Two New York developers are seeking nearly $5 billion in federal loans to demolish the former Commodore Hotel and construct a towering 1,575-foot office and hotel skyscraper in its place.
RXR and TF Cornerstone have put forward the proposal, which would see the hotel—most recently known as the Hyatt Grand Central New York—torn down and replaced with the massive high-rise, according to a recent Business Insider report. With an estimated cost of $6.5 billion, this project would not only be the tallest skyscraper by roof height ever built in the U.S. but also the most expensive. The development plan includes roughly $550 million in transit upgrades that the developers intend to implement as part of the project.
Business Insider also noted that the developers have envisioned improvements to parts of the historic adjacent train terminal and the subway station beneath the site.
To finance what has been dubbed the 175 Park Avenue Project, RXR and TF Cornerstone plan to seek up to $4.84 billion in federal loans. This request is part of a broader list of transportation-related projects vying for federal funding earmarked for transit infrastructure enhancements.
Scott Rechler, CEO and chair of RXR, told Business Insider that securing financing through private-sector lenders has become increasingly difficult due to disruptions in the lending market. He cited ongoing challenges, including rising interest rates and concerns over office vacancies caused by the shift toward hybrid and remote work models.
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Traditional lenders such as banks, life insurance companies, and debt funds have pulled back from office financing, wary of the potential risks associated with declining property values.
Trey Morsbach, an executive managing director at JLL and co-leader of the firm’s real estate debt advisory practice, explained to *Business Insider* that even under favorable market conditions, obtaining financing for large-scale office developments is highly complex. Such projects often require multiple lenders to share the loan to spread the risk.
For instance, One Vanderbilt—a roughly 1,400-foot-tall skyscraper near Grand Central Terminal—secured a $1.5 billion construction loan in 2016 from a coalition of six banks to bring the project to life.
Morsbach noted that while lenders are still funding office construction, they are focusing primarily on high-end, newly built spaces that are expected to perform well despite market uncertainties. However, the number of active lenders has shrunk, making it increasingly difficult for projects like 175 Park Avenue to secure the necessary funding.
“Lenders are interested but aren’t willing to commit at the same scale,” Morsbach said.
The funding programs RXR and TF Cornerstone are targeting include the Transportation Infrastructure Finance and Innovation Act (TIFIA) and the Railroad Rehabilitation and Improvement Financing (RRIF) program. These initiatives provide long-term, low-cost financing with repayment periods extending beyond 35 years.
Originally designed for transit infrastructure projects, these programs were expanded in 2021 under the Infrastructure Investment and Jobs Act to allow funding for private developments within a half-mile walking distance of transit hubs, including commuter and intercity passenger rail stations, according to a Department of Transportation spokesperson.
Despite these adjustments, Business Insider reported that few developers have taken advantage of these funds, in part because of the complex qualification process. The RRIF program, for instance, holds approximately $30 billion in unused funds. For 175 Park Avenue to qualify, the project must obtain an investment-grade credit rating from a major ratings agency and pass a federal environmental review.
Stijn Van Nieuwerburgh, a professor of real estate at Columbia Business School, told *Business Insider* that accessing these funds is “extremely cumbersome.” However, he emphasized that the financial benefits of securing a federal loan for a project of this scale—as opposed to a private loan—would be “absolutely astronomical” for the developers.
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.
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