Bad Loan on Financial District Office Building For Sale

JLL has listed for sale a $240 million nonperforming loan on a troubled Financial District office building.

The property, 61 Broadway, is owned by Scott Rechler’s RXR, but the company has agreed the keys back through a deed in lieu of foreclosure if necessary. The lender is a syndicate led by Aareal Bank.

RXR went into default on the property in December when it stopped making payments on the loan, which it took out in 2019. The loan had a two-year initial term and three one-year extensions. It reached maturity default on May 1.

Rechler said in February that it would shed the dead parts of its office portfolio because rising interest rates and falling office occupancy made the dated buildings not worth trying to rescue.

However, Rechler told The Real Deal that the company had already made its equity back on 61 Broadway after selling a 49 percent stake in 2016 to China Orient Asset Management, which is state-owned.

Built in 1913, 61 Broadway has 780,000 square feet and 33 stories. It was renovated in 1985 and 2019. RXR purchased it in 2014 from Broad Street Development for $330 million.

The office building has an occupancy rate of just 57 percent. In 2019, flexible workspace provider Knotel leased 60,300 square feet over four floors, but filed for bankruptcy two years later.

The loan listing is yet another sign of trouble in New York City’s office market. A report from Savills in July revealed that available office space in Manhattan reached an all-time high in the second quarter of this year, with 19.7 percent of all space being open for lease.

The report was particularly damning for the Financial District, where 29.3 percent of office space is available, the highest of any submarket in Manhattan.

Aareal Bank declined to comment on the listing. JLL didn’t respond to a request for comment in time for publication.

Correction: A previous version of this story incorrectly stated that RXR had handed back the keys to 61 Broadway through a deed-in-lieu of foreclosure. RXR has agreed to hand over the deed, but is still the owner.