The story of WeWork’s mysterious first investor
In 2010, WeWork’s Miguel McKelvey and Adam Neumann were two unknown entrepreneurs scouting buildings for their first co-working space. They set their eyes on a Canal Street property, but when they contacted the landlord, he balked.
Instead, the building’s owner offered a meeting with an acquaintance who, he said, might be interested: Joel Schreiber, an obscure Hasidic real estate investor living in Brooklyn.
“This guy shows up in the meeting, sits down, doesn’t really speak to us, doesn’t shake hands,” McKelvey recalled during a June interview with the NPR podcast “How I Built This.” “These are like Orthodox Jewish guys, you know, wearing the black suit and stuff, so to me as an Oregonian, I don’t really know the world too well. But Adam felt really comfortable with it by then.”
Not long after the meeting was over, Schreiber called the WeWork co-founders. He didn’t have a suitable building, but he had another proposal: He wanted to invest in their company. Neumann and McKelvey hesitated. They already had some money from the recent sale of another co-working venture called Green Desk and wanted to do their own thing.
But Schreiber persisted. “Whatever it takes, I want to be a partner with you,” he said, according to McKelvey. “And so we were like, why not? Let’s throw out a number, and we’ll make it outrageous,” he recalled. “There’s no chance he’ll say yes, but if he does, then hey, we’re fine.”
Neumann and McKelvey reportedly offered Schreiber a third of the company for $15 million, and he accepted. Though McKelvey did not name Schreiber in the podcast, a spokesperson for Schreiber’s firm, Waterbridge Capital, confirmed to The Real Deal that he was WeWork’s first investor, noting that he “provided seed capital to open the first few locations” during its startup phase.
In McKelvey’s telling, the deal was a pivotal moment for what would become the world’s most valuable co-working company. WeWork went on to raise another $6.1 billion over the next seven years and garnered a $20 billion valuation in July 2017. Representatives for the company declined to comment for this story.
Into the spotlight
Now, as WeWork prepares for a rumored blockbuster IPO, its secretive first investor is being thrust into the spotlight. The sudden attention is a big change for Schreiber, who has kept a very low profile within the tight-knit and media-shy community of Brooklyn’s Hasidic property moguls.
Despite his being a key player in several big New York real estate deals — including Williamsburg’s first Apple store and the $481 million trade of the Long Island City office tower One Court Square — finding a photo of Schreiber online is virtually impossible. Even partners who spent years working with him say they know little about the man.
“He likes to be very secretive,” said Ira Zlotowitz, president of the commercial mortgage brokerage Eastern Union Funding, who has helped negotiate debt deals on behalf of Waterbridge. “He’s very below the radar.”
Schreiber, who did not respond to several requests for an interview, would clearly like to keep it that way. One of his allies in the real estate business called TRD last month anonymously, asking what kind of offer it would take to kill this profile. We refused to engage.
But while he may be shy, Schreiber may just as well not want his dirty laundry aired. Court records show a dozen lawsuits against him — almost all of them over money owed. There are allegations of defaulted loans, unpaid commissions and missing partnership payouts.
And not every Joel Schreiber story is as uplifting as McKelvey’s.
“He ruined my life,” said Sally Shtrozberg, an Israeli entrepreneur who told TRD that she lent Schreiber about $5 million in 2008 for various real estate investments but only got a fraction back. Her story was corroborated by the claims in her lawsuit, before she settled.
In 2010, around the time he pledged $15 million to Neumann and McKelvey, Schreiber missed payments on the loan, according to court records.
Shtrozberg, the founder of BuildIn, an online real estate platform, repeatedly broke down in tears during a November phone interview, accusing Schreiber of cheating her. When she read that Schreiber invested $15 million in WeWork, Shtrozberg said, her first thought was: Who did he take the money from?
Schreiber was born into a Hasidic family in London in the 1970s or early 1980s, according to several people who have worked with him.
It wasn’t long before he set out on his own and moved to New York. In 2000, he began buying residential properties in Brooklyn, upstate New York and New Jersey with the help of his family’s money and a syndication of private investors. By 2004 Schreiber had sold those buildings and began focusing on more high-profile commercial properties in Manhattan. He then founded Waterbridge, a small real estate investment firm based in Midtown, in 2006.
A year later, he teamed up with a group of investors to buy a Soho office and retail building at 536 Broadway for $190 million, according to Richard Baxter, who brokered the deal. Baxter recalled him being a “very knowledgeable and savvy investor.”
But Schreiber’s big break as a New York real estate player came with a series of deals in 2012. That April, he partnered with Ben Bernstein and Ben Stokes’ RedSky Capital to buy an assemblage of properties on North 4th and North 3rd streets and Bedford Avenue for $66 million. The joint-venture partners later redeveloped the property and signed Apple to a 20,000-square-foot retail lease — a watershed moment in Williamsburg’s gentrification.
Then in July 2012, Schreiber and Brooklyn real estate investor David Werner bought One Court Square from SL Green and JPMorgan Asset Management. The following month, he partnered with WeWork’s Neumann and Alchemy Properties to buy the top floors of the Woolworth Building for $68 million with plans for a condo conversion. A seven-story penthouse at the tower hit the market for $110 million this September. Alchemy’s Ken Horn did not respond to inquiries about whether Schreiber is still a partner in the project.
Waterbridge is a small operation with fewer than 10 employees, and Schreiber usually leaves development work to the firms he partners with, sources said. What he does, and does well, is find deals and raise money.
