Jim’s Mailbox

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Jim/Bill,

We covered this on this-week’s talk.

Dave

JPMorgan Chase Has Billions In CRE Loans Riding On WeWork Surviving
September 23, 2019

WeWork’s business model isn’t workable. Everybody understands that except the Wall Street bank that has the most to lose if WeWork’s initial public offering (IPO) of its stock doesn’t move forward. That bank is JPMorgan Chase, one of the two main underwriters of the IPO, along with Goldman Sachs.

WeWork’s business model is to take long-term leases in commercial office buildings and then sub-lease that space under short leases to small businesses, start-ups and freelancers – none of which are particularly known for their ability to pay rent in a downturn. WeWork is currently on the hook for more than $47 billion in long term leases while it has yet to figure out how to make a dime of profits.

JPMorgan Chase is so interconnected with WeWork that to a number of minds WeWork looks like little more than a strawman for the bank and the bank’s biggest commercial real estate clients in New York City where WeWork is taking vacant space off the market at seismic speed. WeWork is now the largest office tenant in New York City.

The interconnections between WeWork and JPMorgan Chase include the following: JPMorgan Chase Bank, N.A., a federally insured bank, “has made loans and extended credit to Adam Neumann totaling $97.5 million across a variety of lending products, including mortgages secured by personal property and unsecured credit lines and letters of credit,” according to the prospectus filed with the SEC for the recently aborted IPO.

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