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Category ArchiveWorldwide Plaza

Brains & Braun: SL Green’s David Schonbraun on His New York Lending Strategy

David Schonbraun may be competing for deals like everyone else, but the 40-year-old father of three is no stranger to competition. When he was a high school senior, he nursed dreams of being a professional tennis player.

Now, unlike the majority of lenders out there scrambling to deploy capital, he has an advantage: Schonbraun is charged with keeping real estate investment trust SL Green Realty Corp.’s debt business to a tidy 10 percent of its assets.

As a result, Schonbraun, the co-chief investment officer for Gotham’s largest office landlord, and his team cherry-pick the lending opportunities that are the best fit for the company, selling positions along the way to keep the book balanced. Weighing in at No. 27 on Commercial Observer’s Power 50 list (see page 42), Schonbraun had quite the year in 2017, running SL Green’s side of its and RXR’s purchase of a 49 percent stake in Worldwide Plaza. And like a lot of athletes, he has the stamina to keep going. He gave CO the low-down on which transactions have piqued his team’s interest lately.

Commercial Observer: Congratulations on being on the Power 50 list! How was 2017 for you, overall?

David Schonbraun: Our main focus is always to work to optimize our book…We maximize profit by limiting risk and, with that, run a $200-plus-million revenue business. Last year, we picked good spots for us to invest in—so projects that we really liked with very good sponsors. And one of the trademarks of our business is that we were one of the first groups to have the strategy of taking down the whole loan—or the larger piece of a loan—and then syndicating it out to enhance our yields. It’s very important for us to constantly be evolving our strategies as the market changes, especially in the debt business.


How has your strategy evolved since joining SL Green in 2002?

When we started this business within the REIT, our focus was really on buying subordinate debt. As we grew and the markets changed, we began co-originating, then originating by ourselves and syndicating. Now we’re holding whole loans more and financing them through repo facilities. We’re always trying to evolve the business to stay one step ahead because there are so many more competitors in the market now. We look to where the inefficiency is in the market, and that’s where we think we’ll make the most money.

Where do you see that inefficiency right now?

This is the most efficient market we’ve seen, unfortunately [laughs]. There’s so much capital. We’re focusing on using our relationships and being quick to get deals. We still have a big advantage with transitional assets, given our real estate background. A lot of sponsors—and it may be counterintuitive—prefer us to be in the more complicated deals with some redevelopment and leasing because as their business plans change they know they can come to us and say, “Look, we know this wasn’t on the initial plan, but as we’re looking at the market, we’ve re-evaluated, here’s how we think we should change it.” From a real estate perspective, we can understand those assets quickly and say, “That wasn’t the original plan, maybe it’s more expensive, but we think it makes sense,” or, “We understand you may have to sign a lease to less than underwriting to get the momentum in your leasing and you’ll make it up on the back end,” whereas a lot of pure lenders don’t understand that and are stuck in their model. So, I think in any real value-add real estate, I think we have a big advantage in working with clients. We view ourselves as partners with our borrowers on that.

The transitional space is extremely competitive right now.

Yes, but we’ve always been in that space. Some of the foreign capital is doing the cheap, 10-year fixed-rate [mezzanine lending], and that’s not a space we want to play in as much. Sometimes we’ll take down a mezz loan, sell pieces and lever up that way to get a yield that works for us, but otherwise we’re really looking for better yields for ourselves, and the transitional space tends to be a good fit us.

You provided a $110 million mezzanine loan on 245 Park Avenue and sold part of it. Are you looking at 245 Park again as a potential acquisition now that it’s back on the market?

We look at every asset that’s on the market, and we’re always looking to invest in a way that makes money. We always have conversations. But, for now, we’re a lender and we’re very happy being a lender.

