Two bastions of New York City’s commercial real estate market — landlord RXR and lender Hudson Realty Capital — are launching a lending venture with plans to back $2 billion worth of projects over the next two years.
For the firm’s executives, it’s a partnership 30 years in the making.
RXR President Michael Maturo met Hudson co-founder David Loo in the ’90s when they worked at the same consulting and accounting firm. Over the years, the two toyed with options to combine RXR’s real estate know-how with Hudson’s middle-market lending prowess.
In 2012, the firms took a step toward that goal, launching a commercial real estate lending platform to target tristate area deals.
In the decade since, both Hudson and Scott Rechler–led RXR have beefed up operations nationally, which made for a ripe opportunity to spin out a new lending platform: RXR-Hudson.
“We were looking for a partner that could add to our real estate and fundraising capabilities and where we could contribute our credit expertise,” said Loo. “And the RXR-Hudson combination is actually a perfect fit.”
The venture will be a 50-50 split. Loo said Hudson will leverage its lending capabilities to compete for large construction loans and value-added bridge loans, while RXR’s holdings and equity means RXR-Hudson “can be really aggressive with mezzanine and preferred equity investments.”
Maturo noted that a fair amount of financing is available to the multifamily and industrial sectors, but he sees ample room to provide more construction loans. The firms’ pitch is that RXR’s market knowledge gives the joint venture an edge over traditional real estate lenders.
“Lenders that have full-service, real estate expertise are going to be the ones that ultimately survive and thrive,” Loo said. “It will be those that can work through any potential issues at the borrower level.”
Maturo said that RXR, as a builder and borrower itself, will be more understanding of any changes a project may go through. And in the event that a loan recipient cannot finish a project, RXR-Hudson could take over and complete it.
RXR’s president added that a deal’s senior lender, be it a bank or insurance company, would be more confident with RXR-Hudson participating. He also said the new arm’s expertise and ability to mitigate risk will allow it to take on projects that a bank might avoid.
The joint venture is looking to go big. It is considering deals in the $100 million to $200 million range. Maturo noted that RXR has financed loans up to $500 million and plans to draw investors willing to co-invest in debt transactions.
“The deals that we are starting to look at now are almost unlimited,” Loo touted.
RXR-Hudson intends to lend on multifamily, industrial and lab-space projects. Maturo added that more office deals could come into play as the market emerges from Covid.
“As office landlords, we certainly know that market very well,” Maturo said.