(NEW YORK, NEW YORK)— The iconic Lord & Taylor building is a millstone on WeWork as the company seeks to cut its expenditures. Like many of the company’s deals, the iconic Fifth Avenue building was purchased under significant conflict of interest, centered around disgraced CEO Adam Neumann’s close friend Stephen Langman. Langman was particularly close to Neumann: he was among the three board members, along with Neumann’s own wife, who had the power to designate a new CEO to succeed Neumann in case of death or incapacitation, The Read Deal reports. He was also an early investor in the company, and a member of WeWork’s board as well as the board of its subdivision WeWork Property Advisors.
Within WeWork, the real estate division handled leases while WeWork Property Advisors handled sales and acquisitions. The disastrous investment in the Lord & Taylor building forced these conflicts of interest to the surface. Facing economic pressure, the Hudson Bay Company was forced to sell the building that Lord and Taylor had called home for over 100 years. The building had been valued at $655 million in 2016, and yet WeWork paid $850 million for it in 2017. The high price was supposedly justified by the iconic value of the building. Although Langman and his representatives have insisted that he did not vote in the decision, due to obvious conflicts of interest, many found it suspicious that Langman was forming close personal ties with the Hudson Bay Company at the same time that WeWork was running headlong into a visibly poor deal.
While WeWork was negotiating the purchase, Langman’s own company, Rhône Group, acquired a $500 million stake in the Hudson Bay Company and Langman himself took a seat on the board, only two months after WeWork had acquired the Lord & Taylor building. When Lord & Taylor pulled out of the building altogether, We Work’s lenders, who had financed the $850 million purchase, began pressuring WeWork’s real estate division to lease out the remaining floors at a slightly higher than market rate price per square foot.
Now what will happen to the building? Since the purchase, WeWork has also invested almost $200 million in repairs, according to The Real Deal. The company overpaid in a strong real estate market: in its current state, the company cannot sustain the significant loss they are likely to take on the building if they sell now. They are also struggling to fill the space with prospective tenants. And yet, a representative told The New York Post, “We are fully committed to meeting our obligations with the Lord and Taylor building, a marquee and historic asset that we are excited to continue revitalizing.”