- RXR and SL Green fell 30 days behind on a $940M loan backing a Class A Manhattan office tower.
- The 49-story Midtown office tower’s total debt package is $1.2B, including the $940M current loan balance and $260M in additional mezzanine debt.
- The loan will now go to special servicing after the owners missed the most recent payment.
- Owners RXR and SL Green are working with the special servicer on a modification and extension of the building’s debt, which will mature in November 2027.
SL Green (SLG) and RXR Realty, the high-profile owners of a large Manhattan office tower, have defaulted on a $940M loan backed by the property.
As reported by CRED iQ and Bisnow, the loan balance on 825 Eighth Ave., a 49-story Midtown office property near Times Square, will now go to special servicing.
Leasing Challenges and Modification Efforts
The white-shoe law firm Cravath, Swaine & Moore, the office building’s second-largest tenant, was leasing 30% of the tower’s office space but relocated to a 480 KSF spread at Brookfield’s Two Manhattan West in September.
Worldwide Plaza had been 98% occupied prior to Cravath moving out. Increased expenses at the property led to declining cash flow, which exacerbated the issue when the law firm exited.
Worldwide Plaza was watchlisted by Fitch Ratings last October after news broke that Cravath would be leaving its sizable space in the property. The building’s owners have been working with the special servicer, Situs Holdings, on possibly modifying and extending the debt on the property, which matures in November 2027.
According to Michael Haas founder and CEO of CRED IQ, “This could be another prime example of landlords willing to hand the keys back after the loss of a major tenant. It might have a similar outcome to 1740 Broadway where AAA investors could potentially take a loss. Losing Cravath, a 30% tenant by GLA% but 46% of the rent will crush the value of the building. The office component was appraised for over $900/SF back in 2017.”
Major Office Asset for SL Green and RXR
SL Green and RXR own a nearly 49% stake in the office building, also known as Worldwide Plaza, which the companies agreed to purchase together in 2017. Since the acquisition, SL Green has invested $525M in capital improvements at the nearly 2 MSF property, which has several green certifications including LEED Gold. New York REIT Liquidating LLC owns a 50.1% stake in the property.
Past and current tenants at the 1.8 MSF office building, also known as Worldwide Plaza, include Rubenstein Associates; the WNET Group, the nonprofit parent company of New York’s PBS affiliate THIRTEEN; and Nomura Holdings, an affiliate of the Japanese investment bank and brokerage firm Nomura Group.
Built in the late 1980s by a group led by prominent New York City developer William Zeckendorf, Worldwide Plaza was designed by Skidmore, Owings & Merrill in a postmodern style and rose on the former site of the city’s third Madison Square Garden.
Record High Potential Office Defaults
SL Green and RXR’s troubles with Worldwide Plaza come at a time when a record-high number of U.S. office buildings face defaults. According to the data firm MSCI, $38B in office buildings across the country are at risk of defaulting on loans, going into foreclosure, or other distress.
NYC’s office market has not been immune to the national trend. In January, SL Green and Vornado Realty Trust’s (VNO) office building 280 Park Avenue entered special servicing after the owners defaulted on a $1.1B CMBS loan.
However, SL Green struck a deal to settle the loan, extending and modifying the securitized mortgage as well as modifying, extending, and repaying a $125M mezzanine loan for $62.5M in April.
SL Green and RXR are looking to make similar moves with Worldwide Plaza, where the companies recently signed a 38 KSF lease renewal with M. Shanken Communications, a magazine publisher.