That deal is a perfect example in terms of how we tried to buy [the property], and [HNA] paid a higher price than we were willing to. But when they lined up their financing—because we’d already done all the underwriting—we could quickly commit to doing the bottom mezzanine loan. So, early on that guaranteed us a position in the capital stack. The banks like it because they’re able to sell their bonds and their senior mezz at a lower rate with us as the anchor in the capital stack. And then, to enhance our yield, we sold a piece of our loan off. So it’s kind of a win-win for everyone; the bank that originated the loan gets a better execution with us anchoring and selling the pieces, and we were able to hold what we want, syndicate off a piece and get an above-market return.

Has barbell lending been a consistent strategy for SL Green? 

We’ve always kind of looked to run the business that way. For us, we try to have a blended yield, and in doing that we can do some higher-yielding stuff and some lower-yielding. It allows us to play where we want in each capital stack and at the right risk point. So there are a lot of deals where lenders are junior to us in the transaction, and a lot of people will view us as a first loss, and a lot of times we are. But there are a significant number of other deals where we take a more senior piece of the stack because, for us, that’s the better risk-adjusted return.

How are you choosing the “good spots” in the market and identifying potential opportunities?

Right now, we’re not growing the size of our book significantly. What that enables us to do is seek out transactions where we like the sponsor, the real estate and the basis. We do those deals and then look within our own portfolio and start selling off some other assets we’ve originated. If we can originate a loan on a new vintage at a little higher yield than something we’re selling, it makes the company a little bit more incremental money. Hopefully, we like the credit on the loans we’re [adding] a little more than those we’re selling, or they’re higher yielding but the same credit. We’re always looking to optimize the book.

Tell us about 888 Broadway. Why were you attracted to that particular financing opportunity?

It’s a great location and a great piece of real estate with two very good sponsors. We have a great relationship with Normandy [Real Estate]. They’re great guys and very good operators. We really believed in their business plan for the asset and think it’s going to be an incredibly successful project. It’s a typical transaction where there’s going to be redevelopment and a lot of lease-up, and if they have to come back and change their plans, they know that we’ll be very flexible with them.

Are there any examples of that flexibility you can give us?

For RFR on 285 Madison Avenue, as they got into the project, the scope of the project changed. We thought it was the right thing for the property, so not only did we say, “We agree with what you’re doing, but we’re also happy to upsize our loan to allow it and help fund it because we think it’s right for the project,” and we gave them additional capital to do that.

RXR has been upping its lending activities, joint venturing recently with a Canadian pension fund to do so. What’s the draw is in increasing that activity for New York City owners?

I think it’s driven by the strong desire for institutional capital to be investing in real estate right now. There’s not as much sales activity and so they use the debt space to get real estate exposure and returns.

Is the bid-ask spread still buoying sales?

I don’t think it’s so much that bid-ask spread is so wide, as much as over half the stock of New York City office buildings are owned by a handful of well-capitalized institutions. If they don’t see opportunity to reinvest their capital somewhere else, they’re not going to sell for the sake of selling and then sit on cash. We’ve sold assets to buy back stock and if we didn’t see that opportunity maybe we wouldn’t be as aggressive in selling assets. You’re also seeing some joint ventures because some people want to sell a little bit and have some need for reinvestment. I think a lot of it is driven by a lack of reinvestment opportunity.

That’s good news for the debt side, in terms of increased recapitalizations?

It is, and it isn’t. It’s good in terms of you’ll see a lot more recaps like you saw on 237 Park [Avenue] last year. One of the partners wanted to sell, but they got such attractive financing they said, “You know what, there’s really no reason to sell because this financing is so attractive it’s really not worth exiting.” We were in that loan but got paid off. So, it’s good from that perspective. But part of the spread compression is there’s so much money chasing not as many deals, and if the sales market had a little more transaction volume, you’d probably have a little more easing just because there’d be more financing.

It seems like last year was truly the year of competition.

Yes, and I think it’s even more competitive now. We’ve seen spreads come in significantly, and there are more people raising money to compete in the spaces, so it’s maybe even oversaturated right now. The pricing has come down and we have to work a little bit harder through syndications to get the yields we want.

How has the syndication side of the market evolved?

