Forget WeWork, Adam Neumann Goes Old-School with Real Estate Investments

The fall from fame and business grace came hard for WeWork co-founder Adam Neumann. Investors pressured him out in 2019 after hyper growth, a dizzying $47 billion valuation, and a failed IPO after financial details in the S-1 revealed, among other things, a $900 million loss on $1.5 billion in revenue, as CNBC reported. 

In November, Neumann publicly aired some of his regrets. However, the massive severance agreement that neared $1.7 billion, according to the Wall Street Journal, apparently offered a soft cushion. As the Journal also reported in 2019, he also sold some holdings and borrowed against others to cash out an estimated $700 million that went into a family office.

Some details are now leaking out, suggesting that Neumann is going old school through his family office, 166 2nd Financial Services. “Entities tied to Mr. Neumann have been quietly acquiring majority stakes in more than 4,000 apartments valued at more than $1 billion in Miami, Atlanta, Nashville, Tenn., Fort Lauderdale, Fla., and other US cities, according to court, property and corporate records and people familiar with the transactions,” as the Journal reported on Tuesday. “Many of these investments occurred within the past year.”

The apparent aim is to buy existing Class A properties and build a “widely recognizable apartment brand stocked with amenities.” 

“The pandemic created a moment for people to reset and reevaluate their lives, including where they live,” Joel Steinhaus, CEO and founder of Daybase and a former WeWork executive, tells GlobeSt.com. “With an increase in flexibility and remote work, many cities have the opportunity to be net beneficiaries of mobility based on quality of life and cost of living. Some of these same cities do not have ample or accessible housing, so multi-family development in fast-growing markets is a market whose demand has only increased in the short and intermediate terms. Apartment rental as a product has inherent flexibility, and flexibility across working and living will only demand a premium post-pandemic.”

Pushing on the amenities front—a value-add play—combined with higher end properties isn’t an unusual approach. What a bit more unusual, though not unheard of (think the Donald Trump approach), is to aim for a broadly recognized brand. In this case, one targeting younger professionals who had at one time responded to WeWork properties.

And as a reminder from a 2019 New York Times article, Neumann long had an expansive vision: “He envisioned customers residing in WeLive apartment buildings that would drive down suicide rates because ‘no one ever feels alone.’ He imagined a WeGrow school and an effort to shelter the world’s orphans. (‘We want to solve this problem and give them a new family: the WeWork family.’) There was talk of a WeBank, WeSail, WeSleep, an airline.”

Neumann’s investments also go beyond apartments, according to Crunchbase. 166 2nd Financial made investments in at least four tech companies in 2021: Doorsey (online platform for home buying), Ualá (fintech company), Unybrands (e-commerce platform), and Valon Technologies (tech-enabled residential mortgage servicer).