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<\/p>\nA troubled Midtown office tower is scheduled to hit the auction block next year, another reminder that Manhattan’s rising tide isn\u2019t lifting all boats.<\/p>\n
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\n The entrance to Worldwide Plaza, a 49-story office skyscraper on Eighth Avenue.\n <\/p>\n
Mezzanine lenders have scheduled a UCC foreclosure auction for the public sale of the entity that controls Worldwide Plaza<\/a>, a roughly 2M SF skyscraper at 825 Eighth Ave.<\/p>\n Goldman Sachs<\/a> and Deutsche Bank<\/a>\u00a0originated a combined $260M of mezzanine debt tied to the building, which is owned by a joint venture of SL Green<\/a>, RXR<\/a> and New York REIT Liquidating.\u00a0JLL<\/a>\u00a0scheduled a public sale\u00a0for Jan. 15, a notice for which was obtained by\u00a0Bisnow, for\u00a0WWP Mezz LLC, which controls the deed to Worldwide Plaza.<\/p>\n Proceeds from the auction, in addition to paying off the mezzanine loan, would go to fund unpaid interest payments, attorney fees and related charges, according to a KCP credit alert.<\/p>\n Goldman Sachs, Deutsche Bank and JLL declined to comment on the foreclosure notice.<\/p>\n UCC foreclosures target corporate entities, not properties, are speedier processes than judicial foreclosures, and\u00a0can be\u00a0used by mezzanine lenders<\/a> to seize\u00a0control of\u00a0properties before a senior lender takes action.<\/p>\n In the case of Worldwide Plaza, which has $940M\u00a0in senior\u00a0mortgages broken into multiple\u00a0CMBS\u00a0deals, investors in those securities are bracing for huge losses.\u00a0<\/p>\n RXR and SL Green partnered in 2017 to acquire a 49% stake in the 49-story building from New York REIT at a\u00a0$1.7B valuation, financed by $1.2B in debt underwritten by Goldman Sachs and Deutsche Bank. New York REIT Liquidating, which was established to wind down the REIT in 2018, still owns a majority stake in the building.<\/p>\n The CMBS loans\u00a0were placed into special servicing last September after law firm Cravath, Swaine & Moore\u00a0vacated its 617K SF in the tower<\/a>\u00a0for 480K SF at Brookfield<\/a>\u2019s Two Manhattan West<\/a> in a long-planned move. The space has yet to be filled, according to a Securities and Exchange Commission filing<\/a>\u00a0by New York REIT Liquidating\u00a0in August.<\/p>\n Cravath’s exit\u00a0from Worldwide Plaza, which was built in 1989, has been a blow from which the building’s owners haven’t recovered.\u00a0The building was 63% occupied as of March, according to Morningstar, down from 91% in 2023.<\/p>\n WWP Mezz LLC received a default notice in September 2024 from the holder of $190M of mezzanine debt, according to the filing. As of July, the landlords were in default on both their senior and mezzanine debt, the filing says.<\/p>\n In August,\u00a0an appraisal chopped $1.4B, or 80%, off Worldwide Plaza\u2019s value, Bisnow first reported<\/a>, cutting its estimated value down to just $345M. The reduced appraisal is expected to trigger nearly $500M of losses to the building’s CMBS<\/a> bondholders, hitting previously AAA-rated investment classes, Bloomberg reported<\/a>.<\/p>\n In October, DBRS Morningstar\u00a0downgraded the rating<\/a> on the CMBS\u00a0trust that holds $705M of the building’s debt\u00a0to junk. It noted in its report that the special servicer was negotiating with the borrower on a loan modification.<\/p>\n