I just think the capital is much cheaper, so it used to be that you could take down a loan and there was a significant amount of room in the spread you were getting to syndicate out and get a good deal for yourself. Now, the capital stack and the pricing is so much tighter, you have to be right on top of the pricing when you’re going to sell more inventory or a mezz piece. There’s much less room for error in judging exactly where the capital markets are.

Are you seeing discipline slide anywhere in the lending market?

The only place we see a little less discipline is on refinancings on new acquisitions. When market value is pegged, I think it’s a lot clearer with refinancings when certain nondomestic or newer lenders are looking at appraised values but lending at a higher value. But, it’s still a very controlled market, and you haven’t seen as many financings where borrowers are looking to get very high leverage.

And borrowers are also being pretty disciplined, correct?

It’s a much more equitized market, which is good, as people are really stretching out financings. It leads to a few less mezz opportunities, but for a market as a whole it’s much healthier.

SL Green’s big acquisition last year was Worldwide Plaza. What appealed there?

It’s a Class-A building and we wanted a little more exposure on the West Side. We got in at a very good basis, a very good cap rate. If you look at our returns on a fee-enhanced basis, they were extremely attractive versus anything else we were seeing in the market. So, [it was] a Class-A building at a low basis and [in] an area on West Side [where] we wanted to be, with a great tenant roster. [And the fact that] we thought it was kind of an above-market attractive yield was great for us. It was also good to team up with RXR, with whom we have a great relationship.

Any specific strategy you’re working on for 2018?

We look every year to sell a couple of assets and then find the best way to redeploy that capital from a lending standpoint. We try to manage that to about 10 percent of the company’s assets but always optimizing, working on risk-adjustment return, duration and then finding the best projects and the best borrowers. So, I think that strategy stays throughout the cycle for us.

How many opportunities would you say come to your desk every year?

I would say hundreds of opportunities come across. You don’t dig deep on a lot of them. We really quickly kind of weed out the ones we think are right for us and then focus on them. One of the reasons is that we’ve underwritten almost every asset in New York already, know it and have a view. We generally already have a value on the building, so we can quickly look at it. We know exactly what we’re looking for.

Has SL Green’s debt business always been 10 percent of the company? Do you see it increasing at some point?

It’s been pretty steady for the past decade or so, so I think as a public equity REIT that’s the right level to keep it at. And, in some ways, it doesn’t force us to do transactions the way it does for other people. We have the ability to really just choose the transactions we think are best, and we aren’t forced to put out capital.

Given how busy you are, do you still have time to play tennis?

I do [laughs]. I’ve started playing much more frequently. My kids play, so I’ve started getting more into it.

So they take after you?

They do. The oldest one [9] is playing tournaments, and she’s doing really well. My little guy loves it—and is excellent for a 6-year-old—my 3-year-old has not gotten into it. Yet. What’s interesting is [Fried Frank’s] John Mechanic hosts a lot of tennis games. I’ve played with him a lot. He introduced me to a lot of people in the industry when I was just starting out, and through him, I was fortunate enough to meet a lot of people.

Do you have any career mentors?

My father was in the real estate business—he had an accounting and consulting business—so from a young age I got to learn from him. I grew up listening to his phone calls with people talking about real estate deals and how to structure things. At my first job at Credit Suisse I worked with David Genovese, who—lucky for me—took a big interest in my wellbeing. He would allow me to sit in when we were working on selling properties. I came [to SL Green] in my mid-20s and have been beyond fortunate to work for Andrew [Mathias] and Marc [Holliday]. They’re the best in the industry, and the amount they have taught me is invaluable.

Is your dad happy with your career choices?

He is. I’ve been very fortunate. I’ve worked hard but was at the right companies with the right guys, and it’s worked out pretty well.

Source: commercial

Packing a Punch: Mike Maturo Talks RXR’s New JV and Worldwide Plaza

Deal-making is bloodsport.

Thankfully, Mike Maturo, the president and CFO of RXR Realty, has come prepared.

“On Saturdays, I box,” Maturo, 56, told Commercial Observer from his office at 75 Rockefeller Plaza. “I train with a professional mixed martial arts fighter, and once a week I go into the ring, which is fun as long as I don’t go too far down in the age group. Because when I fight the younger guys, it gets a little rough.”

