As WeWork looks to expand the empire, specific roadblocks have occurred. In the sales pitch for 110 Wall Street, brokers for Rudin Management gave voice to landlords’ worst-case scenario involving WeWork which would be default. This fear has become the center topic of discussion as critics of Wework take the stage to discredit the entity.
A recent memo that was sent out by brokerage Eastdil Secured cited that Wework could possibly flop and fulfill critics’ expectations and fail to pay its rent if the economy turns.
Rudin Management CEO Bill Rudin made mention that the decision to not to sell had nothing to do WeWork, but rather an internal conclusion that the company did not need to sell the property. “It’s a great asset,” he said.
Rudin, met WeWork co-founder Adam Neumann at a cocktail party in 2012, and remembers being astonished by an earlier duplication of the company’s shared offices. A month later, due to Hurricane Sandy Rudin was forced to walk through a debris-strewn 110 Wall with Neumann.
For Rudin, the question swirled around deciding to either tear down the building or saving it — and fast. “We were taking a chance on WeWork back then, we were spending significant capital and needed to protect ourselves,” Rudin said. But he insisted that’s standard business practice for Rudin Management.
The goal Rudin Management had was to revitalize Downtown following a devastating storm. Rudin says that “WeWork has created an environment where competitors feel threatened and need to up their game in terms of what [landlords] need to do to attract and retain tenant in terms of infrastructure, amenities and quality of the building”. This new approach has created a much more competitive attentive environment where the clients needs must be met.
The sales pitch for 110 Wall became even more complicated as Wework geared up for an IPO that was halted due to valuation issues. This specific issue opened up discussions geared towards security if a recession was to occur. Due in part of valuation and issues with recent leadership, uncertainty creeped into the minds of 110 wall landlords regarding Weworks creditability.
“It’s caveat emptor: ‘Hey, don’t blame us if you buy this thing and you run into trouble,’” said Timothy King, managing partner at CPEX Real Estate, commenting on the sales pitch for 110 Wall. “The landlord is almost at the mercy of WeWork if they’re the single tenant. To some extent, they’re the ones holding the cards.”
During this negotiation a review of power dynamics is needed. During the sales pitch and negotiations both parties needed to create an environment where power and value are expandable. Creating an environment where power is expandable, the individuals representing 110 Wall St would have been able to see the benefit and power Wework had in terms of placing 110 Wall St in a rich market filled with perspective clients who want creative infrastructure, amenities, and quality. Expandable power theory focuses on the idea that when individuals view power as an expandable resource and fosters a more cooperative power-sharing orientation. This would aid in creating an environment where 110 Wall St and Wework both see the possible deal as a way to mutually attain their goals.
This ability to expand the pie and look beyond negative attributes of the deal would have set Wework in a success trajectory within the deal. Wework had the power to alleviate and fulfill Rudin Managements goal of revitalizing the area through the specific clients they attract. Being able to correctly displace this power and benefit to 110 Wall St would have closed such a high stakes deal.