City University Pays $40 Million for Space in FiDi
On January 27, the City University Construction Fund (CUCF, which is an affiliate of the City University of New York, or CUNY) closed on the $40 million purchase of 102,000 square feet of commercial condominium space at 40 Rector Street, which was formerly occupied by the Metropolitan College of New York (MCNY). CUNY plans to move its School of Nursing temporarily to three and a half floors at the building, while that institution’s new home is being constructed in the East 20s. Construction for that project, the Science Park and Research Campus (SPARC) Kips Bay expected to take five years, after which the School of Nursing is slated to move back uptown.
This transfer was originally scheduled for last autumn, but ran into a legal obstacle. As noted in CUNY documents, “certain provisions of the Condominium Documents [at 40 Rector] do not align with certain contracting requirements that the University, as a New York State entity, must comply with.” So CUCF lawyers came up with a workaround. By having the Construction Fund (which is not bound by the same legal requirements) purchase the space instead of CUNY itself, and then lease the facility to the University, the regulatory conflict could be resolved. As the same CUNY documents note, “the City University Construction Fund… is authorized to enter into agreements for the provisions of facilities for the University and is not necessarily subject to the University’s contracting requirements as a New York State entity.”
CUCF’s board of directors approved this legerdemain in December, but the strategy also required approval from New York State Comptroller Thomas DiNapoli, who granted it on January 15. Twelve days later, CUCF closed on the purchase and executed a 50-year lease agreement with CUNY, allowing construction work to begin. The School of Nursing is expected to move into the facility later this spring. No plans have been announced for what CUNY intends to do with the space after the School or Nursing moves back to Kips Bay in the early 2030s.
The $40 million paid to MCNY will allow that institution to redeem two-thirds of $60 million in bond debt issued in 2014 on its behalf by the City’s Build NYC Resource Corporation (an arm of the Economic Development Corporation), which floats debt on behalf of non-profits seeking to acquire New York real estate. Two years ago, MCY stopped making payments on that note, triggering a default, but is now scheduled to resume installments in July of this year.
In the early 2010s, MCNY joined other public-service organizations that planted their flags at 40 Rector Street. Its neighbors in the building eventually would include the China Institute, Big Brothers Big Sisters, the National Association for the Advancement of Colored People, and the Urban Justice Center. They were all steered to the Financial District building by a provision in the tax code that allows nonprofit organizations to avoid paying real estate tax on office space they have purchased, but would be indirectly liable for in rented space. (As a commercial condominium, offices at 40 Rector are owned by their occupants, rather than rented.)
Originally called the Barrett Building (for the pioneering chemical company that was a leading manufacturer of roofing tar in the late 1800s, and was later absorbed into the Allied Chemical conglomerate), 40 Rector was designed by the partnership of Warren and Wetmore, seven years after the 1913 opening of that firm’s signature piece, Grand Central Terminal. Warren and Wetmore was also famous in the Jazz Age for iconic Manhattan structures such as the Crown Building, the New York Yacht Club, and Steinway Hall.
The 17-story Renaissance Revival structure faced the Hudson River waterfront when it opened, but the subsequent development of Battery Park City, which is built on landfill partially comprised of spoil excavated from the World Trade Center foundations extended the shoreline by several hundred feet, starting in the late 1960s. In the 1970s and beyond, 40 Rector Street ceased to be a premium address and the building fell on hard times, becoming back office space for number of City agencies. It was further obscured after the terrorist attacks of September 11, 2001, and the (now demolished) Rector Street Pedestrian Bridge was built directly in front of it.