That’s on top of the Pilates he does three times per week. Oh, and the basketball he plays on Sundays before church. (Maturo has a license to marry people. He already has one ceremony under his belt and another in the pipeline.) Finally, a Peloton bike is his latest personal acquisition, and he’s gearing up to compete against Scott Rechler, RXR’s founder and CEO, in online classes.

And that’s just what he does in his free time.

By day, it’s a different kind of competition, as he makes sure to dot all the i’s and cross all the t’s as the finance head of a multibillion dollar real estate empire.

Right now, RXR has what Maturo describes as, “big things in our pockets.” One of those big things is a new joint venture with a Canadian pension fund (Maturo wasn’t at liberty to name it quite yet), adding even more capital power to the real estate powerhouse that is RXR.

Commercial Observer: What can you tell us about this new joint venture?

Mike Maturo: We’ve been actively lending, but I think you’ll see us penetrate the market far more deeply in that respect soon. We have partnered with a Canadian pension fund and formed a joint venture, which will seek opportunities for structured finance investments in the New York metro region. It’s starting with $300 million of equity—with the ability to expand over time—and will invest in a cross section of real estate including office, residential, industrial and retail.

Where in the capital stack will you play?

The joint venture will generally make mezzanine debt and preferred equity investments. Most will involve complex capital structures where we can use our business and real estate skillsets to mitigate risk.

Why is now the right time to increase your lending activities?

The investment market still has this bid-ask gap so we see it as a good opportunity to participate in the lending market. There are good developers and sponsors out there who are smaller players but have a good history in their respective markets and have difficulty accessing both equity and debt capital. We can play into their situations.

We can also write large checks; our size goes from $50 [million] to $500 million. Our deal with [Extell Development Company’s] Gary Barnett [for One Manhattan Square in 2016] was $465 million, and so we don’t shy away from that [size of loan]. We have a big appetite not only in this venture that I’m referring to but from our broad base of investors to do co-investment in these types of transactions. So I think that’s another competitive advantage for us.

If the investment activity on the acquisition side starts to heat up you’ll see us actively playing here. That could also be in combination with banks and other players. It’s going to be active and diverse and on the lending side you’ll see us play across multiple products.

More so than previously?

When we were a public company [prior to 2007] we were very pigeonholed in one sector and that never made sense to us because we’re so deep in this region. We have over 1,500 tenants so think about how many companies we’re touching on a daily basis. We all live here, we raise our kids here, we participate in the community here. We’re really ingrained in these markets. We see a lot across multiple sectors so it makes sense for us to participate. We understand what tenants and customers want, so it’s easy for us to underwrite the market and the economics.

How would you describe your lending appetite?

We have a pretty wide view and we don’t restrict ourselves. Would we do hotels? Probably not. But if we found something we really liked—because we have underwritten hotels in the past—we wouldn’t shy away. But, I think you’ll see us lend more on residential, office, mixed-use and industrial properties.

And you’ll continue to target the New York metro area?

Yes, but we’ll be casting a wider net. We’re looking at a lot of opportunities in the boroughs. We have one deal in Westchester, [N.Y.] where we’re providing construction financing to a developer who is building a St. Regis-flagged gated super luxury condominium community. The project is very similar to our very successful Ritz Carlton Residences project on Long Island. We are lending  both the senior loan and the mezzanine loan. The developer selected RXR because of our experience developing the Ritz Carlton project and determined RXR could be value-add to the development. We are also providing recapitalization financing in the form of preferred equity to a three-property portfolio located in Manhattan and Long Island City.

How busy a year was 2017 for you?

We had over $5 billion in new financings last year so we were very active on that side of the business. On the investment side we weren’t so busy in terms of actual transaction closings, but we bought Worldwide Plaza with SL Green [The duo purchased a 48.7 percent stake in the trophy asset with an agreed-upon property value of $1.73 billion], which is obviously a very big transaction. We underwrote probably $30 billion in transactions but in the market there’s a reasonable bid-ask gap that’s been there for the past 18 months or so. So while we were active looking at deals, we only transacted on buying One Worldwide Plaza.

