An icon of Midtown Manhattan’s office market isn’t immune from the existential challenges facing the sector.
A $670 million loan on RXR’s 230 Park Avenue — also known as the Helmsley Building — is set to mature on Dec. 8. A report from Kroll Bond Ratings reported by Crain’s said the mortgage was sent to special servicing and the landlord is facing “imminent maturity default.”
RXR is working to restructure the loan, a spokesperson for the firm told the outlet.
Scott Rechler’s firm purchased the 35-story, 1.4 million-square-foot landmarked property for $1.2 billion in 2015. It took out a $785 million acquisition loan from American International Group for the acquisition from Monday Properties, Invesco and South Korea’s National Pension Service.
After RXR’s purchase, the firm invested $190 million in improvements on the building’s limestone exterior, bathrooms and windows. Its location adjacent to Grand Central Terminal carried the expectation of continued vibrancy for the property.
But the building’s financial performance has suffered since the start of the pandemic. The landlord needed to provide “very significant” incentives to tenants to keep them around, leading to a weighted average rent of $79.40 per square foot in 2021 according to an S&P Global report, 23 percent below the neighborhood average.
More trouble could be in the distance. Voya, Reed Elsevier and Clarion Partners all have leases that expire in 2025, putting 30 percent of the building’s rent roll at risk of disappearing. The vacancy rate of the property was 20 percent as of 2021, according to S&P.
The property was developed in 1929 and landmarked in 1987. Developer Harry Helmsley was one of the investors to acquire the building in 1978, ultimately putting his own name on the building at the request of his wife. A joint venture led by Monday Properties acquired the building in 2007 for $1.15 billion.
RXR defaulted in May on a 33-story office tower at 61 Broadway in the Financial District, representative of how rising interest rates and growing remote work trends threaten the viability of office properties.
— Holden Walter-Warner