At the WeWork IPO, the money travels back to JPMorgan's door

By Pam Martens and Russ Martens: September 16, 2019 ~

According to the amended prospectus filed with the Securities and Exchange Commission to alert the public of thousands of warts that could harm the WeWork office rental company, which is considering offering its shares for the first time to the public, JPMorgan Chase will benefit no other subscriber: an additional charge of $ 50 million representing "structuring fees". In addition to this, of course, the bank will also receive the large subscription fees that other banks involved in the initial public offering get. .

This is one of the many curious ways that JPMorgan Chase stands out in its relationship with WeWork. (WeWork's parent company, The We Company, actually offers the shares to the public.) In fact, many of JPMorgan Chase's commercial real estate clients who have secured massive bank loans enjoy the benefits of WeWork. leases in their properties, thereby helping JPMorgan Chase customers, have a lower vacancy rate and, therefore, less risk of default on their bank loans. Corporate clients include Rudin Management; L & L Holding Company; and Midwood Investment and Development, to name a few.

JPMorgan Chase is also one of three banks to extend a staggering $ 500 million line of credit to 40-year-old WeWork CEO Adam Neumann who once lived in a kibbutz in Israel. According to the prospectus, Neumann has already used $ 380 million on the line of credit. In addition, JPMorgan Chase "provided loans and credit to Neumann" for a total of $ 97.5 million in various credit products, including mortgages secured by movable property, non-equity lines of credit guarantees and letters of credit ", says the prospectus.

And then, there is the central role of JPMorgan Chase in a very, very strange deal that was announced to the public while WeWork had the financial power to buy the flagship Lord & Taylor store in Manhattan for $ 850 million in 2017 .

On October 24, 2017, Michael J. de la Merced and Michael Corkery, two very knowledgeable New York Times reporters, wrote this: The company owning the Hudson & # 39; s Bay chain of department stores announced on Tuesday that "I'm going to be in business." she was selling the flagship product. store to WeWork, a seven-year-old start-up whose desktop sharing model is helping to reinvent the concept of workspace. "

Three days later, Ginia Bellafante repeated in the New York Times that WeWork was buying the Lord & Taylor building, noting that "the purchase of the Lord & Taylor building by WeWork has a resonance that goes beyond the obvious. WeWork leases office space for small, growing businesses, giving them shared access to common rooms that look like lounges with bars, air hockey tables, lemon-infused water, and more. ".

Again on December 30, 2018 and as recently as August 28, 2019, someone was giving the New York Times scenario the scenario that he consciously spat that WeWork had bought the Lord & Taylor building.

But according to the prospectus, JPMorgan Chase has granted a loan of $ 607 million for the purchase of the Lord & Taylor building, located at 424 Fifth Avenue, which is listed as long-term debt by The We Company in the prospectus. According to the prospectus, We paid only $ 50 million and 17.4% interest. The We company is also on the hook for $ 1.7 billion in rents for the 20 year lease signed by the building. The current wording of the prospectus is as follows:

"In February 2019, the Company invested $ 50 million to acquire a 17.4% interest in a joint venture that simultaneously acquired a $ 850 million property investment in New York (the" 424 Fifth Venture "). WPI is also a 39.1% shareholder of 424 Fifth Venture. The 424 Fifth Venture was initially capitalized with a total of $ 287 million of equity and a credit facility of up to $ 900 million, of which approximately $ 600 million was used at closing. "

According to the prospectus, "the entities that currently advise and manage the WPI fund [which owns the 39.1 percent of the Lord & Taylor building] were each indirectly owned 50% by us [The We Company] and 50% by the subsidiaries of the Rhône group.

This year, the WPI fund was amalgamated into an entity called ARK with a varied counterpart contributed by both The We Company and the Rhône Group, which made it possible to create a structure as clear as possible in the prospectus.

By the time it was reported that WeWork was buying the Lord & Taylor building, the New York Post reported:

"WeWork will transform the headquarters of the 11-story Fifth Avenue and 38th Street building, while investing $ 500 million in HBC [Hudson’s Bay Company] and Rhone Capital, which formed a joint venture with WeWork to create WeWork Property Advisors. "

Hudson's Bay (HBC) announced last June that a consortium of shareholders wanted to make it private. This consortium includes Richard A. Baker, Governor and Executive Chairman of HBC; Rhône Capital L.L.C .; and WeWork Property Advisors. The advice on the contract will be … wait … J.P. Morgan Securities, a unit of JPMorgan Chase – thus opening the door to potentially more fees for the bank.

According to more recent information, the fact that HBC becomes a private company could be sabotaged by other investors who consider the deal as a low bid.

To understand what's really going on here, it's helpful to have a historical perspective on JPMorgan Chase. It is the only mega American bank in American history to survive three criminal charges and the only mega American bank in history to leave the same President and CEO, Jamie Dimon, in place after that his reputation has gone astray. account and $ 36 billion fines for other scandalous claims of its regulators.

Two of the criminal acts occurred in 2014 with JPMorgan Chase, while Bernie Madoff was running his Ponzi scheme on a current account of his bank for two decades. According to Irving Picard, administrator of the Madoff Victims Fund, it was not just an incompetent risk control at JPMorgan Chase (for which he is also famous). It was an operation structured in the manner of Russian Russian dolls with many moving parts and hidden agenda. After reading the details of the criminal charges disclosed by the Department of Justice, the Los Angeles Times asked in a caption of Madoff's photo standing in Federal Court: "Bernie Madoff: Was he part of the JPMorgan ring or JPMorgan of his ring?

One might forgive now for suspicion of inclusion in WeWork's IPO: is Adam Neumann part of the JPMorgan ring or is JPMorgan part of the Adam Neumann ring? Our money is on the first as all the labyrinthine financial trails end strangely at the doors of JPMorgan Chase.

Neumann, of course, made hay while the sun was shining and the SEC was sleeping at the switch. Despite his loyalty to WeWork as President and Chief Executive Officer, he purchased four properties himself and leased them to WeWork under which the company owes "undiscounted minimum rent" of approximately " 236.6 million dollars … ". Neumann owns six other properties that WeWork may decide to buy from it in accordance with the prospectus.

Neumann and his wife, Rebekah (who was previously responsible for the brand for the company) do not put all their eggs in the WeWork basket. They have leveraged the extremely generous loans of JPMorgan Chase, diversifying their assets away from a highly speculative IPO and into residential real estate in some of the most posh and upscale communities in America. The Neumanns now own five opulent homes for which they paid $ 80 million: two in Manhattan; one in the Hamptons east of Long Island; an estate in Westchester, New York; and a $ 22 million property located in the San Francisco Bay Area that was added to their residential assets last year.