We’ve been very active on the development and redevelopment side, including this building at 75 Rock. We continue to work on Pier 57, which is a redevelopment of the site for Google and in Brooklyn we have a big redevelopment in the Navy Yard. That will be a primary focus this year, in terms of getting the redevelopment up and running. We also have a residential portfolio that was very active last year. We finished one project in downtown Stamford, [Conn.], that we’ve started to lease, and we have major projects in [other parts of New York including] Westchester, Downtown New Rochelle, Downtown Yonkers and Glen Cove in Long Island. Plus we’re developing the second phase of our North Hills Ritz Carlton Residences project. The first phase sold out last year. So, we’ve been very active across the board.

How did the Worldwide Plaza acquisition come about last October? And why was it the right time for the deal?

It’s a long story and somewhat complex, but we actually had the contract on that building when it originally sold to NYRT [New York REIT] and through a whole confluence of events it didn’t go our way. But we had significant interest in the building for a long time. When NYRT got into its issues [its gradual winding down via a liquidation plan] I think their plan was more geared toward a liquidation than having an ongoing business. We were a natural player to step in and work through the acquisition with them because we had a very good understanding of the asset. We had actually looked to work with SL Green on a potentially broader purchase of assets in the NYRT portfolio beyond just Worldwide Plaza, and that’s how the relationship with SL Green with respect to the property came about.

What was the property’s biggest selling point?

It’s a great asset and one that would be very difficult to build again—the bones of the building are very strong. The West Side of Manhattan continues to flourish—it’s not part of Hudson Yards, but it’s coordinated into that West Side area that’s getting more popular and more populated on both the residential and office sides. We think as a long-term asset there’s potential there with some of the tenant base that may want to extend and renew, and there’s also potential with the retail. So there’s opportunity to create value, and honestly we’re buying at a good price per foot. We bought it in the upper $800s per square foot, and when you look at pricing in New York and the replacement value for a building of that nature, it feels like a solid deal. It was attractive in terms of what our investors are looking for: a good current yield with potential for upside in an iconic building. So, we checked a lot of boxes.

Was there a lot of competition for the $1.2 billion refinance of Worldwide Plaza?  

We went out to a small crowd because in the [commercial mortgage-backed securities] world the pricing isn’t that different, everyone prices off the same model. So we went to our relationships—a handful of CMBS players we knew could execute quickly. Everyone had a strong relationship with Goldman Sachs, so it came together pretty fast, as opposed to 1330 Avenue of the Americas where we went out and had a distribution through a brokerage process. It wasn’t that complex a deal, the building is fully leased long-term and NYRT had some timing requirements that we needed to meet so I think we were done within 60 days—in today’s world that’s quick.

Why was CMBS the best execution?

At that particular time, the bid in the CMBS market was very strong and it’s a very large loan. So, in order to execute that size of loan, the CMBS market tends to be more favorable for that. That being said, we’ve done billion-dollar loans in the bank market, too. But it just seemed right. And remember we had three parties—RXR, SL Green and NYRT—everyone had to agree on CMBS as the best execution.

Are you eyeing any other key acquisitions?

We have our fingers in the mix of a bunch of things but we look for opportunity. Scott [Rechler] and my other partners are always out in the market speaking to people. I don’t want to name any specific buildings [laughs], but we keep a good chart of what’s going on out there and where there could be potential for trading.

Are sellers becoming more realistic in terms of the prices they’ll sell at?

It’s interesting. If you look at it, we’ve already had a five to 10 percent reduction in valuations in New York City. But what you saw last year was a lot of refinancings. On 237 Park [Avenue] we surveyed the market and once we put New York Presbyterian Hospital in there we did the [$850 million June 2017] refinancing because we didn’t really like what we saw in terms of the market for investment sales. But if you look through to the valuations that underlie the refinancings, you can see that valuations that were done for these refinancings reflect that decrease in value. If I had to guess, I’d say that sellers will move more toward those values than the buyers moving up to the higher values. But, we’ll see what happens.

