NEW YORK CITY — Knotel Inc., a New York City-based flexible workspace provider, has filed for Chapter 11 bankruptcy protection in the United States Bankruptcy Court for the District of Delaware.
Knotel concurrently has agreed to sell the business to an affiliate of commercial real estate services firm Newmark Group Inc. (Nasdaq: NMRK), which is providing Knotel with $20 million of debtor-in-possession (DIP) financing to help fund day-to-operations. The DIP financing, provided by a Newmark-backed entity known as Digiatech LLC, is subject to court approval.
Founded in 2016, Knotel provides custom offices for company’s using an in-house team of architects, interior designers and workplace strategists. The total number of existing Knotel locations was not available, but Knotel has a presence in several global cities, including Amsterdam, Atlanta, Berlin, Boston, Dublin, London, Los Angeles, New York, Paris, San Francisco, Tokyo, Toronto and Washington, D.C.
Amol Sarva, co-founder and CEO of Knotel, cites the COVID-19 pandemic as a black swan event for his firm, which was hampered by companies opting to work from home during the outbreak.
“The pandemic created a uniquely challenging operating environment, with significant impacts on leasing velocity and the rate of renewals in key markets, particularly New York and San Francisco,” says Sarva. “After a thorough review of strategic alternatives, we have determined that a process to sell our business and reshape our U.S. footprint is the best path forward to maximize value for our stakeholders.”
“We look forward to supporting Knotel through this transitional period,” adds Barry Gosin, CEO of Newmark. “We are providing capital to Knotel so it can rightsize its business for the path forward.”
Knotel has announced its plans to exit multiple markets in the United States as part of the sales process, though specific locations were not disclosed. Knotel does not plan to sell or shutter its international locations.
The company has selected Hilco Real Estate, a real estate restructuring specialist, to assist Knotel in rightsizing its portfolio of U.S. workspaces.
Milbank LLP and Fenwick & West LLP are serving as legal counsel to Knotel, and Moelis & Co. LLC is serving as investment banker to Knotel.
Newmark’s stock price closed on Monday, Feb. 1 at $7.59 per share, down from $11.90 a year ago.
— John Nelson