Cooper Union is ready to kick Aby Rosen and Michael Fuchs’ RFR Holding to the curb at the Chrysler Building, but the developer isn’t leaving without a fight.
RFR filed a lawsuit on Thursday to stave off an eviction attempt by the school, PincusCo reported. RFR and partner Signa Holding GmbH bought the ground lease for the building and neighboring properties in 2019 for $151 million, but Cooper Union owns the land under the iconic property.
The college accused RFR of failing to make payments on its ground lease in June and July, according to the suit. The missed payments led the school to send a 10-day termination notice for the lease on Sept. 13. It had previously sent RFR a 30-day notice to cure the missed payments, according to the lawsuit.
RFR alleges the first notice was defective because it didn’t comply with the ground lease agreement and falsely detailed the alleged missed payments. As a result, RFR claims, the 10-day termination notice is defective, too.
In a statement, a representative for Cooper Union, John Ruth, said RFR has not paid rent since May, which left the institution “no choice” but to issue the 10-day notice.
“The ground lease will terminate today, Sept. 27, 2024, and control of the Chrysler Building will transfer to Cooper Union,” Ruth said. “We are engaging a world-class property management firm for the building and are planning for a smooth transition.”
According to a letter sent by attorneys for Cooper Union to RFR’s head of acquisition and obtained by TRD, the institution has tapped Cushman & Wakefield to take over management of the property.
The letter states that RFR repeatedly “misrepresented” its situation, assuring Cooper Union that it had “things under control” and could cobble together enough capital to restructure the ground lease. Meanwhile, RFR’s conversations with prospective investors went nowhere, and the company continued to hold rent “hostage,” according to the letter.
“As experienced asset owners and long-time financial fiduciaries, we find this deeply troubling,” the letter states.
The complaint also dives into the recent issues at the property. RFR claims the building was in worse shape than it was led to believe when it bought the lease in 2019, and the pandemic made matters worse. RFR made $150 million in capital improvements and other expenditures, but alleges when it tried to renegotiate the ground lease in light of the changing commercial landscape, Cooper Union didn’t engage in good faith.
RFR wants the court to nullify the 30-day cure notice and 10-day termination notice. Rosen signed off on the complaint.
In a statement, an RFR spokesperson told The Real Deal that the firm “has invested over $240 million of its own capital into the property and remains committed to working with Cooper Union to bring this iconic landmark back to stable and healthy financial standing.”
“Cooper Union’s misguided decision to share its inaccurate and self-serving letter with the media is a transparent and desperate attempt to deflect attention from, and create a false narrative around, RFR’s commencement of a lawsuit against it mere hours earlier,” said Rosen and Fuchs’ attorneys, Terrence Oved and Darren Oved. “While RFR prefers to resolve this matter amicably, and privately, if possible, it is also prepared for the alternative.”
While the school is allegedly looking to get rid of RFR, Rosen and Fuchs signaled they might want to increase their ownership of the building. An Austrian court is forcing Rene Benko to sell his company’s share after it filed for insolvency last year. A spokesperson for RFR said at the time that the firm would be happy to increase its own stake in the office tower.
Rent from the Chrysler Building is a key component of Cooper Union’s revenue. Ruth said the ground lease default will not affect student scholarships, nor the recently announced news that college seniors will receive free tuition.
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