new county of new - judiciary of new york

SUPREME COURT OF THE STATE OF NEW YORKCOUNTY OF NEW YORK

----------------X

120 East16th

Street Co. LLC, Index No.

Plaintiff,

-against- COMPLAINT

33 Irving Tenant LLC and WeWork Companies Inc.,

Defendants.---------------------------------------------------- X

Plaintiff, 120 East16th

Street Co. LLC ("Plaintiff"or "Landlord")), by its attorneys,

Goldberg Weprin Finkel Goldstein LLP, as and for its complaiñt against the defendants, 33

Irving Tenant LLC ("33Irving"

or "Tenant") and WeWork Companies Inc. ("WWCI") (jointly,

33 Irving and WWCI are "Defendants"), represents and shows this Court as follows:

Nature of the Action

1. This is an action for declaratory judgment seeking a determination that 33 Irving,

as Tenant, has committed an incurable default under its lease with the Plaintiff. As a result, the

Plaintiff is entitled to terminate the lease at its option and seek relief against WWCI, or its

successor, as the corporate guarantor, based upon an acceleration of rents.

2. 33 Irving is or was affiliated with WWCI, and leases multiple floors in a building

owned by Plaintiff located at 21-33 Irving Place, New York, NY (the "Premises") pursuant to

lease agreement, dated October 16, 2016 (the "Lease").

3. Since 33 Irving is effectively a special purpose entity, organized to hold the

Lease, it was critically important to the Landlord that the Lease be guaranteed by a fiñañcially

viable entity. Indeed, the Landlord would not have considered executing the Lease with a

WeWork-related entity without the material inducement of a guaranty by the corporate holding

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FILED: NEW YORK COUNTY CLERK 08/20/2019 11:11 AM INDEX NO. 654746/2019

NYSCEF DOC. NO. 2 RECEIVED NYSCEF: 08/20/2019

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company, WWCI. In the process, WWCI represented to the Landlord that it had a net worth of

more than $150 million in accordance with generally accepted accounting principles ("GAAP").

4. This guaranty was signed and delivered by WWCI simultaneously with the

execution of the Lease. The parties subsequently negotiated and executed a "Form of Revised

Guaranty"executed June 23, 2016 (the "Guaranty") which superseded the initial guaranty. A

copy of the Guaranty is annexed hereto as Exhibit "A".

5. Pursuant to the express terms of the Guaranty, WWCI, inter alia, agreed to

unconditionally and irrevocably guaranty to the Landlord the "full and prompt performance and

observation of all of the obligations of theTenant"

subject to certain maximum guaranteed

amounts as delineated thereunder.

6. At the time the Lease and Guaranty were executed, WWCI held itself out as a

rapidly growing company, with great financial aspirations to redefine commercial office leasing

throughout the United States, if not the world.

7. With the prospect of WWCI's expansion-oriented goals in mind, the parties took

great care to establish procedures under the Guaranty should WWCI undergo or pursue a merger

or consolidation in the future. These procedures served the dual purpose of providing WWCI

with flexibility to pursue corporate restructuring, while simultaneously preserving the Landlord's

rights therewith, through the heavily negotiated and fully agreed upon provisions requiring

delivery of significant prior notice of the intended change, together with assumption of the

Guaranty by the surviving entity with similar prior confirmation that the surviving entity had a

net worth of at least $150 million.

8. In recent weeks, Plaintiff became aware that Defendants have completely ignored

their obligations under the Lease and Guaranty to provide the required notice in advance of an

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intended restructuring. More particularly, on or about June 23, 2019, the Landlord received a

belated notice without any detail to the effect that WWCI had already undergone an undefined

"holding companyreorganization"

under which a new entity known as WeWork Companies

LLC ("WWC LLC") became the corporate holding company.

9. Recent financial reports in the media, however, cast great doubt on the financial

viability of WWC LLC.

10. Because the Landlord was notified of the corporate restructuring after it had

occurred, without the requisite notice period and submission of all necessary financial

information, the Defendants are guilty of a clear breach of the heavily negotiated provisions of

the Lease and Guaranty.

