RFR sues Cooper Union to block termination of $75.5M ground lease at Chrysler Building

UPDATED: Aby Rosen and Michael Fuchs’s RFR Holding filed a lawsuit yesterday asking a judge to block its landlord Cooper Union from terminating RFR Holding’s $75.5 million ground lease at the Chrysler Building. The complaint alleges Cooper Union sent a 10-day lease termination notice on September 13, after it alleged RFR, its tenant, had not made ground lease payments in June and July. RFR filed the case through the entity R&S Chrysler LLC in New York State Supreme Court in Manhattan on September 26, 2024. The complaint does not set a value on the ground lease, the $75.5 million figure is from city property records.
Case LINK

Court filings represent the position of one party and are not necessarily accurate or complete.

RFR Holding is a major commercial landlord in New York City and elsewhere, and like other large landlords has seen the value of its office properties decline following Covid. RFR Holding bought the ground lease in April 2019 through a three-property, $150 million deal, from Tishman Speyer and Abu Dhabi Investment Council. Despite the widely reported $150 million figure, half of that was allocated to the Chrysler Building and half to adjacent buildings at 145-155 East 42nd Street which RFR bought in fee and are not part of this litigation. The city valued the ground lease under the Chrysler Building at $75.5 million in the lease assignment in 2019. At that time RFR borrowed $30 million from Mack Real Estate Group. RFR paid off that loan on July 12, 2024.

According to the complaint, “On or about April 5, 2019, the Amended Ground Lease was assigned to Plaintiff… By its terms, the Ground Lease was set to expire more than 128 years later, on December 31, 2147… Plaintiff infused the Chrysler Building with additional capital and other expenditures exceeding One Hundred Fifty Million Dollars ($150,000,000) in the aggregate, including Plaintiff directly funding amounts to cover the Building’s tenants’ rental shortfalls… Defendant, acting in bad faith, obstinately refused to engage with Plaintiff to effect reasonable and necessary modifications to the Amended Ground Lease… on or about July 24, 2024, Defendant issued a ThirtyDay Notice to Cure (the “Purported Notice to Cure”) purporting to advise Plaintiff that it owed rent for the months of June and July 2024… On or about September 13, 2024, Defendant issued a Ten-Day Notice of Termination.”

The Cooper Union’s John Ruth, Vice President Finance, said in a statement to PincusCo that it was taking control of the property as the ground lease would terminate today, September 27.

“R&S Chrysler LLC stopped making monthly ground lease payments on the Chrysler Building to The Cooper Union. As a result of their nonpayment, they are in default of the ground lease agreement. 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. We are engaging a world-class property management firm, Cushman & Wakefield, to ensure a smooth transition for our tenants.
“Importantly, 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. We anticipated the possibility of a lease agreement default as part of our financial turnaround work and implementation of the Plan to Return to Full-Tuition Scholarships. We built in guardrails to our financial turnaround plan through fundraising, revenue generation, and expense management to protect against a wide range of scenarios, such as this termination and the impacts of the pandemic, all while holding student tuition flat for six, consecutive years and consistently raising scholarship levels for undergraduates.”

According to the New York Post, the ground rent was $32.5 million a year in 2019, and will rise to $41 million in 2028.

Cooper Union for the Advancement of Science and Art has owned the fee under the Chrysler Building since Peter Cooper’s heirs donated the land to the college in 1902.

The property

The office building in Grand Central has 1,035,307 square feet of built space according to a PincusCo analysis of city data. The parcel has frontage of 200 feet and is 205 feet deep with a total lot size of 37,525 square feet. The lot is irregular. The zoning is C5-3 which allows for up to 15 times floor area ratio (FAR) for commercial and up to 10 times FAR for residential with inclusionary housing. The property is in the Individual Landmark. The city-designated market value for the property in 2022 is $397.8 million.

Prior sales and revenue

The 1,035,307-square-foot property generated revenue of $78.3 million or $76 per square foot, according to the most recent income and expense figures.

Violations and lawsuits

According to city public data, the property has received $3,720 in OATH penalties in the last year.

The property was involved in at least one lawsuit over the past two years. The suit was a $275,000 money judgment concerning a office lease filed on June 21, 2024, by Lewis Baach Kaufmann Middlemiss against RFR Holding.

The neighborhood

In Grand Central, The majority, or 83 percent of the 44.4 million square feet of commercial built space are office buildings, with hotel buildings next occupying 8 percent of the space. In sales, Grand Central has near average sales volume among other neighborhoods with $771.9 million in sales volume in the last two years and is the 10th highest in Manhattan. For development, Grand Central is the 8th most active neighborhood among other neighborhoods. It had 5.2 million square feet of commercial and multi-family construction under development in the last two years, which represents 12 percent of the neighborhood’s built space.

The block

On this tax block, PincusCo has identified the owners of two of the four commercial properties representing 1,701,683 square feet of the 1,734,314 square feet. The two identified owners are Rfr Holding and Tishman Speyer. There are no active new building construction projects on this tax block.

The owner

The PincusCo database currently indicates that RFR Holding owned at least 19 commercial properties in New York City with 2,859,746 square feet and a city-determined market value of $1.1 billion. (Market value is typically about 50% of actual value.) Within the portfolio, the bulk, or 87 percent of the 2,859,746 square feet of built space are office properties, with hotel properties next occupying 8 percent of the space. The bulk, or 96 percent of the built space, is in Manhattan, with Brooklyn next at 4 percent of the space.

Direct link to the property’s ACRIS page and link to DOB NOW portal.