As banks increasingly shy away from lending on new residential construction projects, RXR Realty is moving in the opposite direction.
The Scott Rechler-led real estate investment firm is currently working on issuing more than $500 million in mezzanine construction loans and is also looking to lend on asset recapitalizations, Rechler told The Real Deal.
Lending on this scale is new turf for RXR, a firm primarily known as a buyer of commercial properties in Manhattan and the New York metropolitan area.
The rationale behind the move: though some banks are retreating from construction lending amid stricter regulations and market volatility, developers still need financing, which opens up opportunities for players like RXR.
“When there’s volatility you want to decouple yourself from broader market trends to try and find investments where you can capitalize on the impact of that volatility,” Rechler said, explaining his against-the-current strategy. Although RXR has not previously been a lender of note, Reckson Associates, the company Rechler headed until it was bought by SL Green Realty in 2007, was an active lender.
RXR is looking to lend on residential construction, but Rechler said it will shy away from ultra high-end condos amid signs that the luxury market has softened.
Crain’s first reported in June that RXR plans to become a real estate mezzanine lender, without specifying the types of assets and deals it would lend on.
RXR has bought roughly $8.6 billion worth of Manhattan real estate over the past five years, according to Real Capital Analytics. In December, the firm signed a contract to buy office tower 1285 Sixth Avenue for $1.7 billion.