You refinanced 1330 Avenue of the Americas earlier this year with a $285 million loan from DekaBank. What was Deka’s competitive edge?

We saw a very strong bid for that deal; it’s a very strong asset that places well on Sixth Avenue, and it’s the type of asset that—in today’s market—lenders are attracted to. They see upside in terms of the [net operating income], and it’s a solid building that always performs well. Deka came in a little ahead of the pack. It’s interesting, in deals like this there’s always someone who has a feel for the building. Deka is actually in the building, and I think that makes a difference because they see how the building is operating on a day-to-day basis. So, they were pretty aggressive on the deal.

Did the competition for that financing include many foreign capital sources?

Yes, it was really across the board. Even alternative, private equity lenders are bidding into assets of that nature. We had foreign banks, we had foreign lenders, and we had the big U.S. banks. I think—particularly in today’s market—it’s desirable for a lender to get an asset like that in their portfolio. It was an easy deal to get done from an attraction standpoint.

And the Starrett-Lehigh Building’s debt refinance will be coming up soon, right?

The loan is due in June, and we’re in the early stages of the process. We will be looking at both floating-rate and fixed-rate options. We’ll be exploring floating-rate CMBS as well as a bank deal and we’ll likely look for five to seven years of term. That will be a very large loan, probably $1 billion-plus.

20180130 michael maturo 083 Packing a Punch: Mike Maturo Talks RXRs New JV and Worldwide Plaza
Mike Maturo. Photo: Sasha Maslov/ For Commercial Observer

Google is reportedly in talks to lease a substantial amount of space at Starrett-Lehigh. How are those talks going?

They’re going. It’s very exciting. If you look at what Google is doing, it makes sense. They’re building up their presence, and that building has a great personality for them.

It’s a pretty good time to be a borrower, right?

Yes, and I think one thing that’s interesting is the presence of the alternative lenders that are in the market right now. That continues to be an expansive group, and we have used them. We borrowed $5 billion last year, and that’s probably split $3 billion to $4 billion in refinancings and $500 [million] to $600 million in construction financings and transition financings. You’re seeing those transitional lenders be really active in those markets because they understand the real estate markets and mechanics of development properties a lot better than more traditional lenders. The market has gotten very competitive, and spreads have come in with those alternative lenders who historically looked to value add-type construction of redevelopment projects.

The construction side is a little more difficult. Big banks and alternative lenders and insurance companies are looking to make those type of investments but more with sponsors that have a track record of execution and that they have relationships with. We’re fortunate enough to be in that group and we have terrific access to ground-up construction financing.

Has your construction financing primarily come from traditional or nontraditional lenders?

We were very active on the construction borrowing side and used a combination of both traditional and alternative lenders for our New Rochelle, Yonkers and [Garvies Point Long Island] projects as well as the second phase of our Ritz Carlton Residences North Hills project [in Long Island]. I think alternative lenders are still credit-metric focused and maintain that discipline, but they understand the complexities and can focus more on the real estate side of the project.

Additionally, foreign capital is much more willing [to invest] than it previously was and finds lending more attractive from the standpoint of risk benefit metrics. The alternative lenders are benefiting from foreign capital looking to get into lending and investments.

In addition to your New York City presence, RXR is betting on the suburbs.

Our business is New York City-centric but regional in scope, so we look to the suburbs strategically. On the residential side there is an affordability issue in Manhattan, and the notion of trying to solve that in New York City is difficult—foolhardy, even—because there’s just not enough space and it’s not efficient enough to create housing that people can afford. So we think the solution is regional. The suburbs are going through a period of transition and the suburban market of the 1980s and 1990s is slowly becoming a relic in terms of office parks and malls. There’s a re-urbanization not only in New York but across the entire country, and the suburbs really need to wake up and understand that. Unless they change their complexion in terms of their real estate and in terms of office, retail and residential they will continue to lose out to the cities, which has been happening over the last 10 years.

