🚨RXR Realty launched “Project Gemini,” a $3.5B joint venture with Baupost Group, Liberty Mutual, and others, targeting recapitalization of distressed Class A office towers at steep discounts. RXR seeded the fund with three billion-dollar Manhattan assets, including 590 Madison and Starrett-Lehigh, financed at conservative ~50–60% LTV. The structure allows landlords to contribute buildings in exchange for cash and portfolio equity, a model designed to stem foreclosures and stabilize values. For CRE capital markets, this marks one of the first scaled office “rescue funds” — setting potential price floors for prime assets amid record vacancies.
RXR Gemini Fund Size: $3.5B equity pool, seeded Sept 2025
Manhattan Vacancy: ~16%+ in 2024, up from ~8% in 2019
U.S. Office Values: –36% from 2022 peak, steepest sector decline
590 Madison Acquisition: >$1B value, ~$800M financing (~50–60% LTV)
Loan Performance. Conservative leverage (≤50% LTV) avoids debt traps; DSCR stress-tested on current NOI. Initial cash yields likely <3%, requiring reserve-backed carry.
Demand Dynamics. Lease-up modeled with 12+ months free rent and $100/SF+ TI. Flight-to-quality favors Gemini’s towers, while B/C assets bleed tenants.
Asset Strategies. $300M earmarked capex at 1211 Sixth Ave. Operators expected to deliver immediate amenity and ESG upgrades to secure renewals and backfills.
Capital Markets. With Green Street values off 36%, Gemini’s 60–70% discounts set reference pricing. If successful, expect conduit/insurance lenders to mirror this basis in underwriting.
Office values bottoming near 2025–26; Gemini sets price floor.
Only premier, “digital” assets attract leasing momentum.
Debt cautious: low leverage, reserve-heavy execution.
Spreads wide; exit caps underwritten at ~7%+, delaying recovery.
🛠 Operator’s Lens
Refi. Limited leverage; focus on flexible prepay and long-duration caps.
Value-Add. Tenant packages (12 months free rent, $100/SF TI) built into deal budgets.
Development. Conversion optionality considered only for obsolete “film” assets.
Lender POV. Banks, insurers, and CMBS view Gemini as a model to de-risk collateral, preferring structured recaps to fire sales.
Expect Gemini-style rescue funds in San Francisco and Chicago within 12–18 months.
Analysts see office values bottoming late 2025–26; Gemini activity may confirm.
Flight-to-quality will widen gap between trophy and commodity offices.
Risk: prolonged WFH keeps demand permanently ~20% below 2019.
Bisnow — RXR Launches $3.5B Office Fund Backed By Baupost, Liberty Mutual (Sept 24, 2025). Bloomberg — NYC Office Market Sees Generational Shift (2025). Green Street — CPPI® (Feb 2025). Commercial Observer — Maryland to Dispose of 37-Story Baltimore Tower (Sept 2025).
