[NYguy]

https://www.crainsnewyork.com/real-e...-central-tower

RXR Realty to join team developing $3 billion Grand Central tower





DANIEL GEIGER
February 12, 2019

RXR Realty, one of the city's largest commercial landlords, will be part of the team that builds a nearly $3 billion office and hotel tower next to Grand Central Terminal.

The firm is close to reaching a deal to join developer TF Cornerstone and investment firm MSD Capital on the project, which will take advantage of a 2017 rezoning of Midtown East to raise a soaring 2 million-square-foot spire on the site of the Grand Hyatt hotel at East 42nd Street and Lexington Avenue.

"This is a unique development that fits into our model of focusing on irreplaceable locations closely connected to transportation," said Scott Rechler, RXR Realty's chairman and CEO. "We're one of the largest office owners in Midtown East, so we're big believers in the neighborhood and the area surrounding Grand Central."

In order to take part in the development, Rechler said he would step down from the board of the Metropolitan Transportation Authority by the end of February. The developers are required under the rezoning plan to invest what will likely be hundreds of millions of dollars in transportation and infrastructure improvements, the scope and details of which will be negotiated with the MTA.

"I plan to remain an advocate for transportation issues," said Rechler, who before serving on the MTA board was vice chairman of the Port Authority of New York and New Jersey's board of commissioners. "Because we will be negotiating with the MTA on the transportation improvements, it would have been a conflict of interest to remain on the board."

Rechler, an appointee of Gov. Andrew Cuomo, is also the chairman of the Regional Plan Association, an advocacy group active on transportation issues.

Rechler said the new tower could provide several transit upgrades, including a gleaming new entrance to the terminal and subway station. In addition to the transit upgrades and about $30 million of additional funds for public realm improvements that will come as a result of a city toll on air rights transferred to the Grand Hyatt site, Rechler said the tower could generate hundreds of millions of additional dollars for transit and infrastructure. Because the site is a state-owned land parcel, the tower may be assessed payments in lieu of taxes, he said, making it possible to dedicate that revenue stream to MTA needs or other improvement projects.

RXR Realty has amassed an office portfolio of more than 20 million square feet but has yet to build a commercial skyscraper from the ground up. Rechler said the firm has gained development expertise building large-scale residential projects outside of the city, such as in New Rochelle and Yonkers, and redeveloping several prominent office buildings in Manhattan, including 75 Rockefeller Center. It is part of a development team that is overhauling 550 Madison Ave.

Rechler said he also gained experience building office space during his time at the Port Authority, when he helped oversee completion of the nearly 3 million-square-foot, 1,776 foot-tall 1 World Trade Center.

Constructing the tower next to Grand Central, including a 500-room luxury Grand Hyatt to replace the one now at the site, will cost $2.5 billion to $3 billion, Rechler estimated.

The tower is another example of how rezoning has prompted development in Midtown East after other areas of the city such as Hudson Yards and Lower Manhattan began to lure away tenants with gleaming new space. JPMorgan Chase is planning a huge tower at 270 Park Ave., and developer Harry Macklowe wants to raise a more-than-1,500-foot-tall office spire across the street from St. Patrick's Cathedral. One Vanderbilt, a 1,400-foot-tall tower that SL Green is erecting on the other side of Grand Central, has already attracted several tenants.

"One Vanderbilt has helped validate the kind of office tower we want to build," Rechler said. "It's over 50% leased right now."

The plan for the Grand Hyatt site also reflects a growing willingness among developers to build without a tenant in hand because of strong demand for new office space.