Elecor Taps Rithm Capital’s Cash to Revive Office Portfolio

For Elecor Properties, the former Paramount Group, the buildings and the management team are the same. The balance sheet is not. Under new ownership by Rithm Capital, the Manhattan and San Francisco office landlord is refinancing debt, spending $250 million on portfolio upgrades and signing new tenants, Bisnow reported.

“Rithm has come in, looked at the plans and bolstered them,” Richard Reczka, Elecor’s senior vice president of acquisitions and capital markets, told Bisnow. “We’re in execution mode.”

The turnaround follows a rough stretch. Last year, shareholders pressed the company over the performance and management of its nearly 10 million-square-foot portfolio. The company disclosed that longtime CEO Albert Behler had received $4 million in previously undisclosed payments, raising questions about conflicts of interest and executive pay. The episode led to a Securities and Exchange Commission investigation, a leadership shakeup and, a sale.

Shareholders approved Rithm’s $1.6 billion acquisition in December. Rithm, a publicly traded investment manager led by CEO Michael Nierenberg, is shifting from a traditional mortgage REIT toward an alternative investment manager, with $61 billion in assets under management. According to Bisnow, it beat out Blackstone, SL Green Realty and Vornado Realty Trust for the deal. Because real estate operations were a relatively new area for Rithm, it kept most of Elecor’s operations in place.

The financing benefits showed up quickly. Facing a refinancing at 1325 Sixth Ave. while its future was unsettled, Elecor used Rithm’s lender relationships to secure a bridge loan. In April, the property was refinanced with a $283 million securitized loan from JPMorgan Chase. Reczka said he doubted the bridge-to-CMBS path would have been available without Rithm’s relationships.

More deals followed. In July, Elecor landed a $415 million CMBS loan plus $85 million of mezzanine debt for 31 W. 52nd St. Rithm contributed $73 million of fresh equity, including a $43 million leasing reserve, to retire a $500 million mortgage. In October, DRA Advisors bought a 49% stake in 1301 Sixth Ave., valuing the 1.7 million-square-foot tower at $1.3 billion.

Leasing has picked up as well. Per Rithm’s second-quarter earnings presentation, Elecor leased 681,000 square feet in the first half of the year, 62% of it in San Francisco. Rents in its New York portfolio rose 32% from a year earlier. Shortly after the merger, Natixis signed a nearly 203,000-square-foot lease at 1633 Broadway, one of the largest office deals of the fourth quarter.

Capital is also flowing into the buildings themselves. At 1633 Broadway, Elecor plans more than 40,000 square feet of amenities, including a bar, lounge, atrium and event space. Similar projects are underway at 712 Fifth Ave. and at One Market Plaza and One Front Street in San Francisco. Paramount had considered some of the renovations earlier but moved slowly without Rithm’s capital, Bisnow reported.

The backdrop remains tough. Ten-year Treasury yields are still above 5%, and inflation and higher rates are testing the commercial real estate recovery. Lenders increasingly demand upfront reserves to cover obligations such as tenant improvements. Reczka, who spent more than 18 years at Vornado before joining Elecor in 2021, called himself a “half-full kind of person.” He said stricter requirements can sting but reduce risk after years when “underwriting standards somewhat deteriorated.”

Elecor is also watching for acquisitions, though Reczka did not name targets. His takeaway on the ownership change was blunt: “It highlights again why you want to be owned by a company like Rithm. Because that’s not easy to do if you’re not a well-capitalized company.”