Worldwide Plaza's $940M Loan Hits Special Servicing After Missed Debt Payment
The owners of a 1.8M SF Midtown Manhattan office tower are in talks with their lender after falling behind on payments for nearly $1B in CMBS debt.
SL Green and RXR Realty, which own a nearly 49% stake in Worldwide Plaza at 825 Eighth Ave., are the sponsors on a $940M package of CMBS loans that transferred to special servicing last month for “imminent monetary default,” according to the Morningstar Credit database.
The building's owners are working with the special servicer to try to modify and extend the debt on the building, which matures in November 2027. The servicer, Situs Holdings, wrote in a commentary note that the sponsor indicated it “will not fund operating deficits.” The borrowers are delinquent on the September payment, according to Morningstar.
“Ownership remains in dialogue with its lenders toward a modification and extension of the underlying debt,” an SL Green spokesperson told Bisnow in a statement.
The building had an operating shortfall in September following the move-out of Cravath, Swaine & Moore, which had a lease for 30% of the tower's 1.6M SF of office space that expired at the end of August. It relocated to a 480K SF spread at Brookfield's Two Manhattan West.
Cash flow had been declining for some time due to increased expenses, but Cravath’s exit from Worldwide Plaza set off a cash trap that has accrued $22.4M of tenant improvement reserves.
“The landlord has substantial reserves held by the lender to meet the recent leasing activity, assure the continued Class A operation including the on-going, transformative redesign of the building’s plaza and the funding of building carry costs,” SL Green's spokesperson said.
The landlords recently signed M. Shanken Communications, which publishes Wine Spectator and Cigar Aficionado, to a 38K SF renewal, indicative of Worldwide Plaza's "blue-chip tenant roster," per the spokesperson. The building was 98% occupied before Cravath's move-out and also has more than 250K SF of amenity space.
“The existing availability is a highly desirable, large block of premium Class A space,” the spokesperson said.
The building is 50.1% owned by New York REIT Liquidating LLC, which was established in 2018 to wind down New York REIT. SL Green and RXR bought a 48.7% stake in Worldwide Plaza a year before that, valuing the property at $1.7B. The liquidating LLC still owns the majority stake in the building, Bloomberg reported.
An RXR spokesperson didn't respond to Bisnow’s request for comment.
Owners of older vintage office towers in New York have had to grapple with a challenging leasing environment and a dwindling pool of lenders willing to refinance maturing loans.
Blackstone relinquished the 26-story office tower at 1740 Broadway to its lender following two major tenant move-outs. The $308M was placed in special servicing in 2022 after the private equity giant stopped covering the operating shortfall.
The building’s value dropped to $175M, less than a third of the $605M Blackstone paid to acquire it in 2014, by the time the loan was placed in special servicing. The note covering the tower eventually sold earlier this year to opportunistic investor Yellowstone Real Estate, which paid less than $200M for the tower.
The transaction led to the first loss on a AAA-rated CMBS bond since 2008, triggering alarm that investors who put money into highly rated office debt instruments could face losses.
