Blackstone's Muni Moolah & High Noon at Helmsley

High Noon at Helmsley

This one’s tough, not just for RXR but for New York: Lenders at the iconic Helmsley Building have moved to foreclose on the tower, about a year after Scott Rechler’s firm defaulted on its $670M CMBS debt.

Green Loan Services, the special servicer on the debt and a unit of mighty office REIT SL Green, filed a pre-foreclosure action Tuesday. This summer, RXR had been considering converting a portion of the 1.4M sf tower, which is only 70% leased, into resi, and had scored a 90-day forbearance to look into the move. But time may have now run out.

Helmsley (Cont.)

An RXR spox told Crain’s that the firm “continues to have constructive conversations with the lenders.” Last month, the building was appraised at just $770M ($550/foot), a far cry from RXR’s $1.2B ($857/foot) purchase price in ‘15. On top of the $670M CMBS, there’s $125M of mezz on the tower, held by Morgan Stanley and Brookfield, putting them in position to take control of the asset.

SLG’s Green Loan came in as special servicer this fall, giving it a role in shaping the fate of a tower that’s a direct competitor to its One Vandy nearby 🤔. At the time, one CRE attorney described its nomination as special servicer to be “extremely pertinent and unusual.” At this stage of the cycle, the motivations of special servicers have become a major talking point, as we’ve explored here.

Of course, RXR and SL Green have been repeat partners on deals – they own 5 Times Sq. together for e.g. – but that’s the savage beauty of New York real estate: it is not unheard of for BFFs on one property to fight tooth & nail on another. 💅 

Blackstone’s Muni Moolah

NYC’s housing agency is set to sell $550M in muni bond debt on behalf of Blackstone’s 8 Spruce Street, a Frank Gehry-designed luxe rental in Lower Manhattan. About $204M of that debt will be fully tax-exempt, as it’s issued under the federal Liberty Bond program, which provided $8B in financing to help revitalize the area after 9/11 – Larry Silverstein scored $3B of that money for the WTC redevelopment, while Goldman Sachs & BofA also tapped it to build their HQs. The remaining $346M chunk will be exempt from state and local taxes.

The NYC HDC is issuing the bonds as fixed-rate debt w/ multiple classes, a la CMBS, per Bloomberg. BofA is leading the bond sale.
 
The tower, which Blackstone bought in ‘22 from Brookfield & Nuveen for $930M, was 97% occupied as of this summer, with avg. base rents of $6K. It was developed by Forest City Ratner, which issued Liberty Bonds for the project in ‘08; those bonds were last refi’d in ‘14.

More: The HDC’s memo on the deal 

Sleepless in Seattle

Spare a thought for UBS, whose Trumbull Property Fund is getting absolutely bodied in recent office deals. First, we had the debacle at Midtown Manhattan’s 135 W 50th St, where UBS sold the leasehold on that nearly 1M sf office tower on CRE auction platform Ten-X 🥹 for $8.5M – compare that to the $333M ‘06 purchase price. A similarly sorry story is now playing out in Seattle, where UBS’ lender MassMutual is shopping the distressed note (through Eastdil) on the 630K sf Century Square as a takeover play: UBS is cooperating on the sale, per REA, but so far the numbers have been rough: bids have flown in, but at a price of just over $40M, or $65/foot - compare that to the $441M ($700/foot) valuation UBS was touting for the building just 2Y ago. The numbers are so pitiful that MassMutual is considering taking over the property – which is just 42% leased – itself. The building is an extreme example of the Seattle market’s broader woes: CBD occupancy is at just over 2/3, per CushWake, and per Green Street data weighted avg. valuations for office deals ($25M+) through Q3 are at $275/foot, compared to $796/foot in ‘20.

In the fall, PERE reported that UBS was looking to sell $5B in assets from Trumbull ($26B AUM) by the end of ‘26, in an attempt to meet $5.7B in redemption requests.

WeWork’s Amazon Collab

A fascinating deal just went down in Midtown Manhattan: WeWork took 304K sf at Vornado’s 330 W 34th St., a throwback to an era when the firm (then led by Adam Neumann 😊 ) was signing such fat leases on the regular. However, here, WeWork is merely running point on the process – the true tenant is Amazon.

“We are pleased to confirm that WeWork is working with Amazon to support its real estate strategy,” a WeWork spox told CO. The e-commerce giant is making employees come back to the office 5x/week starting Jan., so its space demands are quite pressing and it may be striking these alliances to speed things up. Unclear how this particular collab is structured, but it reminded me of a ‘17 deal that Amazon & WeWork struck at Sitt Asset’s 2 Herald Sq.: Amazon signed a membership deal for all the desks at WeWork’s 122K sf spread there.

While Neumann is running around the world striking deals for his new venture Flow (“It’s a feeling”), WeWork, now run by the mustachioed John Santora, is adulting hard under its new owner, Anant Yardi, who took control of the firm as part of a bankruptcy reorg this spring. “WeWork is such a popular and well-known brand, it didn’t seem right to let it go down,” Yardi said in May.

SL Green Buys Time at One Madison

One Madison, which SL Green owns in partnership w/ Hines and a Korean pension fund, has snagged a loan mod & extension after slower-than-expected leasing at the 1.4M sf tower. SLG had landed a $1.25B construction loan package from a consortium of banks in ‘20, and has now extended the loan (at SOFR + 3.1%, Wells leading) through ‘27, w/ the ability to reduce the spread upon achieving certain leasing milestones. The tower is 65% leased, which means the last 2Y haven’t been great on that front – a Sept. ‘22 Franklin Templeton 350K sf deal (asking rent at the time was $145/foot) had brought the tower to 55% leased. 🦥 Far cry from One Vandy.

Quickies  

• Snowflake subleases nearly 800K sf from Meta in Bay Area’s biggest lease of ‘24

• Wells to sell SF HQ as bank’s power base is now 🗽 

• 👂️Why JPMorgan didn’t buy One Vandy: Mary Ann Tighe tells the tale 

• Dondero’s NexPoint REIT refis $1.5B in debt at lower rates

• TF Cornerstone lands $448M perm loan from PNC at Pacific Park project

• Ghermezians claim East Rutherford owe them $183M at American Dream megamall

• Ready Capital to buy controversy-scarred TX resi lender UDF IV

• ICYMI: Starwood comes at Tides’ principals personally 

Unquotable Quotes