This Wall Street Journal Article about WeWork: WeWork’s CEO Makes Millions as Landlord to WeWork has been stuck in my head ever since it was published. I’ve been involved in transactions involving WeWork, but you don’t need to be a practitioner to see the truly transformative effect of the company on the way people use space and the commercial real estate market as a whole.
If the reporting in the article is accurate, it is quite damning. To this end, the Wall Street Journal reports that Adam Neumann bought several properties after gaining 65% of the overall share vote. The article points to one building at 88 University Place owned by Neummann where IBM employees who were stationed at that particular WeWork facility had problems with the elevator of the building which was co-owned by Neumann.
What was the rate of return that Adam Neumann received in leases to his company WeWork? How is that different than the rates at other buildings? These are among the types of questions that WeWork’s purported independent committee must have before disclosing the transaction to shareholders.
Without more information, no one can definitively say whether or not there has been a breach of fiduciary duty, but it highlights the point that what happens within a privately held startup can garner significant public attention later on.