RXR Realty will join TF Cornerstone and Michael Dell’s investment firm on the $3 billion redevelopment of Grand Central’s Grand Hyatt hotel.
Scott Rechler, RXR’s CEO, will step down from his role as a board member at the Metropolitan Transportation Authority in order to avoid a potential conflict of interest, Crain’s reported.
“This is a unique development that fits into our model of focusing on irreplaceable locations closely connected to transportation,” Rechler said. “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.”
TF Cornerstone and Dell’s MSD Capital plan to redevelop the hotel at the corner of East 42nd Street and Lexington Avenue into a hotel and office building clocking it at more than 2 million square feet.
The project was made possible because of the city’s 2017 rezoning of Midtown East. That rezoning, however, required developers to make contributions toward improving transportation infrastructure that could reach into the hundreds of millions of dollars.
“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,” said Rechler, who is chairman of the Regional Plan Association, adding that he plans to “remain an advocate” for transportation issues.
The new tower could provide transit upgrades including a new entrance to the terminal and subway station. Because the property is owned by the state, the new building could make payments in lieu of taxes that could become a dedicated revenue stream to help fund the MTA’s other improvement projects.
“From a public policy standpoint, this is exactly how we should use value-capture methods from our transit to create new revenue streams,” Rechler said.
Construction on the new building, which will include a 500-room luxury Grand Hyatt, will cost between $2.5 billion and $3 billion, Rechler estimated. [Crain’s] – Rich Bockmann