Genova Burns Partner Don Clarke Talks Distressed Assets Amidst WeWork Bankruptcy

For Genova Burns Partner Don Clarke, the creation of a distressed real estate task force at the firm is a no-brainer.

“Our bankruptcy practice is really a ‘jack of all trades’ collaborative effort,” Clarke said. “We’ve always been able to handle all kinds of situations.”

There’s no better example of a situation Genova Burns is equipped to handle right now than the ongoing WeWork case. After the world’s most valuable startup, valued at $47 billion, WeWork recently filed for bankruptcy. Clarke, along with Practice Chair Dan Stolz (of LTL/J+J fame), Counsel Susan S. Long, Esq., and Associate Sydney Schubert, have been tapped to represent over twenty landlords in this case.

Although this is a bankruptcy case, Clarke and his team may have to rely on other members of the Genova Burns team. Clarke emphasizes that, in a case like this, “everything is connected.”

“In any new case, we have to understand and learn the industry in which the debtor operates, including any regulatory framework,” Clarke explained. “WeWork could require that we get involved with real estate and contract law, for example. We need to understand our landlords’ rights, and (Genova Burns) has those experts on hand to help us.”

The WeWork case is a substantial one and may take years before it is fully resolved. Clarke explained that he, along with a litany of other lawyers, is dealing with landlords across the country with differing interests. WeWork, as the primary debtor, has many leases. Some are for properties that are completely vacant, while others are either under or over market price.

“The landlords are waiting to find out what the debtor wants to do with the space,” Clarke explained. WeWork claims to want to keep the performing (ie., profitable) leases and drop the non-performing ones. That would make sense since the product and service WeWork provides are dependent on the respective landlords’ spaces. However, he went on to discuss how the bankruptcy process, which gives the debtor (in this case WeWork) wide discretion to assume and assign a lease, but the relevant bankruptcy statutes also require the debtor to first make the landlords whole and prove that the new tenant (either a “reorganized” WeWork or new entity altogether) can handle the obligations in the lease.

Clarke says the WeWork case is just another landmark case for Genova Burns. In the short (almost) three-year period the firm has had a bankruptcy and restructuring practice group, the firm has had principal roles in some of New Jersey’s largest matters, including LTL Management, LLC (commonly referred to as the “Johnson & Johnson Bankruptcy”) and BlockFi, Inc.

Clarke explained, “the focus is on New Jersey right now, and it is proving to be a jurisdiction that can handle large and complicated cases – that’s a testament to our bench and bar.”

Clarke then re-emphasized the need for a distressed real estate task force, especially in a case like this. “We’ve often needed other specialties to get involved in cases as special counsel,” he said. “Disciplines including complex commercial litigation, regulatory, and transaction are needed in any number of cases. Having a team under one roof that can focus on the property interests of commercial landlords when it comes to the distressed financial landscape so many are facing (and are predicted to continue to face for the foreseeable future) makes the service we provide to our client more efficient and effective.”