• Almost 50 years ago, a young Donald Trump had a career breakthrough redeveloping a NYC hotel.
• Now, developers want to replace the property with the country's most expensive tower.
• The project's builders need almost $5 billion of federal loans to do it.

Donald Trump was a young developer eager to make a name for himself in the Manhattan real estate industry when he struck a career-making deal to redevelop the Commodore Hotel next to Grand Central Terminal into a 1,300-room Grand Hyatt clad in dark glass.

Nearly half a century later, Trump may again have an opportunity to play a role in the site's destiny when he returns to the White House.

New York developers RXR and TF Cornerstone have proposed leveling the property and raising a 1,575-foot-tall office and hotel tower in its place that would cost as much as $6.5 billion to construct. It would be both the tallest skyscraper by roof height ever built in America as well as the most expensive.

Renderings of the mega-tower show how it will dwarf surrounding structures, including the neighboring landmark Chrysler Building and even a new headquarters tower being built nearby for JPMorgan Chase.

As part of the work, the pair have imagined making improvements to portions of the historic neighboring train terminal and the subway station below the site.

To help pay for the immense project — called 175 Park Avenue — the developers are taking an unusual approach at a moment when lenders have remained wary to finance such large-scale office development.

The property was recently included on a list of mostly transportation related projects that are seeking access to federal money earmarked for transit infrastructure development and upgrades.

RXR and TF Cornerstone are planning to apply for as much as $4.84 billion of federal loans to help pay for the tower, according to the document. The developers expect to spend as much as $6.5 billion on the project, a sum that includes about $550 million of accompanying transit improvements they will make as part of the project. The team is listed as having submitted a draft letter of interest in the federal money, a preliminary and non-binding step in applying for the funding.

The federal money is discretionary and administered by the US Department of Transportation, meaning that the incoming Trump administration — and possibly even the president himself — will have decision-making authority over which projects are ultimately awarded.

"I would expect he'd be supportive and excited about it, and obviously at the appropriate time we're going to be reaching out," Scott Rechler, the CEO and chairman of RXR, said, noting that he hadn't yet attempted to discuss the tower project with the president-elect or anyone in his circle. "He understands office buildings better than any president before."

A shortage of capital for office development

Rechler said the project team behind 175 Park Avenue is exploring the federal loans because of lingering dislocations in the lending market that have made it difficult to source financing from private sector lenders.

Banks, life insurance companies, debt funds, and other sources of mortgage debt have pulled away from office financing as a result of concerns about the stresses of higher interest rates on property values and vacancies created by the enduring popularity of hybrid and remote work.

Trey Morsbach, an executive managing director at JLL who co-leads the firm's real estate debt advisory practice, said that multi-billion-dollar office projects are tricky to finance even during favorable leasing and lending conditions, requiring collections of lenders to divide the loan and spread their risk.

One Vanderbilt, a roughly 1,400-foot-tall tower that opened in 2020 on the other side of Grand Central Terminal from 175 Park Avenue, for instance, received a $1.5 billion construction loan from a group of six banks in 2016 in order to proceed.

Morsbach said that lenders were still funding office construction today, in large part because there is a growing belief that newly built, high-end spaces will outperform the broader market. The pool of active financing groups has shrunk, however, challenging deals like 175 Park Avenue that rely on lending consortiums and benefit from market depth.

Lenders "are interested, but just aren't willing to commit the same scale," Morsbach said.

An unused pot of tens of billions of federal dollars

RXR and TF Cornerstone are aiming to tap lending programs called the Transportation Infrastructure Finance and Innovation Act and Railroad Rehabilitation and Improvement Financing. The programs, known by their acronyms Tifia and Rrif, respectively, offer projects access to low-cost financing and long payback periods stretching 35 years or more.

The cost benefits of sourcing a loan at the scale necessary to fund the construction of 175 Park Avenue from the federal government versus the private market would be "absolutely astronomical" for the developers, according to Stijn Van Nieuwerburgh, the Earle W. Kazis and Benjamin Schore Professor of Real Estate at Columbia Business School.

Although the programs are aimed at transit upgrades, they were updated as part of the Infrastructure Investment and Jobs Act in 2021 to allow funding for private development located "within a half mile walking distance of transit — commuter and intercity passenger rail stations," according to a DOT spokeswoman.

Few builders, however, have tapped the money, even though the Rrif program holds about $30 billion of unused funds, in part, because of the tedious qualification process.

To receive the financing, the 175 Park Avenue project must receive an investment grade credit rating from a major ratings agency and pass through a federal environmental review.

"It's extremely cumbersome to access that money," Van Nieuwerburgh said.

There has been optimism in the commercial real estate industry that the Trump administration will be more accommodative of business, including by stripping back regulation.

"Donald Trump comes in, his team cuts through the red tape, navigates through and unleashes a $6 billion project that's going to improve transit, create the biggest building in the Western hemisphere," Rechler said of 175 Park Avenue's potential appeal to the president-elect. "It speaks to a lot of his policies and the administration's approach to wanting to get things done."

Unflattering politics

Rechler, however, was for years closely aligned politically with former New York Governor Andrew Cuomo — a Democrat and nemesis of Trump's during his first term in the White House.

Rechler, who noted he is a registered independent, is hoping that economic development will prevail over politics.

But a person who is in line to become a Trump administration official said that Rechler's past associations may not be lost on the new administration.

"I'm not speaking for Trump, but I would be in utter shock if the transportation department, which must oversee the railroads, if they signed off on that deal," the person said.