As WeWork tallies up the damage from its New York shopping sprees, the splurge it made at Lord & Taylor may prove to be the most costly of all. The office-sharing startup — which scrapped its IPO last month amid accusations of self-dealing that ousted its charismatic CEO Adam Neumann — is now scrambling to shore up a massive bet it made on the landmark Lord & Taylor building on Fifth Avenue, The Post has learned. In January, WeWork teamed up in an $850 million deal to buy the department-store chain’s historic flagship at 424 Fifth Avenue. In an unusual move a month later, it signed a long-term lease to also become the lone tenant in the 10-story, 660,000-square-foot building. The big worry: WeWork agreed to pay a stiff $105 per square foot — well above the $80-a-foot that’s more typical of buildings in the neighborhood. Now, sources say it’s having trouble finding subtenants who are interested in the pricey floor space — including Amazon, which had weighed a deal to become the sole occupant. “It’s become the real bloodsucker of WeWork,” one source close to the situation told The Post. Insiders now speculate that, with Neumann gone, WeWork will be forced to tap outside brokers to market its L&T space for traditional long-term use. It’s one of the thorniest problems left in WeWork’s lap by Neumann, who cut a string of deals to become a landlord to his own company. In this case, he became part owner of the Lord & Taylor building through a joint venture called WeWork Property Investors. “Adam pushed everything through as he was the majority owner on everything, and nobody ever said no to him,” a source close to the company said. “The property fund is a huge conflict to the operating company. It was Adam’s way of profiting off the back of the money-losing side.” WeWork is Manhattan’s largest office tenant with over 5 million square feet. The Lord & Taylor building is believed to be its biggest lease, spanning nearly twice the square footage of any of WeWork’s other city locations. Originally, WeWork had said it would make the Lord & Taylor site its corporate headquarters. It had an apparent change of heart last summer, however, when it began talks with Jeff Bezos for Amazon to sublease most or all of the building. Those discussions broke down, sources said, after Amazon turned its eye on 400,000 square feet at SL Green’s 460 W. 34th St. That negotiation, first reported in August by The Post, is likely to lead to a signed lease soon. The asking rent for an earlier lease at the building for First Republic Bank was $90 per square foot, SL Green said. Now, some insiders say the prospect of Amazon coming to the Lord & Taylor space looks remote at best. One said Amazon was never serious to begin with — that “they were playing one landlord off another” following the collapse of its “HQ2” plan in Long Island City. Another, however, insisted it was WeWork that decided to discontinue the Amazon talks, and that they could still be revived. “They went back to their plan to make Lord & Taylor a showplace. They’re spending a fortune on making it unique.” Indeed, as WeWork reportedly raced to sell assets and lay off thousands of workers to stem its cash bleed, construction workers last week were busy renovating the Italian Renaissance Revival tower into a hip office-sharing space. At this point, sources say getting out of the lease isn’t an option. “We are fully committed to meeting our obligations with the Lord and Taylor building, a marquee and historic asset that we are excited to continue revitalizing,” a WeWork spokesperson said. Another source close to the deal put it more bluntly: “The only option for them to get out of it is if it goes bankrupt. If they have to raise money at the $5 billion valuation instead of $10 billion valuation, so be it.” If worse comes to worse, WeWork is considering using half the space for its headquarters, a source said. The joint venture that bought the Lord & Taylor building’s other backers include Rhone Capital and the Canadian pension fund Caisse de Depot. Hudson’s Bay, the Canada-based retailer that previously owned Lord & Taylor, also retains a $125 million stake in the building. The purchase was funded by a $600 million mortgage from JPMorgan and Starwood Property. Last week, The Post reported that JPMorgan was in talks to assemble a financing package to help WeWork avoid a cash crunch in the wake of the cancelled IPO. “Without the previously anticipated funding to shore them up, the building is now a huge problem,” a source said of the Lord & Taylor property. Reps for JPMorgan and Amazon declined to comment. Reps for ARK didn’t respond to requests for comment. Lisa Fickenscher contributed reporting.
WeWork ’s long - term lease in the former Lord & Taylor building , for which they are paying well above the market rate , is costing $ 73.5 million annually . Originally planned as its headquarters , the leased area is nearly twice as much as any of WeWork 's other Chicago - based offices at nearly 700,000 square feet . WeWork can only break the lease if the company goes bankrupt . There is a conflict of interest with the building owned by WeWork Property Investors ( ARK ) who bought the building for $ 850 million and then leased the space to WeWork , the operating company . Equity and Starwood Property Trust gave ARK a $ 600 million mortgage for the Lord & Taylor building purchase .