Extell’s Gary Barnett Buys Mezz Debt on One WorldWide Plaza as UCC Foreclosure Looms

In under a year, one of Manhattan’s prime office buildings has gone from being worked-out to being at the center of a foreclosure auction.  

But one of the biggest names in New York City commercial real estate is in the driver’s seat as the owner of the mezz debt, sources said.  

Nine months after Commercial Observer reported sponsors SL Green and RXR secured a modification on the $940 million commercial mortgage-backed securities (CMBS) loan on One Worldwide Plaza — a 2 million-square-foot office tower at 825 Eighth Avenue — mezzanine lenders have scheduled a UCC foreclosure auction of the property for Jan. 15. 

Sources familiar with the auction said Gary Barnett, president and founder of Extell Development Company, bought the mezzanine debt and the UCC foreclosure could now give him control of the 35-year-old Postmodern brick tower. 

Extell Development declined to comment. 

The Real Deal and BizNow reported that New York REIT Liquidating LLC, a limited liability company formed to complete the liquidation of New York REIT, defaulted on $190 million in mezzanine debt, and that the ownership trio has been in default on both the senior and mezzanine debt since July. 

The mezzanine loan is secured by the equity interest in the borrowing entity, so an auction or foreclosure on that loan effectively allows the winner of the auction to step in as the new borrower on the secured debt, and usually when that happens, the new borrower would then negotiate with the servicer to modify the CMBS loan, explained David Putro, heard of analytics at Morningstar Credit.

SL Green and RXR acquired a 49.9 percent ownership stake in the property in 2017, when they valued the office building at $1.7 billion. New York REIT Liquidating retains the 50.1 percent ownership of Worldwide Plaza.

TRD reported the property was appraised at $345 million in April, an 80 percent decline from its 2017 valuation. 

The building’s $940 million single-asset, single-borrower (SASB) mortgage —is  securitized in WPT 2017-WWP multiple conduits — with  pari passu senior notes also now held in GSMS 2017-GS8, GSMS 2017-GS9, BMARK 2018-B1 and BMARK 2018-B2. There is an additional $260 million in debt across three mezzanine loans.

The March 2025 modification was first highlighted by Morningstar Credit, which added that the sponsorship team planned to use loan reserves to fund operating expenses and debt service shortfalls. The loan was scheduled to mature in November 2027.

SL Green and RXR declined to comment. 

The massive SASB CMBS loan was first transferred to special servicing in September 2024 following a monetary default, as One Worldwide Plaza began feeling the effects stemming from the August 2024 loss of tenants Cravath, Swain & Moore, which had occupied 30 percent of the building. Moreover, tenant Nomura, occupier of 34 percent of the leasable area, holds an early termination option for January 2027. 

The departure of Cravath triggered a cash-trap provision that froze roughly $22 million that had been reserved for tenant improvements — almost all of the money was instead used by the sponsors to fund financial shortfalls in the ensuing months, according to CO’s earlier report on Morningstar’s analysis. 

During an October 2023 interview, SL Green CEO Marc Holliday told CO that sponsorship was working on redevelopment plans for One Worldwide Plaza and planned to make the 500,000 square feet of office space once occupied by Cravath at the top of the building “as attractive as can be to the market.” 

“It was kind of a state-of-the-art building when it was constructed back in the 1980s,” explained Holliday, “And I think, with a little attention paid to modernizing and creating some amenities in the building, it will be competitive.”

Brian Pascus can be reached at bpascus@commercialobserver.com while Cathy Cunningham can be reached at ccunningham@commericalobserver.com.