RXR faces $315M foreclosure on office building it aims to keep

Scott Rechler’s firm blames “broken” capital structure at 340 Madison Ave

<p>A photo illustration of RXR’s Scott Rechler and 340 Madison Avenue (Getty, Google Maps, RXR)</p>

A photo illustration of RXR’s Scott Rechler and 340 Madison Avenue (Getty, Google Maps, RXR)

Scott Rechler divides his office portfolio into “digital” buildings worth investing in and “film” properties that are obsolete.

For the former, such as 1285 Sixth Avenue, his firm, RXR, has handed lenders hundreds of millions of dollars to extend loans. On the latter — take 61 Broadway in FiDi — it has stopped making mortgage payments.

RXR considers 340 Madison Avenue to be digital, not film. But a foreclosure filing Friday shows it’s not exactly black and white.

Massachusetts Mutual Life Insurance Company filed the complaint after RXR defaulted on the property’s $315 million mortgage, which went unpaid when it matured this year.

A spokesperson for the firm said RXR had identified 340 Madison “as a ‘digital,’ high-quality building with a broken capital structure.”

Last summer, RXR negotiated a six-month extension on the loan, seemingly to buy time to negotiate a workout. Though MassMutual took the matter to court, the spokesperson said a modification is still on the table.

“We have been in active discussions with the lender to restructure the $315 million mortgage, which is a non-recourse loan,” the spokesperson added.

Office financing has been tough to come by for several years. Banks have retreated, interest rates have spiked and some lenders are demanding hefty equity infusions to extend maturity dates.

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Fresh-faced office buildings with strong occupancy are best positioned to nab extensions or new debt. L&L Holding, renovated in 2022, locked down a $911 million debt package for 425 Park Ave in Midtown last month, according to BisNow. The building is 90 percent leased, mostly to financial firms such as anchor tenant Citadel.

The nearly century-old 340 Madison was last redeveloped in 2006, according to its website, but executive William Elder recently touted its “infrastructure upgrades and state-of-the-art amenities,” to BisNow.

Prospective tenants don’t seem to be impressed: About 300,000 square feet are available, according to its site. That’s 40 percent of the total rentable area.

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But RXR has been working to whittle that down, plugging holes with the finance and investing firms that lenders like.

In April, RXR leased about 7,000 square feet at 340 Madison to investment firm Yaupon Capital Management and 5,500 to Northampton Capital Partners, a new infrastructure and energy-transition investment firm headed by a former Apollo Global Management executive, according to the Commercial Observer.

RXR also inked renewals with SRS Real Estate Partners and Edelman Financial Engines and new leases with investment firm Tide Rock and Boundary Creek Advisors.

The additions, Elder said, boost the building’s reputation as a “coveted location within the financial industry.”