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Financing Is Set For Rebuilding Of Commodore

Financing Is Set For Rebuilding Of Commodore
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December 23, 1977, Page 1Buy Reprints
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Two financial institutions have agreed to put up $80 million of the $100 million needed to reconstruct the Commodore Hotel, and work will begin in February, Donald Trump, the developer, said yesterday.

All the necessary approvals have been obtained from the Board of Estimate and the City Planning Commission, and the hotel is scheduled to reopen in the spring of 1980 as a glass‐sheathed Hyatt Regency.

“Everything is signed,” said the 31‐year old builder, who has been seeking financing for more than a year for the new 32‐story structure that will rise on 42d Street between Park and Lexington Avenues.

The new building will contain 1,407 rooms, five restaurants with a total of 2,000 seats, a 65,000‐square‐foot shopping plaza, and a dramatic 170‐foot‐long, glass‐enclosed bar that will be built out over the 42d Street sidewalk on the second floor level—the first of its kind in New York.

The project was the first beneficiary of the city's new Business Investment Incentive Policy, under which it was granted generous tax abatements over the next 40 years.

One argument used for granting the abatements was that the city had received no real estate tax payments on the property since 1970 when its owner, the Penn Central Company, declared bankruptcy.

The Bowery Savings Bank and the Equitable Life Assurance Society of the United States are putting up $45 million and S35 million, respectively, with the balance coming from Mr. Trump and the Hyatt Corporation, who are equal partners in the hotel.

Mr. Trump will pay the Penn Central Company $9.5 million for the property and $6 million of that amount will go to the city for the payment of back taxes.

The hotel will then be sold for Si to the New York Urban Development Corporation, whose condemnation powers were necessary, and will be leased back to Mr. Trump and Hyatt for 99 years.

The hotel corporation will pay New York City $250,000 a year during construction in lieu of real estate taxes.

These payments will be increased regularly after the hotel opens to $2.27 million after 40 years. The city will also benefit under a profit‐sharing formula; its share increases to 50 percent should profits exceed $5.5 million a year.

Faith in City Cited

For Mr. Trump, who is the scion of a family that owns 22,000 apartments, shopping centers and office buildings, it I is the first project he has brought to fruition on his own.

“I think we've proven people still have a lot of confidence in the city,” said the builder. He acknowledged that the recent high occupancy rates in all of the city's higher‐priced hotels had made it easier to raise the needed funds.

The Commodore has been vacant, except for some ground‐floor commercial tenants, since W. J. Schapp of St. Louis became the last guest to check in on May 18 of last year.

The Penn Central said at the time that the hotel was losing more than $1 million a year, but some real estate owners .contended the closing was timed to increase the pressure on the Board of Estimate to approve the tax abatements Mr. Trump said he needed.

The $4 million‐a‐year tax abatement was passed by the Board of Estimate two days after the hotel closed.

Mr. Trump decided to tear down the Commodore, rather than merely renovate the structure, to permit a more dramatic design, including a six‐story‐high entrance lobby with fountains and foliage as well as the bar that will hang over the street.

Another major new hotel scheduled to begin construction in the next few weeks is the Palace, to be built behind the Villard Houses on the block bounded by Madison and Park Avenues between 50th and 51st Streets. The 600‐room structure will he constructed by Harry B. Helmsley, who will operate it himself.

Mr. Helmsely is also considering the consruction of a hotel at another site he owns on 42d Street, east of Third Avenue, and the New York Hilton is reexamining the possibility of building a 1,200‐room addition.

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