11. Defendants are effectively foisting on the Landlord a guarantor not of its

choosing, without the required prior notice and prior proof that the substitute guarantor has a net

worth of at least $150 million.

12. Fundamentally, for purposes of the Lease and Guaranty, because the so-called

"holding companyreorganization"

has already occurred, Defendants cannot cure the default.

There is nothing in the Lease or Guaranty which permits ratification of a successor guarantor

without prior notice to the Landlord and the opportunity for the Landlord to review financial

information. Accordingly, the default remains on-going despite theDefendants'

attempts to

designate WWC LLC as a successor guarantor.

13. In view of these events, Plaintiff hereby seeks a declaratory judgment finding and

declaring as follows: (i) that the Guarantor is in default of the Guaranty by failing to provide

prior notice of the corporate restructuring and complying with the Net Worth Requirement; (ii)

that the default under the Guaranty is a default under the Lease; (iii) that the Tenant has no

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ability to cure such default; (iv) that the Landlord may terminate the Lease at its option by reason

of the Tenant's default, and exercise all remedies as provided in Article 20 of the Lease; and (v)

that the liability under the Guaranty has been triggered and Plaintiff may seek enforcement

thereof for all obligations owed by the Tenant upon termination of the Lease, as set forth in

Article 20 of the Lease.

The Parties

14. Plaintiff is a New York limited liability company having an office at 125 Park

Avenue, New York, New York 10017.

15. Defendant 33 Irving Tenant LLC is a New York limited liability company with

offices located at 115 West18th

Street, New York, New York.

16. Defendant WWCI (hereinafter defined as the "Guarantor") is a Delaware

corporation with offices located at 115 West18th

Street, New York, NY.

As and For a First Cause of Action for a Declaratory Judgment

17. Plaintiff repeats and realleges the allegations set forth in paragraphs"1"

through

"16"above as though set forth at length herein.

18. The Lease relates to the second, third, fourth, fifth, ninth, and tenth floors of the

subject Premises, and provides for flexible workplace center use by the Tenant. A copy of the

Lease is annexed hereto as Exhibit "B".

19. The Tenant is currently obligated to pay annual base rent of $2,815,435.45, plus

certain additional rent obligations.

20. Given the extensive rent obligations, in entering the Lease the Landlord naturally

was concerned with the overall financial viability and solvency of the Tenant, particularly given

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the Tenant's special purpose status of having been organized to hold only this single leasehold

without any other tangible assets or net worth.

21. Thus, significant effort was devoted to obtaining the Guaranty from the main

WeWork holding company, so that the Landlord could be assured that there was a viable entity

standing behind the Tenant's obligations under the Lease.

22. The Guaranty by WWCI, an entity having a net worth of not less than $150

million under GAAP, became a critical component of the Lease transaction and was a material

inducement to the Landlord to enter into the Lease.

23. The Guaranty was negotiated by sophisticated businesspeople, all of whom were

represented by competent counsel.

24. Among its many essential provisions, the Guaranty contains clear procedures to

be employed in the event that the Guarantor should pursue a merger, consolidation or other

restructuring, including requiring the Landlord's consent to the substitution of a new guarantor

based upon heavily negotiated prior notice with satisfactory proof of net worth in excess of $150

million.

25. In this regard, the Guaranty specifically required:

Any merger or consolidation in which the Guarantor is not the surviving

party and / or any transfer of substantially all of Guarantor's assets, shall

be preconditioned upon the surviving party or the acquiring party (as the

case may be, the "Successor Guarantor") (i) expressly assuming the

obligations of Guarantor pursuant to this Guaranty, and (ii) the Successor

Guarantor having, as of the date of any such transaction, a net worth

computed in accordance with generally accepted accounting principles at

least equal of $150,000,000.00 (the "New Worth Requirement"), and such

proof satisfactory to landlord of such net worth shall have been delivered

to Landlord at least ten (10) days prior to the effective date of such

transaction. (Emphasis added)

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26. As highlighted above, and as the result of heavily negotiation, notice of an

intended consolidation must be given in advance of the actual event.

