Cooper Union won its battle with Aby Rosen last week when Manhattan Supreme Court Judge Jennifer Schecter booted Rosen from the Chrysler Building’s leasehold.
But short of an unlikely legal reversal, the distinguished educational institution is now on its own in bringing the beloved but troubled skyscraper into the 21st Century.
The big question is how to do that. The school and its real estate advisor, Savills, are studying numerous options.
“I think we can all agree that operating a Chrysler Building is not the school’s forte,” said Savills Capital Markets Group senior managing director David Heller.
“We are evaluating the alternatives” for the future of the landmark, he said. “We understand there’s going to have to be significant capital investment.”
Rosen’s RFR held the leasehold since 2019 when it succeeded Tishman Speyer. Cooper Union moved to oust Rosen over his failure to pay $21 million in ground rent.
Rosen counter-sued, blaming the school for “mismanaging” the property, but Schecter rejected his arguments.
Rosen theoretically could appeal.
“We’ve had no indication yet” of that happening, said Cooper Union’s lawyer Gabriel Herrmann of Gibson Dunn.
Rosen’s representative said he had no comment.
Whatever Rosen’s failings might have been, he’s an experienced real estate developer with the know-how needed to restore and update a classic property — as he did with the Seagram Building.
Without him, Chrysler’s problems remain to be addressed.
They include office floors that are 40% vacant despite its location in the red-hot Grand Central area, awkward floor layouts, and badly aged infrastructure and interior design that don’t cut it for today’s tenants.
The woes include limited sunlight, poor cell phone reception, balky elevators and overall decay in the magnificent Art Deco lobby.
Finding a different real estate developer to take over the leasehold won’t be easy. The annual ground rent rose from just $7.75 million in 2018 to $31.5 million this year, and will increase to $41 million in 2028 — numbers that Rosen told the New York Times were “not sustainable or economically feasible.”
Rosen had invested $170 million in physical improvements, but it wasn’t enough to stem a pandemic-years exodus. Creative Artists Agency is the only current marquee-name tenant.
Although Cushman & Wakefield is managing and leasing the building day-to-day, Savills has the long-term role.
“We’re making sure we evaluate all alternatives, whether they’re structural, to bring in a partner, to bring maximum risk-adjusted value to the school. We’re making sure everyone understands the options,” Heller said.
“As you’d expect, we’ve had a significant amount of interest from potential partners. It’s a great landmark in the best market in the city. But we haven’t engaged in conversations” with any of them.
One strategy could include seeking historic-property tax credits from the federal and state governments, as were used to help pay for the Moynihan Station project.
“Maybe they’re not available but it’s part of our due diligence,” Heller said.
Once the building is repositioned, rents might run from the $80s per square foot in lower floors to “north of $150 at the top,” Heller added, but “we’d struggle to get those now.”
Credit: Source link
