Part of the Cornell Tech campus on Roosevelt Island.
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After the hotel attached to Cornell Tech’s Roosevelt Island campus unexpectedly shuttered late last year, the university is suing the management company legally bound to run it, alleging it violated their lease agreement and must turn the building over to the university.
Cornell leased some of its Roosevelt Island land to AJ Capital-owned The Graduate to develop and operate an 18-story hotel on its new Roosevelt Island campus in 2018. The 65-year lease agreement held that Graduate, a Hilton subsidiary, would retain full ownership of the hotel building it constructed and pay monthly rent to Cornell for use of the land while operating the hotel.
The hotel opened in 2021 and served the “critical” purpose of supporting educational conferences, the student body, and the traveling research community that the university had planned for its Cornell Tech campus. But things took a turn last year, Cornell charged, when Graduate started defaulting on lease and loan payments and not paying utility bills.
Those nonpayments culminated in the hotel’s sudden shuttering in late November, with Graduate saying it didn’t have the money to keep operating after its mortgage lender stopped sending it funds because it defaulted on its loan, according to the suit.
That closure threw students and traveling academics planning to stay for a loop, with many saying they were caught off guard and had to find new accommodations on short notice.
Retaining ownership of the building while not running it as an active hotel is a major violation of the lease agreement, Cornell says in its suit, filed in Manhattan Supreme Court. The university tells the court it terminated its lease with Graduate earlier this month and wants a state judge to force the developer to hand over the hotel so it can work to reopen it and begin to recoup the over $1 million in losses it sustained due to its abrupt closure.
“The university takes this action to facilitate reopening the hotel as soon as possible and restoring a vital economic engine for the campus, Roosevelt Island, and New York City,” Cornell told amNewYork Law in a statement on the suit.
AJ Capital did not return a request for comment.
If a judge doesn’t force Graduate to give up ownership of the hotel, Cornell says it would face “catastrophic” economic harm. That’s because the university will be out tens of millions it was planning to collect in revenue from hotel guests and in rent over the remaining 57 years of its lease, it says.
Cornell is also asking the court to compel Graduate to pay it back for the months of missed rent, utility payments and lost revenue, totaling about $1 million, along with other to be determined financial penalties.