RXR Negotiates $1.2B Loan Modification for Midtown Office Property

RXR Realty has successfully negotiated a loan modification for one of its substantial Midtown office properties, highlighting the complex process that property owners must navigate when dealing with maturing debt.

What the new agreement entails: The modification entails a $1.2 billion loan associated with the 1.8 million square-foot building, located at 1285 Sixth Avenue. Under the revised terms, RXR Realty has committed to injecting $220 million of equity for reserves, resulting in a reduced loan balance of $980 million. 

This agreement also extends the debt maturity period by five years and increases the senior loan interest rate from 4% to 6%. The loan in question is jointly owned by Morgan Stanley and AIG. Additionally, the new arrangement includes a $60 million facility designated for future capital costs.

What the initial plan was: The original loan, initially secured in 2016, reached maturity in March, at which point the borrowers, comprising RXR Realty, David Werner, and China Life Insurance Co., negotiated a short extension. Despite efforts led by RXR President Michael Maturo to refinance the loan, they were ultimately unsuccessful.

A worrisome trend: The handling of maturing loans and the intricacies of modifications have garnered substantial attention this year, as a significant volume of loans are reaching maturity. Notably, more than 88% of office Commercial Mortgage-Backed Securities (CMBS) loans that matured in September did not pay off, according to Moody's Analytics.

In response to the challenges, several high-profile office property owners have chosen to relinquish ownership of their buildings, including Brookfield and Blackstone. Others, such as Aby Rosen's RFR, have succeeded in negotiating modifications and extensions for their loans. RXR Realty itself faced loan default issues at 61 Broadway earlier this year and recently entered into a deed-in-lieu-of-foreclosure agreement with its lender.