RXR Closes 590 Madison Avenue with Apollo loan

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Scott Rechler closed his $1 billion deal for 590 Madison Avenue with a big private equity loan, marking New York City’s largest investment sale in three years.

Mark Rowan’s Apollo Global Management provided $785 million in debt to finance RXR’s $1.08 billion purchase of the Plaza District office tower from the State Teachers Retirement System of Ohio, sources told The Real Deal.

“This is one of the highest quality buildings in Manhattan with one of the best locations at 57th Street and Madison,” Rechler said. “With institutions seeking to shed their exposure to office, we view this as a great time to be investing.”

RXR partnered with Elliott Investment Management on the deal, which closed Thursday.

The closing wasn’t without its hiccups.

Rechler signed a contract to buy the building in May, with a closing deadline set for July 31. But RXR needed more time to lock in its financing and got a two-week extension, for which the company had to pay a $5 million fee that was tacked onto the final purchase price.

Rechler said the delay was the result of President Donald Trump’s “Liberation Day” tariffs in early April unsettling financial markets. He had been negotiating late into the process with Cale Street Partners, a privately held real estate finance firm based in the U.K. and backed by the Kuwait Investment Authority.

But RXR ultimately pivoted to Apollo, which earlier this year provided a $575 million loan for the company’s conversion of the 5 Times Square office building into nearly 1,000 apartments. It’s possible that Cale Street could take a piece of the financing deal at a later date.

The final debt package is broken down into a $650 million senior loan, a $135 million mezzanine loan and about $60 million in future funding commitments for things like tenant improvements and leasing costs.

An Eastdil Secured team led by Will Silverman and Gary Phillips negotiated the sale. Eastdil’s Grant Frankel arranged the debt.

In the past year, Ohio Teachers signed about 300,000 square feet of leases at the tower — including a 100,000 square foot deal with Apollo in April — and Rechler said he’s already got leases out with new tenants for space in the building.

Some have described the 43-story, 1 million-square-foot property as a B building in an A+ location.

The tower was completed in 1983 and shows its age with challenging design features like relatively low ceilings and heating/cooling infrastructure along the outside walls, limiting the amount of exposed window space.

Rechler said the building’s setbacks mitigate some of those challenges and provide enough light and air. He said 590 Madison is “clearly digital” in his paradigm of high-quality “digital” office buildings versus outdated “film” ones.

RXR plans to renovate the building’s atrium area, and there’s also some potential upside in the retail space, which is currently occupied by the luxury watch seller Tourneau. Retail properties in the area have been bolstered recently by luxury brands like Gucci, Prada and Akris buying spaces on Fifth and Madison avenues.

Rechler said he’s in talks with LMVH, which is also an office tenant at 590, about the building’s retail.

It’s been a long road to get to this point.

Rechler said he first took a look at 590 Madison in 1993 when he was working with Odyssey Investment Partners, which teamed up with Ohio Teachers to purchase the building. He made an offer on the tower in 2018 when the sellers put it up for sale, and then made an unsolicited offer sometime in the past two years or so.

Rechler said each offer was roughly in the same area as the $1.08 billion he ultimately paid.

“Part of the challenge with a lot of these groups and where it becomes interesting is you’ve had these buildings valued at a certain level and it’s hard to sell until that comes down to a level that clears the market,” he explained. “There are opportunities today with a lot of institutions where office valuations have dropped and they’re marking their positions down to reasonable enough levels where it becomes compelling.”