Company Culture
Coworking / Legal

Surprise eviction at 1776 Rittenhouse was likely result of unpaid rent suits

Recent court documents show rent amounts owed up to $165,034 by the coworking company.

At 1776's now-former spot on 1608 Walnut St. (Courtesy photo)
Full disclosure: Technically Media was previously a tenant of 1776's former Washington Square location, and our DC reporter works out of the company's Lafayette Square location.

A series of lawsuits claiming multiple instances of unpaid rent from 1776 — previously known as Benjamin’s Desk — at the prominent local coworking company’s Rittenhouse location is the likely cause of tenants being temporarily evicted from the space without explanation last week, court documents show.

Unpaid rents range in amounts up to about $165,000.

In response to an inquiry Thursday afternoon, CEO Jennifer Maher told through a spokesperson that the company has “been in good faith negotiations” with the building.

Last Wednesday morning, at 1776 Rittenhouse, the company’s flagship location, tenants were told they had to leave the space without explanation, and that they’d be given about 10 minutes to collect their things.

Some took to Twitter and Slack or reached out to saying their teams had to leave things like desktop computers and plants behind. Others said they weren’t let up to the floor when they arrived for the day, starting around 10 a.m.

“It was just like ‘scatter to the wind,’ no information,” tenant LeAnne Matlach told last week.

Later that morning, Maher reached out to a handful of tenants to say that she and her team were aware of the events. She later told it was “the result of a large miscommunication between the company and the building’s management,” but didn’t explain further.

Tenants were told late afternoon that they could return to the space, and that the campus would be operating as usual the following day.

Folks who talked to last week said they have returned to the space, and that it’s operating as usual. Rachel Bennett, a designer at OpenForge, said that her team has since returned, but hasn’t heard a clear explanation of events. No further explanation of last Wednesday’s events have been shared publicly with tenants, either.

Landlord complaints

Court documents show that 1608 Walnut Street Associates, L.P., landlords of the 1776 Rittenhouse location on the 12th floor of the Sun Oil Building, leased 1776 the space in May 2016. The lease, included as evidence in a handful of court documents, states that rent cost $21.50 per square foot for the first year, and would increase 50 cents per square foot each year after. The space is 11,693 square feet, bringing the first year’s rent to a total of about $251,400, or about $21,000 per month.

About two years into the lease, 1608 Walnut Street Associates L.P. filed its first suit against the coworking space, naming Benjamin’s Desk, Jennifer Maher and her husband, Michael Maher, as defendants. (In 2018, Jennifer Maher became the sole CEO of 1776, as Michael Maher had stepped away from running the business to focus on his real estate tech startup, Houwzer.)

The first complaint, filed in April of 2018, claimed that 1776 owed $93,357 in unpaid rent for January through April of 2018. That complaint was settled, documents show.

Then, in January 2019, 1608 Walnut Street Associates L.P. again filed a complaint claiming they were owed $84,431 in rent for October 2018 through January 2019.

In October 2019, 1608 Walnut Street Associates LP again filed a complaint that 1776 owed $110,459 in rent for June through September of 2019.

On December 19, 2019, another document shows that 1608 Walnut Street Associates L.P. was now claiming $165,034 in unpaid rent. On the same date, 1608 Walnut Street Associates L.P. and the entity’s lawyer filed an eviction document.

Then, on Feb. 26, 2020 — the day tenants were temporarily removed from the space — court filings show eviction documents were served.

It’s not clear how tenants came to be let back inside the building later that day, as Jennifer Maher did not comment on specifics about the ongoing negotiations with the building.

“As you know, over the last two years, we have been switching from a leased arbitrage model to a managed services model,” she said through a spokesperson Thursday afternoon. “We have been in good faith negotiations with the landlords at 1776 Rittenhouse during this time and resolved all outstanding issues. We look forward to continued growth at the 1776 Rittenhouse campus.”

1608 Walnut Street Associates L.P.’s lawyer, Kenneth Baritz, told this week that he had in fact recently represented the entity, but couldn’t comment on pending litigation.

It appears that 1776 and the landlord had previously been able to settle the payment issues out of court, said a lawyer who spoke with on background.

A changing business model

In 2017, 1776, then a D.C.-based incubator network merged with Philly-based Benjamin’s Desk, making the Mahers co-CEOs of the company. The combined companies took the 1776 name, and in the last few years have opened multiple spaces, such as Philly’s Brewerytown location, the Cherry Hill Mall location and Maryland’s North Bethesda location.

The company has also shut down some of its campuses including its Crystal City location in D.C. and at Washington Square.

The merger in 2017 also came with a new business model. 1776 said it was moving away from signing leases and focusing on partnering with asset owners in a management capacity — essentially, deals in which someone else owns a space, and 1776 would staff it and create programming.

In August 2019, DC checked in with then-Senior Director of Strategy Lucas McCanna about how the company’s business model was doing two years post-change.

“As rents have started to increase, it has become more apparent that we need to switch over a majority of our locations to managed deals,” he said.

McCanna said at the time that the 1776 Rittenhouse location “is on a lease and is performing well and won’t be switched over to the new model.”

1776 operates local spaces in Rittenhouse, Brewerytown, Grays Ferry via Pennovation, Ambler Yards and the Cherry Hill Mall, as well as in downtown D.C. and Maryland’s Montgomery County; couldn’t find evidence of legal issues at any locations besides Rittenhouse. 1776 operated 119,000 square feet in Philadelphia, trailing only WeWork and Cambridge Innovation Center in square footage, as of fall 2019, according to a CBRE report.

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