’s team, DiRaimondo thinks San Francisco eventually will bounce back, but he thinks not before reality hits older office properties.

Take a “commodity” building downtown, often older and midblock with generic features, that previously might have been worth $750 to $800 a square foot. It now looks worth less than $300 a square foot, he said.

The early stages of fire-sales have begun already, with the 22-story tower at 350 California, nearby to DiRaimondo’s office, reportedly fetching $200 to $225 a square foot.

“San Francisco is not dead,” DiRaimondo said. “I think there are opportunities in San Francisco.”

See: San Francisco’s office market erases all gains since 2017 as prices sag nationally

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August 14, 2023
‘San Francisco is not dead’: Not everyone is shunning the city’s reeling office market

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Barry DiRaimondo, chief of SteelWave, a West Coast property developer that in the past half-century has partnering with many of the biggest names in commercial real estate, is looking for diamonds in the rough, distressed office properties located in the American city that many have given up on.

Others may be shunning San Francisco while it’s down on its luck, but DiRaimondo sees better days ahead, despite the city’s threat of a growing deficit, its fentanyl crisis, homelessness and a reluctant return of office workers to its financial core.

“Not much is coming up right now,” DiRaimondo said of buying opportunities, while speaking from his office in the heart of San Francisco’s financial district. But he was eager to point out several nearby buildings that could be candidates to buy, at the right price.

“I think over the next 12 to 18 months, you’re going to see a tsunami,” of distressed office properties, DiRaimondo said.

Like in many big cities, a wave of office buildings bought at peak prices before the pandemic now have a pile of debt coming due, at much higher rates. But San Francisco’s financial core only recently has begun to show flickers of hope in its weak recovery post-COVID.

“Whether it’s San Francisco, Oakland or anywhere here, and your debt is rolling, you’re having a conversation with your lender,” DiRaimondo said. “There’s either a restructuring going on or a foreclosure going on.”

A number of high-profile property owners this year surrendered local properties to lenders, including Westfield’s namesake shopping center downtown and a string of well-known hotels, a blow to the city’s comeback efforts.

Still, DiRaimondo expects the bulk of property ownership transfers in this boom-and-bust cycle to take place quietly, behind the scenes, often through a building’s debt changing hands. It’s a familiar playbook for veteran real-estate developers like SteelWave and its partners, especially when San Francisco office property values tumble and new loans remains expensive and hard to come by.

“Office is a nasty word, right now. Especially tech office,” he said. “We are doing something that’s a bit different.”

Booms, busts

San Francisco’s history as a boom-and-bust town perhaps is best suited for real-estate developers able to take a bunch of lemons and make lemonade.

That has been SteelWave’s signature move in the notoriously rough-and-tumble commercial real-estate industry, through its ups and downs. It has bought over $17.5 billion in properties and developments in the past five decades, first under the Legacy Partners Commercial brand before it was renamed in 2015.

It has partnered with some of the biggest names in commercial real estate, including with Angelo Gordon & Co. in 2021 on two Silicon Valley office buildings, but also distressed debt titans that include Rialto Capital, and with Chenco, one of the largest Chinese-owned U.S. real-estate investment firms.

Its stronghold is the Bay Area and DiRaimondo is now looking to raise a $500 million fund to buy distressed buildings, including in downtown San Francisco, a place major Wall Street lenders have been backing away from for months.

“It’s hard to raise equity to buy this stuff right now,” he said, but argues his strategy, which includes expanding its reach to potential investors in the U.A.E., Israel and parts of Europe, will pan out.

SteelWave’s model of buying a property includes a final tally of costs often three to four times the initial purchase price, due to extensive overhauls.

“Typically, what we do is buy something, tear it apart, put it back together, lease it, sell it,” DiRaimondo said.

It’s niche in the distressed world that’s already produced overhauls of buildings from Seattle to Colorado to Los Angeles, places the tech industry wants to lease.