People who have worked with Schreiber describe him as blunt, quick to the point and at times charming. “He’s a character, no doubt about it,” said Dagan Lacorte of the investment advisory firm L&L Partners Wealth Management. “He’s not afraid to ask for what he wants.”
RedSky’s Bernstein said one of Schreiber’s greatest strengths is the speed at which he goes after deals. There is “no rethinking, no additional noise,” he noted.
Still, not every deal has been wrinkle-free. Just short of three years ago, Schreiber went into contract on an assemblage of properties on North 3rd Street — near the Apple-leased property — that includes the popular Radegast Beer Hall. But he struggled to land bank financing at favorable terms, according to Lacorte, who brokered the deal. Instead, he cut a deal with the seller, the estate of Olga Sosa, in which Sosa became the de facto lender by allowing the buyer to postpone full payment.
Schreiber paid about 30 percent of the $92.3 million cost at the closing in April 2015 and paid the rest with interest by September 2016, Lacorte said. Waterbridge refinanced the property the following month with an $82 million loan from Deutsche Bank.
At one point Schreiber tried to flip the property to New York developer Chaim Miller, according to news reports, but the deal fell through.
“Along the way, I wasn’t sure he was going to close,” Lacorte said.
It was Schreiber’s savvy as a dealmaker that convinced Shtrozberg to lend him the roughly $5 million back in 2008.
The Israeli native had recently moved to New York on a mission to invest her family’s savings in local real estate. A mutual acquaintance from her home country introduced her to Schreiber, who took her around town with his private chauffeur and showed her all the buildings he claimed to own.
Shtrozberg said she was impressed. “He speaks very fast to show that he’s a big guy,” she recalled. “It was all an act.”
When Shtrozberg requested a full reimbursement in early 2009, Schreiber didn’t pay, she told TRD. They agreed to an extension that February, but after the new promissory note came due one year later, Schreiber still owed her $3.8 million, according to her lawsuit. She then took him to court.
In the end, Shtrozberg said she recouped about $3 million. A few days after her on-the-record interview, she requested that her remarks not be printed. Her attorney, Saar Rosman of Lipa Meir & Co. in Israel, later sent TRD a demand letter regarding the matter.
“The said loan has been repaid in full and any controversies between my client and Mr. Schreiber, in connection with the foregoing, have been settled to the satisfaction of my client,” Rosman’s letter read.
Similar lawsuits from other parties followed Shtrozberg’s. Investors Oren Evenhar and Isaac Hershko filed a complaint against Schreiber in June 2014, accusing him of cheating them out of a 35 percent stake in 119 West 25th Street, which Waterbridge and its partners bought for $54.5 million in 2013. Court records indicate that the suit was later settled.
Then in August 2015, the commercial brokerage Eastern Consolidated sued Schreiber over a commission he allegedly failed to pay for the Radegast deal. That same year, investor Marco di Laurenti sued Schreiber for allegedly bilking him out of his share of profits from a $38 million sale of a Soho retail property at 154 Spring Street. The sides reached a settlement, but Schreiber never paid the agreed-upon sum, di Laurenti’s lawyer Stephen Meister said. Only after Meister filed a confession of judgment and froze his bank account did Schreiber finally pay.
And last year Schreiber and his partners filed for Chapter 11 bankruptcy on their mixed-use development at 182-186 Spring Street, where they owed lenders, including Acadia Realty Trust, $26 million. The real estate investment firm Opal Holdings bought the site out of bankruptcy for $31.6 million this June.
“Waterbridge was a preferred equity investor in the deal, and the bankruptcy filing facilitated the reorganization of the partnership,” the firm’s spokesperson noted. “All creditors were paid in full.”
Despite the lawsuits and financial troubles, Schreiber still has plenty of friends in the NYC real estate industry. “I only have good things to say about Joel,” noted Normandy Realty’s Gavin Evans, who partnered with Waterbridge on the purchase of 119 West 25th Street. RedSky’s Bernstein described Schreiber as loyal, honest and fair, while Zlotowitz of Eastern Union pointed out that several of the lawsuits against Schreiber and his firm were ultimately resolved.
“He has vision,” Lacorte said, pointing to Schreiber’s WeWork investment — as good as the investment looks in hindsight, giving two entrepreneurs with little track record a big chunk of money was incredibly risky.
But how much of the reported $15 million Schreiber paid and how much of WeWork he actually owns today remain unclear.
“He gave us some of the cash,” McKelvey said on the “How I Built This” podcast. “A little bit to start and a little bit more over time.”
A former business partner of Schreiber’s, speaking on condition of anonymity, said he finds it “extremely hard to believe” that he ever owned one-third of WeWork.
An investor in the co-working company, who also asked not to be named, said Schreiber owns 1 percent of WeWork at most, and that he could have held a much larger share if he followed through on his funding commitments.
But even if his stake is that small, he could still strike gold once the company goes public.
“If he owns 1 percent of the company, that’s still worth $200 million,” Schreiber’s former partner said, referring to WeWork’s $20 billion valuation. “That’s probably more money than he’s made in any other venture.”
Shtrozberg has her own hopes for WeWork’s anticipated IPO, which she speculates would raise the level of scrutiny on Schreiber.
“Now it’s [soon to be] a public issue,” she said. “If you have a shareholder in a company who is [questionable], the market can respond to that.”
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