Two New York developers are seeking nearly $5 billion in federal loans to level the former Commodore Hotel in New York City and replace it with a 1,575-foot-tall office and hotel tower.
RXR and TF Cornerstone have proposed the project, which would see the hotel – most recently known as the Hyatt Grand Central New York – leveled and replaced with a 1,575-foot-tall office and hotel tower, according to a recent Business Insider article. This $6.5 billion construction project would result in the tallest skyscraper by roof height ever built in America – and the most expensive. This includes about $550 million worth of accompanying transit improvements the developers intend to make as part of the project.
Business Insider also reported that the developers have “imagined improving portions of the historic neighboring train terminal and the subway station below the site.”
To help pay for what has been dubbed the 175 Park Avenue Project, RXR and TF Cornerstone plan to apply for as much as $4.84 billion in federal loans to help pay for the tower, according to a list of mostly transportation-related projects seeking federal money earmarked for transit-infrastructure development and upgrades.
Scott Rechler, CEO and chair of RXR, told Business Insider that the project team behind 175 Park Avenue is attempting to secure federal loans for the project due to ongoing disruptions in the lending market, which have made securing financing from private-sector lenders challenging.
Banks, life insurance companies, debt funds, and other mortgage debt providers have retreated from office financing due to concerns over the impact of rising interest rates on property values and vacancies driven by the sustained popularity of hybrid and remote work.
Trey Morsbach, an executive managing director at JLL and co-leader of the firm’s real estate debt advisory practice, noted to Business Insider that even in favorable leasing and lending environments, securing financing for multibillion-dollar office developments was complex. These projects typically require multiple lenders to share the loan and mitigate risk.
For example, One Vanderbilt—a roughly 1,400-foot-tall tower that opened in 2020 near Grand Central Terminal—secured a $1.5 billion construction loan from a consortium of six banks in 2016 to move forward.
Morsbach added that lenders continue to fund office construction, largely because there’s a growing belief that newly built, high-end spaces will outperform the broader market. However, the pool of active financing groups has dwindled, making it more difficult for projects like 175 Park Avenue, which depend on lending consortiums and market liquidity, to secure funding.
Lenders "are interested but just aren't willing to commit the same scale," Morsbach said.
The lending programs RXR and TF Cornerstone are looking to apply for are called the Transportation Infrastructure Finance and Innovation Act and Railroad Rehabilitation and Improvement Financing. These programs offer low-cost financing and payback periods of 35 years or more.
While initially intended for transit upgrades, the programs were updated in 2021 as part of the Infrastructure Investment and Jobs Act to allow funding for private development “within a half mile walking distance of transit – commuter and intercity passenger rail stations,” a DOT spokesperson told Business Insider.
But according to the publication, few builders have tapped the money despite the RRIF holding about $30 billion in unused funds. Many developers have reportedly stayed away, at least in part due to the tedious qualification process. The 175 Park Avenue project will need to receive an investment-grade credit rating from a major ratings agency and pass a federal environmental review to receive the financing.
Stijn Van Nieuwerburgh, the Earle W. Kazis and Benjamin Schore professor of real estate at Columbia Business School, told Business Insider that “it’s extremely cumbersome to access that money,” but added that the cost benefits for successfully sourcing a federal loan at the scale necessary for a project as large as 175 Park Avenue versus a private one would be “absolutely astronomical” for the developers.
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Frequently Asked Questions
Will I need to mark out the utilities that GPRS locates?
GPRS will locate and mark all utilities for you. We have a variety of tools and markers we can use to highlight the locations of utilities, underground storage tanks and whatever else may be hiding.
What is the difference between a design intent and as-built model?
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