In the southern California town of Costa Mesa, that meant partnering with Invesco to turn an old newsroom and printing press for the Los Angeles Times into a creative work campus. An opinion piece in 2022 from the newspaper described the revamp as turning, “the glum newspaper architecture into something inviting.”

Forget being a ‘rent bandit’

“In New York, people rushed back and refilled the apartments, streets, and subways. Restaurants and stores flooded with customers again,” a team from Moody’s analytics wrote in a recent “tale of two cities” report. “San Francisco, on the other end, battled safety concerns, homelessness, and population exodus which existed before but only became more obvious with barren neighborhoods.”

SteelWave thinks the old days of landlords raking in top-dollar commercial rents in San Francisco, while adding little back to office buildings, are a thing of the past.

“You have to have owners who want to create cool work environments to attract people back into the city,” DiRaimondo said of downtown San Francisco’s long slog back from the brink.

That means buying properties at low prices, but also risking putting money down for major improvements. He isn’t a distressed investors looking to become a “rent bandit,” he says, because the strategy will fail to get quality tenants.

Like the Moody’s team, DiRaimondo thinks San Francisco eventually will bounce back, but he thinks not before reality hits older office properties.

Take a “commodity” building downtown, often older and midblock with generic features, that previously might have been worth $750 to $800 a square foot. It now looks worth less than $300 a square foot, he said.

The early stages of fire-sales have begun already, with the 22-story tower at 350 California, nearby to DiRaimondo’s office, reportedly fetching $200 to $225 a square foot.

“San Francisco is not dead,” DiRaimondo said. “I think there are opportunities in San Francisco.”

See: San Francisco’s office market erases all gains since 2017 as prices sag nationally

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August 14, 2023
WeWork Raises Doubt About Its Survival

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WeWork Raises Doubt About Its Survival

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August 8, 2023
WeWork flags ‘substantial doubt’ about its ability to stay in business

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WeWork Inc. disclosed Tuesday that there’s “substantial doubt” about its ability to continue operating, as the company seeks to improve its financial positioning.

Shares of the company, which provides co-working spaces, were down 33% in Tuesday’s after-hours trading.

WeWork
WE,
-5.50%
lost $397 million in the second quarter and has $680 million of liquidity. In light of its losses and expected cash needs, “substantial doubt exists about the company’s ability to continue as a going concern,” WeWork said in its second-quarter earnings release.

Its ability to continue “is contingent upon successful execution of management’s plan to improve liquidity and profitability over the next 12 months.”

See also: Proterra stock craters as electric-bus maker files for Chapter 11 bankruptcy

As part of that liquidity planning, WeWork will aim to cut its rent and tenancy costs through restructuring as a renegotiation of lease terms. The company is also looking to boost revenue by lowering member churn, and it will try to rein in expenses and capital expenditures. Finally, WeWork is seeking additional capital through the issuance of debt or equity, or via asset divestitures.

The company was a hot technology player before the pandemic, enabling businesses to obtain flexible arrangements for workspaces, but it’s struggled to find its footing again now that companies and employees have become more comfortable with remote work.

WeWork’s losses narrowed in the latest quarter, though they were still sizable, as the company logged a net loss of $397 million, or 21 cents a share, compared with a loss of $635 million, or 76 cents a share, in the year-prior period. The FactSet consensus was for a 12-cent loss per share, based on three estimates.

The company also managed to grow revenue in its latest quarter, bringing in an $844 million haul on the top line, up from $815 million a year earlier, though analysts had been looking for $850 million.

“The company’s transformation continues at pace, with a laser focus on member retention and growth, doubling down on our real-estate portfolio optimization efforts, and maintaining a disciplined approach to reducing operating costs,” Interim Chief Executive David Tolley said in a release.

The company’s prior CEO stepped down in May.

See more: WeWork bonds sink after top executives resign from cash-burning company

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August 8, 2023