Chrysler Building Owner Is Poised to Lose Control of Iconic Skyscraper
Partnership led by RFR Holding is said to have missed $21 million in ground-rent payments
The owner of the land beneath the historic Chrysler Building said Friday it was taking control of the office tower, in what would be one of the most prominent buildings in the U.S. to be lost during the office-market collapse.
A partnership led by RFR Holding, which leases the land from the Cooper Union school, hasn’t paid rent since May and has missed $21 million in ground-rent payments, Cooper Union said.
“The ground lease will terminate today,” said John Ruth, the school’s vice president of finance. Cooper Union has hired the real-estate firm Cushman & Wakefield to manage the building but hasn’t indicated its future plans for the property.
Attorneys for RFR said that the company was still fighting to hold on to the building and that it had filed a lawsuit to block Cooper Union’s takeover. The lease is set to terminate at midnight.
“While RFR prefers to resolve this matter amicably, and privately, if possible, it is also prepared for the alternative, if necessary,” said Terrence Oved and Darren Oved, attorneys for RFR, referring to court action.
Cooper Union’s move to take back this iconic jewel of the Manhattan skyline would mark the end of the road for a big investment bet that was rocky almost from the start. It is also one that has felt the full impact of the broader office market meltdown, which has hit New York City especially hard.
Defaults and other kinds of distress in the commercial-property market have ballooned to near historic levels because of high interest rates and the slow return of workers to office buildings. In the second quarter, portfolios of foreclosed and seized office buildings, apartments and other commercial properties reached $20.5 billion, the highest quarterly figure since 2015.
When it was built in 1930, the art deco Chrysler Building was briefly the tallest tower in the world, a feat accomplished thanks to the addition of its signature steel spire. The Empire State Building became the world’s tallest building the following year.
RFR and an Austrian investment partner bought the Chrysler Building in 2019 for about $150 million. The sale represented a loss for its previous majority owner, the Abu Dhabi Investment Council, whose stake was once valued at $800 million. That was before a boom in the construction of more-modern, spacious office buildings reduced the Chrysler Building’s appeal.
Even with the then seemingly rock-bottom sale price, RFR faced a major financial obstacle in the form of the property’s ground lease, which was set to become more expensive over time. At the time of sale, the $32.5 million annual lease was set to increase to $41 million by 2028.
Then the Covid-19 pandemic dealt the property a major blow, zapping demand for office space and setting back the owners’ plans to upgrade the property to attract higher-paying office tenants.
The owners said in a lawsuit that they spent $150 million on improving the property and covering tenant-rent shortfalls since the acquisition. At one point, the owners considered adding a hotel but abandoned the idea.
RFR, led by Aby Rosen and Michael Fuchs, had been in talks to restructure the lease for the property. Last year those prospects dimmed considerably when RFR’s investment partner, René Benko’s Signa Holding, began defaulting on other debts and was ordered by an Austrian court to sell its Chrysler Building stake.
RFR has had its own struggles. In August, it was hit by lenders with a foreclosure lawsuit at an office building at 475 Fifth Ave.
The Chrysler Building’s largest tenant is Spaces, a co-working company, according to the data firm CoStar. Several floors are shown on the building’s website as available for lease.