A small but well-established Manhattan college is in the middle of a contentious real estate battle focusing on a much larger New York icon: the Chrysler Building.

New York Times and other publications recently announced The battle between Cooper Union for the Advancement of Science and Art, a private college that owns the ground beneath the Chrysler Building, and Signa Holding and RFR Holding, two companies that bought the building in 2019. The two companies purchased lease shares of the building and agreed to pay Cooper Union for use of the building and its sublease offices.

However, they later delayed their payments. court records It shows that in July, Cooper Union gave owners a 30-day notice of missing payments totaling more than $8.6 million plus interest. The university eventually moved to evict the owners in September, which led to RFR will file a lawsuitHe claimed the evacuation did not follow proper procedures. As of October 31, RFR had been evacuated and ordered The New York State Supreme Court ruled not to interfere with Cooper Union’s operations in the building or the collection of tenants’ rent payments.

Real estate experts say such conflicts are not particularly unique in New York City, where about 100 buildings lease land. 2015 Times article. But what is unusual is that a university owns the land beneath such an important building and relies heavily on real estate as its business model.

Cooper Union was founded in 1859 by inventor and philanthropist Peter Cooper, who dreamed of educating the working class regardless of race or gender. The mission appealed to Andrew Carnegie, according to Ethan Ris, a historian of higher education and associate professor at the University of Nevada, Reno. So Carnegie purchased the land and gifted it to the university in 1902, 27 years before construction began on the Chrysler Building.

At the time, philanthropists were trying to use their wealth to shape large institutions like universities and promote new ideas about how they should be run, Ris said.

“There’s an ideology of savings and efficiency, and there’s a tendency for philanthropists to not just give unlimited funds,” he said. “(Cooper Union) was designed so that the first-floor retail stores extend everywhere. If you walk around the building you can still see how they could have been storefronts. “The school would be a school, but he would also pay his own bills as a homeowner.”

Other colleges around the country have unusual assets, but in most cases they were donated in the hope that they would contribute to the educational mission (think gifts of works of art), whereas the land beneath the Chrysler Building was always intended to make money. (Some colleges sold artworks to help improve their financial situation, but rarely without argument.)

Even though Cooper Union used the Chrysler Building as an asset, it struggled to maintain the mission that had first won Carnegie’s support. The college offered free tuition to all students for most of its history, but in 2013 officials began charging tuition to manage the institution’s significant budget deficits. Five years later, under new leadership, Cooper Union changed course once again and announced that it would begin working toward free education by 2028. This fall, it took another step toward that goal by offering students their senior year for free.

“Our financial position is strong… (since 2018) Cooper has met or exceeded its financial targets, creating incredibly positive fundraising momentum that has allowed us to build significant reserves and surpluses, all while steadily increasing scholarship levels according to plan ( we are now addressing, “85% of all undergraduate courses on average) while keeping tuition rates steady for six consecutive years,” university spokeswoman Kim Newman wrote in an email. Inside Higher Education.

He said the dispute over the Chrysler Building did not negatively impact the plan, and that the agency had built “guardrails” for situations such as lease expirations and had “increased its reserves and surpluses through fundraising, revenue generation and expense management” in recent years. ”

Unusual Gift

It’s unclear exactly what the future holds for the iconic building; hosted fewer and fewer tenants Since the COVID-19 pandemic, it has fallen into a state of disrepair that RFR and Signa said they hoped to address when they first purchased the building. Cooper Union is committed to addressing the disrepair and maximizing the building’s value once the legal dispute is resolved, a source familiar with the matter said.

Ground rental fee, Times It has grown from $7.75 million in 2018 to $32.5 million today; however, building owners were always aware that such an increase would occur. At the same time, the university’s total operating budget for fiscal year 2023 was over $147 million.

Mark DeFusco, a senior consultant at Higher Learn Consolidation Solutions, said it’s clear from these figures that the building is a tremendous asset for the university; an asset that will probably never be willing to evacuate, despite the legal complexity it brings.

“They wouldn’t be able to break even if it wasn’t for their investment income,” he said. “They expect this income; “They’ve been waiting for this for a very long time.”

So could real estate be a good gift for a college now? “Probably not,” Ris said.

“If we’re taking a very, very specific example of Cooper Union, I wouldn’t be surprised if the real estate was worth more than if you invested in some stocks, but that’s because it’s Manhattan. Downtown Manhattan. And this is the Chrysler Building. “Many, very good things came together around this special gift,” he said. “I’m pretty sure if you had given a similar piece of land to the University of Cincinnati—I’m just speculating here—the money would have been better invested in the stock market.”