The real estate investment firm RXR has closed on Manhattan’s biggest office purchase in at least three years, spending $1.08 billion.
RXR bought 590 Madison Ave., a trophy 1 million-square-foot, 42-story Class A tower that was previously known as the IBM Building, from the State Teachers Retirement System of Ohio, one of the largest U.S. pension funds, RXR said Thursday in a statement.
The billion-dollar transaction is the largest office deal since March 2022, when global investment giant Blackstone bought a 49% stake in New York’s One Manhattan West, valuing it at $2.85 billion, according to CoStar data.
RXR bills the deal as the largest “full asset, non-user driven” acquisition in the city’s office market since March 2018.
The purchase of 590 Madison is a telling example of RXR’s “office recovery strategy” that targets Class A, trophy office properties that can be bought at “significant discounts to peak valuation,” RXR said. The firm said it buys these properties from institutions that are seeking to reduce their exposure to office, viewing them as “long-term winners in a bifurcated office market that is increasingly characterized by soaring demand for and shrinking supply of high-quality office space in Manhattan.”
A spokesperson for RXR didn’t immediately respond to a request for comment.
The property has attracted over 300,000 square feet of new leases as firms seek top-tier properties and locations, RXR said, adding it counts among tenants Apollo Global Management and Tiger Management as well as global fashion brands such as luxury label Louis Vuitton. Apollo inked a lease spanning 96,000 square feet at the property in April, according to CoStar data.
The property also has what RXR described as “high-street retail exposure” and counts among retail tenants luxury labels such as the jewelry and watch label Bucherer. The property has undergone a $100 million-plus overhaul, including a new $400-plus million, 21,000-square-foot Madison Avenue Club amenity suite, RXR said.
Positive outlook
The purchase comes as the office outlook remains positive for both New York and the Plaza District, the biggest U.S. office cluster and New York’s most expensive, according to a CoStar analysis.
Trophy properties near major transit hubs, especially in the Plaza District and nearby Grand Central market, are outperforming, with leasing volumes now at or near pre-pandemic levels, according to the CoStar report, adding “leasing momentum is being fueled by a relative sense of urgency as office tenants compete for a shrinking pool of top-tier space.”
RXR said in a separate statement it also has expanded its partnership with Liberty Mutual Investments, the investment arm of insurance firm Liberty Mutual Group, with the partnership to target $1 billion of “credit deployments,” including giving senior loans and construction financing.
For the record
RXR partnered on the transaction with Elliott Investment Management with the purchase backed by a senior mortgage financing from Apollo Global Management. Eastdil Secured represented the seller in the transaction while Newmark served as RXR’s equity capital adviser.