Lenders Initiate Foreclosure of RXR’s Helmsley Building

A year after Scott Rechler’s RXR defaulted on a massive loan backing the iconic Helmsley Building in Midtown Manhattan, lenders made their move.

Operating on behalf of lenders, including Morgan Stanley, the plaintiff filed a foreclosure action in New York State Supreme Court, Crain’s reported. The move comes almost exactly a year after RXR allegedly defaulted on a $670 million mortgage backing the Helmsley Building at 230 Park Avenue, which is adjacent to Grand Central Terminal.

The loan in question was transferred to special servicing ahead of the maturity default. At the time, RXR said it was working to restructure the loan. A year later, the company says it’s still having “constructive conversations” with the lenders.

Outside of the $670 million mortgage, there’s another $125 million in mezzanine debt owned by Morgan Stanley and Brookfield, positioning the firms to assume the mortgage and control of the building upon completion of the foreclosure process.

RXR purchased the 35-story, 1.4 million-square-foot landmarked property from Invesco, Monday Properties and South Korea’s National Pension Service for $1.2 billion in 2015. The firm took out a $785 million acquisition loan from American International Group, and invested $190 million in improvements on the limestone exterior, bathrooms and windows.

But the pandemic caused ample problems for the office tower, which was appraised last month at $770 million, roughly 64% of its purchase price about a decade ago. Vacancy soared while the average weighted rent of the building’s tenants dropped. Voya, Reed Elsevier and Clarion Partners all have leases that expire next year, threatening 30 percent of the building’s rent roll as of last November.

RXR started analyzing the prospect of converting part of the property this year — presumably into residences — but progress on that possibility hasn’t been publicly revealed.

The property was developed in 1929 and landmarked in 1987. Harry Helmsley was one of the investors to acquire the building in 1978, putting his own name on the building at the request of his wife. A joint venture led by Monday Properties acquired the building in 2007 for $1.15 billion.

— Holden Walter-Warner