Wait, a College Owns the Land Beneath the Chrysler Building?

A small but storied Manhattan college is embroiled in a contentious real estate battle focused on a much bigger New York icon—the Chrysler Building.

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

But they later fell behind on their payments. Court filings show that in July, Cooper Union gave the owners a 30-day warning about the missing payments, which totaled over $8.6 million, plus interest. The college eventually moved to evict the owners in September, prompting RFR to sue, alleging the eviction had not followed proper procedures. As of Oct. 31, RFR had been evicted and ordered by the Supreme Court of the State of New York not to interfere with Cooper Union’s operation of the building or collection of the tenants’ rental payments.

Real estate experts say such conflicts aren’t particularly unique in New York City, where roughly 100 buildings have ground leases, according to a 2015 Times article. But what is unusual is a college owning the land beneath such a significant building—and relying so heavily on real estate for its business model.

Cooper Union was founded in 1859 by Peter Cooper, an inventor and philanthropist, who imagined it educating the working class, regardless of race or gender. The mission resonated with Andrew Carnegie, according to Ethan Ris, a historian of higher education and an associate professor at the University of Nevada, Reno. That’s why Carnegie bought the land and gifted it to the college in 1902, 27 years before the Chrysler Building began construction.

Ris said back then, philanthropists sought to use their wealth to shape large institutions like colleges and promote new ideas about how they should be run.

“There’s an ideology of thrift and efficiency and the inclination of philanthropists to not just give unrestricted funds,” he said. “[Cooper Union] was designed with retail stores on the first floor going all the way around. If you walk around the building, you can still see how they might have been storefronts. The school would be a school, but it would pay its own bills by being a landlord, as well.”

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 artwork—whereas the land beneath the Chrysler Building was always intended to be a moneymaker. (Some colleges have sold off artwork to help improve their financial situation—but rarely without controversy.)

Even with the Chrysler Building as an asset, Cooper Union has struggled to sustain the mission that first won Carnegie’s support. For most of its history, the college offered free tuition for all students, 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, announcing that it would begin working toward free tuition 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, generating incredibly positive fundraising momentum which allowed us to build important reserves and surpluses—all while steadily increasing scholarship levels according to the plan (we now cover, on average, 85% of all undergraduate tuition) and also holding tuition flat for six consecutive years,” wrote college spokesperson Kim Newman in an email to Inside Higher Ed.

She said the conflict over the Chrysler Building had not negatively impacted the plan, as the institution had built in “guardrails” for situations like a lease termination, boosting its reserves and surpluses in recent years “through fundraising, revenue generation, and expense management.”

Unusual Gift

It’s unclear exactly what the future holds for the iconic building; it has housed fewer and fewer tenants since the COVID-19 pandemic, and suffers from a level of disrepair that RFR and Signa had said they hoped to address when they first purchased the building. A source familiar with the matter said that Cooper Union is dedicated to finding solutions to the disrepair and maximizing the building’s value once the legal dispute is resolved.

The price of the ground lease, the Times reported, has soared from $7.75 million in 2018 to $32.5 million today—although the owners of the building were always aware such an increase would occur. At the same time, the college’s total operating budget for fiscal year 2023 was over $147 million.

Mark DeFusco, a senior consultant at Higher Ed Consolidation Solutions, said that it was evident from those numbers that the building is a huge asset to the university—one that it would probably never be inclined to offload, despite the legal complexities it brings.

“Without their investment income, they wouldn’t be breaking even,” he said. “They’re expecting this revenue; they’ve been expecting it for a very long time.”

But would real estate make a good gift to a college now? Probably not, said Ris.

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