In June, the Helmsley Building, a well-known RXR property in Midtown, was put up for sale following a lengthy default process. A key point of discussion among real estate experts was the identity of the special servicer for the Helmsley Building's Commercial Mortgage-Backed Securities (CMBS) loan: Green Loan Services (GLS), a subsidiary of SL Green, an RXR competitor.
The relationship between borrowers and special servicers has been predominantly antagonistic throughout the thirty-year history of the CMBS market. However, some of New York's most prominent property owners see an opportunity in incorporating special servicing into their service offerings. While the idea of a borrower's CMBS loan being sent to a direct competitor for workout in the event of a default might raise concerns, proponents argue that property owners can bring unique insights and thus added value to the resolution of distressed assets.
RXR also recognises this value and is in the process of establishing its own special servicing platform this year. RXR views this step as a way to leverage the extensive expertise from its large office property portfolio on the equity side and its growing credit platform. The New York-based company's REX Loan Services platform was approved by Fitch Ratings in early July and by Morningstar in December.
Steven Schwartz, Executive Vice President and Head of Real Estate Credit at RXR, comments: “The clear advantage for us lies in our expertise in an asset class that has been under severe pressure for many years, and there is still an enormous number of office buildings that require a resolution. Participating in the CMBS business as a workout unit, or as a special servicer, complements our credit business and our comprehensive knowledge of office properties. If anyone can find a solution, it's us.” Schwartz, who joined RXR in late 2024 and has over 30 years of experience in CRE lending, stresses that a special servicing business will be useful in advising investors in RXR's credit sphere if they wish to acquire the controlling bonds, known as Directing Certificate Holder (DCH) – the most subordinate and lowest-rated debt in a CMBS transaction. He adds that those who wish to acquire bonds with higher credit risk will see value in the advisory services of a company with extensive experience on both the owner and lender sides in the office sector.
RXR is establishing its special servicing platform at a time of increasing distress in the commercial real estate market and existing concerns regarding potential conflicts of interest during the loan workout process. The issue of conflicts of interest is persistent. GLS's involvement as special servicer in the sale of RXR's Helmsley Building came two years after Fitch Ratings placed GLS's special servicer rating on negative watch. Fitch cited “the potential for conflicts of interest” in CMBS workouts in relation to the servicing standard. SL Green, New York’s largest office property owner, established its special servicer business back in 2006. A July 2025 Fitch report on GLS also noted that the platform “is subject to potential conflicts of interest” because SL Green subsidiaries “hold controlling positions in loans as well as workout responsibilities.”
Among the potential conflicts that a property owner or developer might encounter in special servicing is deep insight into competitors' books regarding the asset in question. This could offer an advantage concerning performance, leases, maturities, debt service coverage ratios, and other information that competitors usually keep confidential – especially during times of crisis. Fitch stated that GLS had assured it “acts in the best interest of the lenders it serves and adheres to the applicable servicing standard,” but it lacked policies outlining how “the influence of affiliates on workouts is minimised.”
Nevertheless, rating agencies play a crucial role in curbing conflicts of interest and preventing special servicers from sharing property information with unauthorised parties. A source familiar with the special servicing process remarks: “Their entire rating agency business is predicated on adhering to securities law. That’s why you have ratings, and special servicers have to adhere to the special servicing standard to preserve those ratings. I think there is pretty tight control over material non-public information.”
Despite the potential conflicts of interest highlighted by Fitch, GLS has created value as a special servicer due to its comprehensive knowledge of the New York office market and other property markets nationally. Christopher Herron, Managing Director at Iron Hound Management, a CRE advisory firm that assists borrowers with CMBS loan restructurings, states: “GLS, by its nature as an owner/operator, has a unique perspective to potentially know what something is truly worth, where deals get done, and how quickly to implement a turnaround plan or a stabilisation strategy. They have a very well-informed opinion on asset valuation, and that gets everyone to the table quicker to find a resolution to the problem at hand.” To limit potential conflicts of interest, GLS informed Fitch that it forms separate deal teams from investment and special servicing areas when servicing a loan in which SL Green holds a position. However, Fitch noted that the credit committee includes senior managers.
