The “office-market collapse caused by WFH” is believed to have lasted less than 72 hours. But it certainly stirred up what Scott Rechler, CEO of RXR Realty, called a “firestorm,” showing just how much the industry is on edge.
The Financial Times reported last week That Rechler planned to “give back the keys” to his banks on some RXR properties prompted scary headlines. Fortune chimed in, “A new era of remote working has prompted New York property tycoons to consider giving up some of their office buildings: ‘I don’t think we can do anything with them.'”
OMG, speculation gone. Can Reckler take down the mammoth Worldwide Plaza, Five Times Square or 75 Rockefeller Plaza?
But it turns out Rechler was referring to only two under-performers out of RXR’s 91-building, 31 million-square-foot commercial holdings valued at $21.2 billion. Rechler wrote a note to investors, disclosed by the commercial supervisorClarifying that there was no wholesale purge in the works.
The properties are probably 110-year-old 61 Broadway and 1889-vintage 47 Hall Street near the Brooklyn Navy Yard. Rechler would not confirm the exact addresses, citing bank confidentiality.
But he told Realty Check on Friday, “How the story picked up was symbolic of concern about the future of the offices. It lit a fire. We all know that sense of existential change.”
Rechler said RXR may no longer even part with the two properties under discussion. Talks are underway with lenders to convert them into apartments or mixed-use, and only if those efforts fail will Rechler be willing to hand back the keys.
“We are actively working on conversion plans, but we will need lenders to modify the loans,” he said. “We will invest a lot of money in this.”
Rechler offered this perspective on the business situation in the Big Apple. “The much-talked-about ‘quality flight’‘ There is a reality playing itself,’ he said. “One theme is renovation by tenants who want to spend a lot of money to live, and the other is trading up to high-quality buildings to rent tenants out” before they outgrow.
He’s pleased with a visible occupancy at the RXR towers, some of which have seen 100 percent employee attendance on “peak midweek days.” One day last week, “I’ve never seen our lobby so busy at 75 Rock.”