NYU Local has reported on NYU’s tendency to give bigshot professors and administrators loans on multimillion-dollar residences, and pay that far outstrips most of the faculty. Everyone knows about the $25 million tax-exempt real estate company tucked away in the returns. It’s also public knowledge that former NYU EVP and current Secretary of Treasury Jack Lew received a $1.5 million mortgage on top of a pretty hefty severance package, and that the university has $72 million in outstanding real estate loans to other faculty members.
But beach houses? Beach houses are a new one.
The New York Times reported yesterday that NYU distributed loans to at least five upper administrators for second homes in Connecticut and the Hamptons. This includes a series of loans totaling $1.6 million for John Sexton’s kick-ass Fire Island getaway, a $5.7 million loan to former law dean Richard Revesz including a 65-acre Connecticut property, and a $200,000 loan to EVP Martin Dorph on a home that he already owned. And both portions of Sexton’s and Dorph’s loan are being either partially or completely forgiven.
The university defends the practice as a necessary key to faculty retention, arguing that NYU’s rise to an elite-level university required providing all-star professors with equitable perks—especially among high-paid doctors and lawyers. According to NYU Vice President of Public Affairs John Beckman:
“The purpose of our loan programs goes right to the heart of several decades of sustained and successful effort at NYU: to transform NYU from a regional university into a world-class research residential university. [Loans help faculty who] can easily pursue a financially rewarding professional career instead of choosing the path of university scholarship and teaching.”
And its hard to argue with the result—NYU is today home to one of the most elite law schools in the world (ranked sixth in the U.S. by U.S. News and World Report), a top ranked medical school and hospital, and famous business and arts schools. But in an effort to attract stellar faculty—one of whom, Ariel Kaminer, wrote the bombshell Times story—the university continues to engage in practices that, while legal, keep NYU in the news in a bad way. Cheap mortgages on primary faculty residences are widespread in higher education and nothing new, but NYU’s worldwide expansion and position in the country’s most expensive real estate market ensures big-ticket compensations. Now, the summer houses are a fractional but embarrassing dimension.
NYU’s real estate business is extensive. The law school alone has four separate tax-exempt nonprofits dealing with faculty houses: NYU School of Law Foundation (which provided the initial loan to President Sexton’s residence), NYU School of Law Faculty Retention Assistance Corporation, NYU School of Law Housing Assistance Corporation, and the NYU School of Law Recruitment Assistance Corporation. The three organizations involved solely in housing have publicly-released assets of over $5 million.
This pales in comparison to the New York University Real Estate Corporation, which currently possesses around $25 million in assets—befitting for one of the largest landholders in the city. The tax forms state that the money will be used toward “research and other educational activities in the area of science and the practice of medicine,” which could partially explain why we can’t find a housing corporation for the generously-compensated administrators of the medical school. (More info on them here.)
The new loan discoveries come amid repeated calls by Senator Chuck Grassley (R-Iowa) for more access to NYU’s financial records in response to Lew’s nomination a few months ago. While partisan, such efforts to determine whether loans violate NYU’s non-profit status have won admirers across the aisle.
In a previous Times article, President Sexton defended the housing loans as productive. “Faculty housing loans on which interest is paid and appreciation is enjoyed by the university actually produce additional revenue. They’re probably the best-performing parts of our portfolio, so as to reduce the amount of tuition that we require.”
However, NYU declined our request for comment, and meanwhile the Times article also implied that a generous forgiveness program was used as a retention incentive for at least three major loans to faculty (in Dorph’s case, this was in lieu of a salary increase). So we can’t say either way, but are left with frustrating questions—since a real estate loan may not be a productive investment when a large portion of that investment is being forgiven.
The secondary residences don’t put much of a dent in the overall loan amount—the university declined to comment on the precise number of secondary residences contained within the program, but Beckman told the Times they represent a “small fraction.” Even still, this is a PR nightmare for a university that is increasingly becoming the lightning rod for “everything wrong with higher education in America.” It would pain all involved to compare the low interest rate and debt forgiveness on President Sexton’s beach house loan to that of our student loans.
Maybe in lieu of a dinner at President Sexton’s WSP penthouse, we can go to Fire Island for a beach weekend. This isn’t even sarcasm—if J Sex emails us “Come hang at my beach house,” we are totally there, and promise to never write the words “no confidence” ever again.