is anchored by
Davis Polk & Wardwell.
(RealShare New York comes to the Grand Hyatt, New York, NY, October 9.)
NEW YORK CITY-RXR Realty, a New York-based operating and investment company run by industry veteran Scott Rechler, has officially acquired 450 Lexington Avenue from Istithmar World, a deal that furthers the company’s strategy of expanding its core investments in Manhattan.
“This was a very complex transaction that was two years in the making,” Rechler says, in a statement. “It further demonstrates our continuing commitment to and belief in the New York City market where we have acquired over five million square feet of space in the past 24 months.”
As part of the deal, RXR purchased the $300 million mezzanine loan secured by the 40-story, 920,000-square-foot after working through the capital stack. According to Fitch Ratings, the loan was part of Credit Suisse Commercial Mortgage Trust Series 2007-C5, and was passed off to C-III Asset Management LLC due to maturity default after passing its July 17 maturity date. After the loan matured on July 11, RXR entered into the contract to acquire the property while ownership was in the midst of a rent re-set process with its largest tenant, Davis Polk & Wardwell, the same tenant that the building was constructed for in 1992. Prior to closing, RXR was able to resolve the negotiations with the tenant and extended their remaining lease term from 10 to 15 years.
The property – located between East 44th and 45th Streets just east of Grand Central Terminal – is 99% occupied. Other tenants besides Davis Polk here include private equity firm Warburg Pincus and Morgan Stanley Smith Barney.
According to a performance report from Fitch, the loan, sponsored by Istithmar, was originally purchased for $600 million in June 2006. Following that, a 2007 refinancing represented a full cash-out by the sponsor, and a $200 million pari passu note is held outside the trust, along with the $290 million mezzanine debt.
Property cash flow is expected to remain stable at the building, according to the report. Fitch says less than 3% of the net rentable area rolls during the remaining term, and less than 10% of the NRA rolls over the next four years. The property’s two largest tenants, comprising 85% of the NRA, operate on long-term leases through 2022 and 2024, respectively.
Over the last 18 months, RXR has acquired interested or made investments in seven New York City assets encompassing 6.6 million square feet, including the much-talked about acquisition of the Starrett-Lehigh Building in West Chelsea for $920 million.
[Missed it? Check out GlobeSt.com’s exclusive Q&A with RXR here.]