Scott Rechler restructured his “digital asset” at 75 Rockefeller Plaza – a major capital overhaul for a building that just three years ago seemed to have solved some of the challenges of remote work.
RXR has tapped San Francisco-based hedge fund Farallon Capital Management as an investor in the 33-story tower that serves as RXR’s headquarters, sources said The real deal.
Farallon’s investment values the 60,000-square-foot tower at somewhere between $190 million and $200 million, according to a source familiar with the deal. That figure is significantly lower than the $260 million in debt RXR took on in 2022, when it secured a refinancing from Bank of America and Carlyle Group.
As part of this new deal, Rechler restructured the property’s debt. One person familiar said the lenders agreed to split the mortgage into a primary A note and a B “hope note,” which will be repaid if the building performs well.
The deal is notable because Bank of America and Carlyle Group made an offer not long ago, in the midst of the work-from-home era, when lenders were extremely cautious about office properties. Even deals from that period must be revisited today, as investors like Farrallon — and RXR with properties like 590 Madison Avenue — are still looking for big discounts on office properties.
Rechler described 75 Rock as a “digital asset” that is 95 percent leased to companies like Merrill Lynch, American Girl and Guidehouse, with record rents of more than $100 per square foot.
“We have never wavered in our belief in the New York City office market, but we have been disciplined in supporting the right assets,” he said in a statement. “The recapitalization of 75 Rock reflects our belief that prime real estate in world-class locations will continue to outperform.”
RXR’s CEO said this is the company’s seventh recapitalization in the past two years at 9 million square feet under its ‘3R’ strategy of resetting its base, restructuring debt and re-leasing space.
A representative for RXR declined to comment further on the deal. Representatives for Bank of America and Carlyle Group did not immediately respond to requests for comment.
A Newmark team led by Adam Spies and Adam Doneger negotiated the investment with Farallon.
The restructuring illustrates how uncertain the current office environment is, even for those who thought they knew where things stood.
If the financing had been done in 2022 at a conservative loan-to-value ratio of 60 percent, the property would have been valued at approximately $433 million — meaning its valuation has fallen by more than half in just three years.
At the time, the deal was heralded as a sign of stability in the volatile Covid era.
“This asset is the epitome of what lenders need in today’s capital markets: A+ sponsorship, investment-grade rentals and a superior capital improvement program near great lifestyle amenities,” Dustin Stolly of Newmark, who negotiated the 2022 loan, said in a statement at the time.
The new price is even further from the reported $500 million valuation that RXR set when it purchased the 99-year leasehold on 75 Rock in 2013. The company invested $150 million in renovating the tower in 2017.
Rechler announced a deal with Airbnb in 2019 to convert 10 floors in the building into 200 hotel-style units, but the deal fell apart the following year.
WeWork had leased about 300,000 square feet in the building, about half of the skyscraper, but terminated that lease as part of its 2023 bankruptcy restructuring.
Farallon was founded in 1986 by billionaire investor Tom Steyer, who stepped down in 2012 to focus on climate investments. Steyer – who ran in the 2020 Democratic presidential primaries – was a pioneer of merger arbitrage, investing in a corporate takeover target on the bet that a deal would or would not go through.
Farallon also has a significant real estate activity. The firm raised its fourth real estate fund in 2023: a $650 million vehicle focused on opportunistic deals in the US.
The real estate arm is led by Avner Husen, a former manager of Blackstone’s BREIT investment trust, who joined Farallon last year. The hedge fund partnered with Fetner Properties and MCB Real Estate in July to buy the 463-unit rental building 240 Willoughby Street in Fort Greene for $210 million.
Last year, Farallon struck another deal with Fetner, purchasing the 74-unit luxury rental building at 85 East End Avenue for $75 million.
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