RXR launches portfolio review dubbed Project Kodak to rethink profitability as offices remain half-full

BY C. J. HUGHES

RXR is planning to turn one of its landmark prewar office buildings in the Financial District into apartments as part of a broader portfolio review it has dubbed Project Kodak after the photographic film–maker, which also rethought its business model as its industry faced disruption.

The top office landlord is looking to convert 61 Broadway, a 33-story tower with a high level of vacancy. The 753,000-square-foot building, built in 1916, currently has 16 vacancies, among the highest in RXR’s New York portfolio, according to the company’s website.

The company is also considering converting 47 Hall St., a former prewar factory near the Brooklyn Navy Yard and one of the firm’s four Brooklyn properties.

RXR Chairman Scott Rechler told Crain’s that the company is reviewing all its buildings through Project Kodak. RXR will not invest in any buildings that are deemed to be obsolete “film” buildings, he said, and will focus instead on those properties that are up-todate “digital” buildings that can continue to attract office tenants.

“I said to my team, ‘Let’s be intellectually honest with ourselves,’ ” he told Crain’s. “ ‘What are alternatives we should pursue relative to these film buildings?’ ”

Rechler added that if he could not work out some kind of deals with his lenders for properties struggling with vacancies in order to restructure their loans, he would be forced to surrender some buildings.

“If you want to put new money in, you need to reset the deck to do so,” he said. “And if we can’t, we may have to hand back the keys.”

Rechler declined to discuss specific buildings in his company’s portfolio.

Not that easy

RXR bought 61 Broadway in 2014 from Broad Street Development for $330 million and later borrowed $240 million against the property from the Bank of China. The building, which extends through its block to Trinity Place and has an alley along its southern edge, also features windows on all four facades, a selling point for a residential conversion.

Also, its ninth floor includes an 11,500- s quare-foot amenity lounge for office tenants.

But Rechler said conversions aren’t as easy as they might seem, because commercial tenants can’t just be evicted. Lease buy-outs are pricey, he added.

“Some might be happy to leave, but you can’t do anything without their consent,” he said, adding that “the most vacant buildings are the most compelling.”

An average weekly head count in New York offices is 52%, according to a report from the Partnership for New York City that came out recently. ■