RXR, SL Green, Apollo Recap 5 Times Square in Preparation for Repositioning

RXR, SL Green Realty and Apollo Global Management just closed a recap for 5 Times Square that involves a modification of the building’s $1.3 billion loan, along with a future $200 million equity infusion, Commercial Observer has learned. 

Sources familiar with the transaction said the modification allows the owners to use loan proceeds that otherwise would have been used for tenant improvements and office buildouts at the 39-story office tower to instead explore a multi-use conversion that would include office, residential and retail.

The loan was provided by Morgan Stanley, AIG and Apollo in September 2022.

Apollo was previously a mezzanine lender in the capital stack but converted its position into equity on Oct. 31 — becoming part of ownership— to effectuate the conversion. AIG, now Corebridge, is staying in the deal as a senior lender, while Morgan Stanley is not, sources said.

The building is currently 80 percent vacant, providing owners RXR, SL Green and Apollo a blank canvas for a fresh approach. As 5 Times Square’s next chapter is explored, ownership will now invest the additional $200 million in the property as needed during its conversion, sources said.

The recap closed Oct. 31. 

“They’re figuring out the highest and best use for the building that optimizes its value and potential, as well as the existing loan’s best use,” one source familiar with the modification told CO. 

Commercial Observer first reported in August that a residential conversion was being considered at the property. It’s being pursued under the new 467-m tax incentive, part of New York State’s 2025 budget to encourage office-to-residential conversions, and includes an affordable requirement. The incentive also allows the city to lift the 12 floor area ratio density cap — implemented in the 1960s to limit the size of properties — and rezone for bigger apartment buildings in certain areas. 

Sponsorship has been in conversation with the city and state about utilizing the new program at 5 Times Square, sources said. 

RXR mulled a similar residential rental concept for 75 Rockefeller Center in 2019, when it came close to an Airbnb partnership at the Midtown building. Pre-pandemic, the firm was trying to answer the overarching question of how to create an ecosystem within an office building that would bring it to life outside of the traditional 9-to-5 workday. Those plans didn’t pan out, and the idea was tossed during the height of the pandemic in 2020. 

Still, the thinking is that 5 Times Square holds potential for that same type of 15-minute city-type activation, with the buzzing square right outside its door, Bryant Park a block away, and the subway system beneath.

5 Times Square may be the first Times Square building to be converted to residential use, but it follows announcements that other Midtown properties were following the same path, such as the former Pfizer headquarters at 219 and 235 East 42nd Street and SL Green’s plan to convert 750 Third Avenue into apartments. 

While the building is largely empty and gutted, an office component will continue to exist, sources said, with Roku staying in the building. The streaming technology company signed a lease for 240,000 square feet at the building in January 2022, marking one of the biggest lease signings of the year. “The office market for the right buildings is seeing a lot of demand,” one source said. 

On the retail side, a brand-new signage wrap was just added to the building, and ownership is both upgrading the retail and exploring some experiential options for the space.

The building underwent a renovation following its financing in 2022. In addition to the $1.3 billion loan ownership secured, they also invested an additional $300 million in the property at that time to improve the lobby, restrooms and elevators and create a 32,000-square-foot amenity space with a fitness center, lounge, restaurant, bar and two golf simulators. Those amenities will be incorporated into the new plan, and shared among 5 Times Square’s multiple users, whether they’re office employees or residents sources said. 

It’s all happening in Times Square for SL Green, which is simultaneously pursuing a potential redevelopment of 1515 Broadway into a casino, along with partner Caesars Entertainment, and hoping high rollers will put everything on “Green.” 

Officials at RXR and Apollo declined to comment. SL Green officials didn’t return a request for comment. 

Cathy Cunningham can be reached at ccunningham@commercialobserver.com.