The future of SL Green and RXR’s Worldwide Plaza was uncertain. But a big name in New York City real estate appears to hold the key: Gary Barnett.
The Extell Development leader purchased the mezzanine debt backing the Midtown office building, the Commercial Observer reported. It’s unclear when Extell came into control of the debt — the company declined to comment to the publication — but it puts Barnett in prime position to take control of the building at its UCC foreclosure auction, scheduled for Jan. 15.
The previously undisclosed mezzanine lender scheduled a foreclosure auction for the controlling entity of 825 Eighth Avenue. The entity that controls the building received a default notice last September from the owner of $190 million in mezzanine debt, according to a Securities and Exchange Commission filing from New York REIT Liquidating (the LLC in charge of New York REIT’s liquidation), which is also an owner of the property. Ownership is in default of both senior and mezzanine debt as of July, according to the filing.
Goldman Sachs and Deutsche Bank originated $260 million in mezzanine debt. The property is backed by $940 million in CMBS debt originated by the two institutions, plus the mezzanine financing. Proceeds from the auction will go towards paying off the mezzanine debt and funding unpaid interest payments.
The debt went to special servicing in September 2024 after law firm Cravath, Swaine & Moore vacated 617,000 square feet for Brookfield’s Two Manhattan West, leaving Worldwide Plaza about 40 percent vacant. That space remains empty and the building was only 63 percent occupied as of March, according to Morningstar, down from 91 percent in 2023.
That could worsen as Nomura Holdings — the largest tenant remaining — plans to slash 75,000 square feet from its footprint by the beginning of 2027. The leftover 630,000 square feet is due to expire in 2033.
The property was appraised at $345 million in April, down 80 percent from its $1.7 billion valuation in 2017, according to CMBS loan documents. That appraisal drop is expected to cause $500 million of losses to the property’s CMBS bondholders.
SL Green and RXR acquired a roughly 49 percent stake in 2015; the since-liquidated New York REIT holds the majority.
Last month, DBRS Morningstar downgraded the rating to junk on the CMBS trust holding $705M of the building’s debt. The special servicer is reportedly negotiating with the borrower regarding a loan modification, according to Morningstar.
— Holden Walter-Warner
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