The college that has long owned the ground underneath the Chrysler Building says it has wrested control of the iconic skyscraper.
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A partnership led by RFR Holding has held the ground lease to the Chrysler Building for the past five years, but it stopped making rent payments after May, according to Cooper Union, the private college that owns the land at 405 Lexington Ave.
“As a result of their nonpayment, they are in default of the ground lease agreement,” Cooper Union Vice President of Finance John Ruth said in a statement Friday. “We issued a lease termination notice on Sept. 13, 2024. The ground lease will terminate today, Sept. 27, 2024, and control of the Chrysler Building will transfer to Cooper Union.”
RFR owes roughly $21M in unpaid rent, according to an email obtained by Crain's New York Business, which first reported Cooper Union's eviction notice.
RFR sued the school on Thursday in an effort to have the lease termination voided, leaving the fate of the iconic tower uncertain.
“Cooper Union’s misguided decision to share its inaccurate and self-serving letter with the media is a transparent and desperate attempt to deflect attention from, and create a false narrative around, RFR’s commencement of a lawsuit against it mere hours earlier,” Oved & Oved's Terrence and Darren Oved, attorneys for RFR’s Aby Rosen and Michael Fuchs, told Bisnow in a statement.
“While RFR prefers to resolve this matter amicably, and privately, if possible, it is also prepared for the alternative, if necessary.”
RFR paid $150M to acquire the tower in 2019 in a 50-50 partnership with Austrian investment firm Signa Holding. Signa collapsed last year, and the administrator in charge of handling the insolvency has looked to sell its stake in the tower.
Cooper Union hired Cushman & Wakefield to manage the building. The brokerage didn't immediately respond to Bisnow’s request for comment.
“This has no impact on student scholarship levels, nor on the recent announcement that Cooper Union’s senior class will attend tuition free in each of the next four years,” Ruth said.
Under the ground lease, the Chrysler Building's owners collected rent from the tower and paid an annual rent to Cooper Union. That was $32.5M a year at the start of the lease and due to increase to $41M by 2028, The Wall Street Journal reported.
RFR and Signa's acquisition was seen as a discount at the time. The building's prior owner, the Abu Dhabi Investment Council, had bought a 90% stake for $800M.
The ground lease payment schedule runs through 2147, but negotiations between Cooper Union and the skyscraper’s owner have stalled. RFR claimed in its lawsuit it has invested upward of $150M since acquiring the tower but still needed to rework its ground lease to “maintain financial feasibility” to operate the 1.3M SF tower, briefly the world's tallest building.
RFR claims Cooper Union “obstinately refused to engage” in talks to amend the lease.
Earlier this year, ownership signed its first retail tenants since the skyscraper’s luxury repositioning of its retail portion. But coworking firm Spaces is still the building’s largest tenant, and several floors are available for lease, according to the WSJ.
The dispute also places the building among a collection of RFR office properties with uncertain futures. The landlord received two foreclosure notices on other Manhattan offices in August and has as much as $2.4B in maturing loans due before May 2025.
Sasha Jones contributed reporting to this story.
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