RXR, one of New York's largest office landlords, and Ares Management are forming a $1 billion fund to invest in the city's distressed offices, according to a report in the Financial Times.
The timing is finally right, the principals believe, with many owners ready to accept new valuations and either sell or restructure their assets.
"We have clarity as to where rates are, we have clarity about the future of offices, and which buildings are going to be competitive, and we have a capitulation, I think, to a recognition that values aren't just bouncing back like they did in '08," RXR CEO Scott Rechler told the publication, adding that they were already in negotiations to buy $1 billion in office loans from different banks at varying discounts.
The two companies are only planning to invest in buildings with certain criteria though: namely assets that are still competitive but need new capital for renovations or debt restructuring – a category that Rechler described as "that middle, class-A part of the market."
RXR and Ares have seeded the new fund with $500 million and are hoping to raise at least an additional $500 million, according to the FT.
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Erika Morphy
Erika Morphy has been writing about commercial real estate at GlobeSt.com for more than ten years, covering the capital markets, the Mid-Atlantic region and national topics. She's a nerd so favorite examples of the former include accounting standards, Basel III and what Congress is brewing.
