CIM Group — a real estate lender, developer and operator — has foreclosed on an Arch Companies-owned boutique office space in Manhattan. This action follows months of turmoil for Arch, including internal disputes and financial difficulties.
The foreclosure stems from the company’s failure to make debt payments for 88 University Place, a 94,000-square-foot property that was originally built in 1906. However, the troubles began several years prior to the current predicament.
In 2015, WeWork co-founder Adam Neumann partnered with fashion designer Elie Tahari to acquire 88 University Place for $70 million. The coworking giant then went on to lease out 90,000 square feet of space within the building, eventually subleasing 70,000 square feet of its total footprint to IBM.
Four years later, as WeWork prepared for its IPO launch, the arrangement came under fire: Concerns arose about a potential conflict of interest due to Neumann’s involvement in both WeWork and 88 University Place. The building’s challenges were further exacerbated by the COVID-19 pandemic. As a result, IBM left the 11-story property, resulting in a significant vacancy.
Then, in the summer of 2022, Arch Companies acquired a stake in the property and obtained a $71 million loan from CIM Group for renovation purposes. The company occupied part of the building while Neumann’s multifamily startup, Flow, was also listed as a tenant at 88 University Place.
One year later, the lender had begun sending default notices to Arch Companies, alleging that the owners had defaulted on both their mortgage interest payments and mezzanine loan payments.
According to the lender, the company’s financial troubles were further compounded by internal disputes as partners Jeffrey Simpson and Jared Chassen clashed with Simpson accusing the Wiener family — the firm’s main investor — of a hostile takeover.
Notably, 88 University Place is one of several commercial real estate properties in Manhattan and other major markets that have experienced Uniform Commercial Code (UCC) foreclosures. Rising interest rates and the disruptions caused by the pandemic have contributed to these financial challenges.
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