Holliday, Rechler Sue Barnett Over Worldwide Plaza Auction

Three of New York’s biggest real estate players are locked in a legal fight over a UCC sale tied to Worldwide Plaza.

Owners SL Green and RXR are asking a New York judge to stop what they call a “sham auction” by an entity tied to Gary Barnett’s Extell Development that aims to wrest control of the debt on the 1.8-million-square-foot office tower at 825 Eighth Avenue.

In a lawsuit filed Wednesday in Manhattan Supreme Court, the landlords accused Barnett of engineering a rigged UCC foreclosure to seize control of the ongoing restructuring of the $940 million CMBS senior mortgage on the 49-story tower. They are asking a judge to stop the January 15 sale.

Barnett claims to own a $190 million mezzanine loan tied to the property and has scheduled a public auction of the controlling entity. But the landlords say Extell has never shown any proof that it actually owns the loan, despite repeated requests. The owners received a default notice in October from Barnett, according to the suit.

According to the complaint, the foreclosure effort is not a genuine attempt to recover on the mezzanine debt but a control play orchestrated by Barnett to give Extell leverage in the ongoing debt restructuring, claiming that Extell has a direct interest in the bonds backed by the tower.

SL Green and RXR argue the UCC sale is a sham because it was structured to deter real bidders. In their filing, the landlords say the auction’s rushed timeline, lack of proper documentation and restrictive terms all but guarantee Barnett will win control of the property.

An Extell spokesperson did not immediately respond to a request for comment.

“Worldwide Plaza is an iconic, well-located asset, and we are ready to execute a robust redevelopment plan that will create an incredible offering in the heart of Midtown,” an SL Green spokesperson said. “The complaint reveals the lender’s underhanded attempt to interfere with the revitalization of the building and the tenants in our property.”

Korea-based Shinhan Financial Group provided $190 million of mezzanine debt on the building in 2017. The property is backed by $940 million in CMBS debt originated by Goldman Sachs and Deutsche Bank.

The debt went to special servicing in September 2024 after law firm Cravath, Swaine & Moore vacated 617,000 square feet for Brookfield’s Two Manhattan West, leaving Worldwide Plaza about 40 percent vacant. That space remains empty and the building was only 63 percent occupied as of March, according to Morningstar, down from 91 percent in 2023.

That could worsen as Nomura Holdings — the largest remaining tenant — plans to slash 75,000 square feet from its footprint by the beginning of 2027. The leftover 630,000 square feet is due to expire in 2033.

The property was appraised at $345 million in April, down 80 percent from its 2017 $1.7 billion valuation, according to CMBS loan documents. That appraisal drop is expected to cause $500 million of losses to the property’s CMBS bondholders.

Last month, Morningstar downgraded the rating to junk on the CMBS trust holding $705M of the building’s debt. The special servicer is reportedly negotiating with the borrower regarding a loan modification, according to Morningstar.