Real estate developer RFR, locked in a fight for control of the Chrysler Building in New York with the owner of the land beneath the iconic property, has been dealt a big setback.
A Manhattan judge ruled Thursday that The Cooper Union for the Advancement of Science and Art, the ground lessor for the landmarked art deco tower, had every right in September to terminate a ground lease it’s had with RFR after the real estate investment firm failed to pay some $21 million in rent since its last payment in May, according to court papers. The judge also ruled that Cooper Union, beginning on or after Friday, can start collecting rent from tenants in the building.
“The court clearly agreed that we were in our rights to terminate the lease,” Cooper Union’s Vice President of Finance and Administration John Ruth said in a statement, adding the court stated that RFR co-founder Aby Rosen and his partners “had presented not one viable defense to the termination of the ground lease.”
The court also noted as “undisputed” the fact that Rosen and his partners owe $21 million in arrears to the school, which also “is being irreparably harmed by their interference with our contractual rights to receive sub-tenants’ rent,” Cooper Union told CoStar News.
The children of Peter Cooper, who established the school in 1859, transferred the land where the building sits at 405 Lexington Ave. by 42nd Street to Cooper Union in 1902.
RFR’s involvement with the Chrysler Building began after it took over control of the ground lease in 2019 with its Australian partner Signal Holding before Signal was reportedly ordered last year to sell its stake in the building as part of its bankruptcy filing. RFR has said it’s invested more than $150 million in preventing the building, “an icon of the New York City skyline,” from “deteriorating and falling into disrepair and decline” amid the COVID-19 pandemic’s “deleterious economic effects” and the remote working trend.
The property isn’t the only one that RFR has had issues with as high interest rates, coupled with the troubled office market, have hurt office landlords nationwide. Eleven of RFR's Manhattan office properties were fighting foreclosures from lenders, suffering from high vacancy rates or bracing for possible mortgage defaults, Crain’s New York reported in September.
“RFR’s temporary removal from the Chrysler Building, resulting in the halting of its multi-hundred-million-dollar restoration, is a tremendous loss for New York City,” a spokesperson said in an emailed statement to CoStar News on Thursday. “Over the years, RFR has shown exceptional dedication to restoring and enhancing this historic property, to ensure it remains a leading address for tenants and a major asset for Cooper Union. This investment was not just about financial commitment; it reflects a broader vision to reestablish the Chrysler Building as a world-class office space.”
RFR said its plan for the building has included “meticulously planned upgrades,” including “revitalized” retail food and beverage options and “large scale fitness, health and wellness amenities.” It also has planned a “reimagined” 61st floor indoor/outdoor Cloud Club.
“With a capital improvement plan designed by top architects and preservationists, RFR has taken a forward-looking approach, aiming to lift the Chrysler Building back to a competitive Class A status, essential in today’s challenging real estate market,” RFR said.