27. This provision is clear, unequivocal and contains no exceptions or qualifications.

28. On July 24, 2019, the Landlord received a letter from the Tenant dated July 23,

2019 stating that the Guarantor (WWCI) had already completed a holding company

reorganization, and that constituted notice of the event. A copy of the July 23, 2019 letter is

annexed hereto as Exhibit "C".

29. The Tenant provided no other information, and instead suggested that it would,

upon request, direct Landlord to a secure website for "pro forma financial information".

30. Although the Tenant also forwarded a document entitled "Ratification and

Reaffirmation ofGuaranty"

(a copy of which is included as part of Exhibit "C"), no effort was

made to explain why prior notice was not given to the Landlord as required by the express

language of the Guaranty.

31. On July 28, 2019, the Landlord notified Tenant that the clearly delineated

procedures established by the Guaranty had not been followed and Tenant had thus breached the

Lease. The Landlord pointed to the fact that "satisfactory tolandlord"

proof of WWC LLC's

meeting the Net Worth Requirement was required to be delivered to the Landlord at least ten

days before the effective date of the already completed reorganization. The Landlord advised

that the failure to do so constituted a default under the Guaranty and the Lease.

32. A default under the Guaranty constituted a default under Section 19.1(c) of the

Lease.

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33. The Landlord concluded by noting that an after-the-fact delivery of a

"ratification"of the Guaranty obligations by WWC LLC is inadequate and untimely. A copy of

the Landlord's letter is annexed hereto as Exhibit "D".

34. The Tenant refused to accept the letter delivered by Federal Express so Landlord

delivered a copy of same to Tenant by hand.

35. The Tenant did not respond to this letter, nor a follow-up letter dated August 8,

2019, which provided the Tenant with a final opportunity to propose a method to address an

otherwise incurable default. A copy of Landlord's August 8, 2019 letter is annexed hereto as

Exhibit "E".

36. There was no response from the Tenant, which has refused to acknowledge the

breaches of the Guaranty and Lease.

37. The efforts to circumvent the contractual obligations by means of an unauthorized

and untimely ratification of the Guaranty runs afoul of the express terms of the Lease and

Guaranty, and does not constitute a valid cure.

38. Plaintiff anticipates that Defendants will not acknowledge breach of the Guaranty

and the Lease.

39. In view of the foregoing, a justiciable controversy exists concerning the existence

of defaults by the Tenant and the Guarantor under the Lease and Guaranty, and whether those

defaults entitle the Landlord to terminate the Lease and immediately enforce the Guaranty for

monetary damages due under the Lease upon termination thereof.

40. The Landlord is, and continues to be greatly prejudiced by the failure of the

Tenant and the Guarantor to abide by the Lease and Guaranty, and is entitled to seek an

immediate declaration of its rights and remedies.

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41. By reason of the foregoing, the Landlord is entitled a declaration from this Court

as follows: (i) finding Guarantor breached the Guaranty by failing to provide prior notice of the

corporate restructuring and otherwise complying with the Net Worth Requirement; (ii) finding

that breach of the Guaranty constitutes a default under the Lease; (iii) finding that Tenant is in

default under the Lease; (vi) finding that the Landlord may proceed to terminate the Lease by

reason of this default, which is otherwise incurable; and (v) finding that the Landlord may

proceed to enforce the Guaranty for all amounts due thereunder, including the recovery of

attorneys'fees from the Defendants.

WHEREFORE, the Landlord respectfully demands a declaratory judgment against the

Defendants consistent with the foregoing, together with such other and further relief as is just

and proper.

Dated: New York, NYAugust 19, 2019

Goldberg Weprin Finkel Gol n LLP

By:

Mattl eg¢fInifrle

Attorneys for the Plaintiff

1501 Broadway,22nd

FlOOr

New York, NY 10036

(212) 221-5700

[email protected]

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