Barnett Slams SL Green, RXR Over Worldwide Plaza Lawsuit

Gary Barnett is firing back against claims that a foreclosure auction tied to Worldwide Plaza is a rigged attempt from SL Green and RXR to wrest control of the property.

An entity tied to Barnett’s Extell Development filed court papers on Monday calling the lawsuit by the rival landlords meritless and accusing the firms of a last-minute scheme to block a UCC sale they’ve known about for months.

The legal fight centers on a planned January 15 foreclosure auction for the controlling entity of 825 Eighth Avenue, the 1.8 million-square-foot Midtown office complex owned by SL Green and RXR. The landlords sued Barnett to stop the UCC sale, arguing that the auction is commercially unreasonable.

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 Worldwide Plaza stake.

But Extell says SL Green and RXR are rewriting history.

In a memorandum filed in New York Supreme Court, the Barnett-backed mezzanine lender argues that SL Green and RXR have been in default for more than a year and were made aware of the foreclosure auction on October 31. Extell argues the lawsuit makes “no legitimate arguments” to stop the UCC sale, per court documents.

The filing also rejects claims that Barnett failed to supply proof that he controls the mezzanine loan, saying Extell made the original note available for inspection by the landlords. Extell also clapped back at claims the auction terms are too restrictive, saying they were explicitly negotiated and approved when the loan was originated.

Extell also argues that SL Green and RXR cannot show irreparable harm, a key requirement for stopping a foreclosure. The landlords themselves have claimed the property’s value has fallen well below the senior debt, Extell points out, meaning there is no equity left to protect, per the filing.

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

The senior 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.

“Our filing speaks for itself, and we maintain that the lender attempted to interfere with the revitalization of Worldwide Plaza and its tenants. Our formal response will be filed imminently,” said an SL Green spokesperson.

Representatives for RXR did not immediately respond to requests for comment. Lawyers for Extell did not immediately respond to a request for comment.