- WeWork CEO Adam Neumann reportedly made millions of dollars by renting office space in buildings that he partially owns back to the company, according to a Wall Street Journal report on Wednesday.
- In a filing for prospective investors last year, WeWork reportedly disclosed that it paid $ 12 million in rent between 2016 and 2017 to buildings “partially owned by officers” of WeWork.
- Investors tell the Journal that they’re concerned that the situation creates a conflict of interest – if those buildings were to raise their rents, Neumann could potentially stand to benefit.
- WeWork tells Business Insider that Neumann only has a stake in four properties from which it leases space, out of the 400-plus coworking spaces the company operates globally, and that its board and investors are both fully aware of the situation.
WeWork, the coworking company said to be valued at $ 47 billion, has been renting space in buildings partially owned by its CEO Adam Neumann, according to a Wall Street Journal report on Wednesday – an arrangement that’s reportedly netted the executive millions of dollars.
Multiple WeWork investors told the Journal that the arrangement was concerning to them, as the situation creates a potential conflict of interest for Neumann. For example, if those buildings were to raise WeWork’s rent, Neumann could personally profit. WeWork’s business model involves leasing large amounts of office space, and then subleasing smaller chunks of that space out to individuals, startups, and smaller groups.
In a document for prospective investors last year, the company disclosed that it paid $ 12 million in rent between 2016 and 2017 to buildings “partially owned by officers” of WeWork, and said that it will pay more than $ 110 million over the lifetime of those leases, according to the report.
Neumann reportedly has a 50% stake in an 11-story New York City building where WeWork operates a coworking space. The Journal also reports that Neumann is the “main investor” in a group that buys multiple properties in San Jose, CA, some of which are leasing space to WeWork.
A spokesperson for WeWork tells Business Insider that Neumann only has a stake in four properties from which the company operates, out of its network of 400 coworking spaces globally. Furthermore, the company says that everything has been disclosed to investors and approved by the board, and that it hasn’t heard complaints.
“WeWork has a review process in place for related party transactions. Those transactions are reviewed and approved by the board, and they are disclosed to investors,” said the spokesperson.
Of note, however, is that in a 2014 fundraising deal, Neumann was awarded enough equity in the company to exert voting control over its board of directors. While WeWork’s board mainly consists of independent directors, Neumann’s vote is enough to make or break any proposal.
Read the full Wall Street Journal report here.
Earlier this month, the coworking company announced it would be rebranding from WeWork to The We Company, which it said would better reflect company’s ambitions of moving beyond providing office space and pushing further into markets like education or residential living.
The day before the rebranding was announced, WeWork lost out on a $ 16 billion investment from the Japanese tech company Softbank, which decided to downsize its investment to $ 2 billion.