So, you have an interesting combination of the cities—which can’t solve their issues with the housing they can produce—with the suburbs that now need to recreate the housing produced. It’s no longer white picket fences; more densification is needed in downtown developments.

So, we’ve combined those two. We’ve put a lot of effort into working with municipalities and helping them create revitalization programs. What’s interesting is if you go back to the 1960s and 1970s, these downtowns were bustling commercial centers. So the streetscapes and the architecture are already there; they just were abandoned and need to be refigured and revamped.

How’s your Long Island University Brooklyn campus project coming along?

We’re helping LIU with their future plans to redevelop their campus, and that will include some housing options. That will be market housing, but we’re also thinking through some plans to have creative-type shared houses in there. We’ve finished our development agreement and are now in our planning stages.

Are you on the hunt for construction financing yet?

Not yet, but we will be. It’s a pretty major project. I’ve been out whispering about it but—particularly where there is some complexity to it—you want to go through your predevelopment process and have your budgets done so you know what things will cost before you go out and talk construction financing.

So, is it just nonstop action at RXR?

We’re 24/7 here. I say that half-joking, but all weekend long we’re all connected—whether through email or texts—there’s constant collaboration and a flow of ideas. We’re a tight group of people. We worked hard to get to this point, but people come to us for solutions, and they see how we can take a property and recreate it. It’s a good place to be.

Source: commercial

RXR, SL Green to Buy 49 Percent Stake in $1.7B Worldwide Plaza

 RXR Realty and SL Green Realty Corp. have entered into an agreement to purchase a 48.7 percent stake in Midtown West’s Worldwide Plaza from New York REIT with an agreed-upon property value of $1.7 billion, sources familiar with the transaction told Commercial Observer.

New York REIT will maintain a 50.1 percent equity interest, and George Comfort and Sons will continue to own the remaining 1.2 percent that it currently owns, sources said.

The deal on the trophy asset is expected to close in the fourth quarter. Further details regarding how the acquisition will be financed could not immediately be gleaned. 

The Real Deal first reported in July that the RXR-SL Green partnership was the front-runner to purchase the trophy asset.

Worldwide Plaza is a mixed-use building at 825 Eighth Avenue between West 49th and West 50th Streets. Its 2.1 million rentable square feet includes approximately 1.8 million square feet of office space.

Harry Macklowe owned Worldwide Plaza before defaulting on his loan and handing the asset over to lender Deutsche Bank in 2007, The Wall Street Journal reported at the time. The bank sold it two years later to George Comfort & Sons and RCG Longview for the bargain price of $600 million.  

In November 2013, New York REIT—then known as American Realty Capital New York Recovery—bought a 48.9 percent stake in the property for $220 million. The deal faced backlash from RXR at the time, which filed a lawsuit against the REIT for $200 million—alleging that RXR was promised the stake in the tower.

New York REIT marketed its almost-49 percent-stake in Worldwide Plaza in January, before choosing to exercise its equity option to buy an additional 49.9 percent stake in the property in June (bringing its equity interest up to 98.8 percent).

Both RXR and SL Green have been actively closing deals on trophy properties recently.

In July, RXR closed a $850 million refi for 237 Park Avenue. As previously reported by CO, a $477.8 million portion of the $693.2 million whole loan on the property—co-originated by Morgan Stanley (65 percent) and Société Générale (35 percent) was securitized by the lenders in the MSSG 2017-237P single-asset, single borrower commercial mortgage-backed securities deal. (A further $87.8 million in mezzanine debt is also in place on the property, with up to $69 million in future subordinate mezzanine financing permitted, bringing the total debt on the building to $850 million.)

And SL Green and Vornado Realty Trust recently closed a $1.2 billion refinancing of 280 Park Avenue, also with a securitization execution, with lenders Deutsche Bank, Goldman Sachs, Citi Real Estate Funding and Barclays Bank.

Spokeswomen for RXR and SL Green declined to comment.


Source: commercial