RXR Launches $3.5B Office Fund Backed By Baupost, Liberty Mutual
RXR Realty has put three billion-dollar properties into a new office venture in the hopes of enticing owners of assets in dire financial straits to join it.
The prominent real estate investor run by CEO Scott Rechler launched its Gemini Office Venture on Wednesday, a $3.5B vehicle with three Manhattan properties owned by RXR and a slate of new investors.
RXR put its stakes in 590 Madison Ave. — which it just acquired for more than $1B in a deal with Elliott Investment Management — the Starrett-Lehigh Building and 1211 Sixth Ave. into Gemini, it said in a release. The Baupost Group, Criterion Real Estate Capital, Liberty Mutual Investments, Abrams Capital and King Street Capital Management all contributed equity to the new venture.
Rechler said in a statement that "Project Gemini" is the culmination of RXR's postpandemic office strategy of investing in buildings he refers to as "digital" and exiting buildings with no future, or "film" assets.
"With one of the largest structural realignments of the office market in decades, institutional investors have generally found office to be an uninvestable asset class, creating an opportunity for RXR to invest in high-quality properties at generationally attractive valuations," Rechler said in a statement.
Gemini and Elliott bought 590 Madison from the State Teachers Retirement System of Ohio last month, financed with a nearly $800M loan from Apollo Global Management.
RXR bought a 49% stake in 1211 Sixth Ave., the headquarters of News Corp. and Fox News, in January and extended the nearly $1.1B CMBS loan tied to the tower a few months later, agreeing to spend $300M along with co-owner Ivanhoé Cambridge in building upgrades.
Rechler's firm paid $920M in 2011 to acquire the 2.2M SF Starrett-Lehigh Building in Chelsea. In the Gemini release, RXR said it and its co-investors executed a $1.1B recapitalization of the building, which is popular with fashion tenants like Ralph Lauren.
Newmark and Eastdil Secured worked with RXR on structuring the Gemini fund, which is "designed to serve as a vehicle through which institutional office owners can contribute their legacy office holdings in exchange for liquidity and an interest in a high-quality, diversified portfolio," according to the release.
