NYU Is Also Giving Faculty Vacation Homes With Your Tuition Money

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.

[Image via the New York Times]

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  1. Ernesto G. says

    Obscene and disgraceful to this NYU faculty member (and, I would hope, all of my colleagues). Business as usual to Pres. Sexton and the lawyers, real estate big shots and master branders who make up the Board of Trustees that protects and insulates him within its echo chamber of an inner-circle.

    This is all the more nauseating in light of the following figures that point to the group that pays the heaviest toll for all of this inexplicable largesse: our increasingly-anxious students and their struggling families.

    While NYU has stagnated in the low 30s of the US News and World Report national rankings ever since Sexton was appointed to the Presidency by our Board in 2002, Princeton Review ranks NYU last nationally in two critically-important categories, financial aid and administration

    Newsweek ranks NYU as the 4th “Least Affordable School” of all private and public
    universities in the U.S. in 2012

    Business Insider ranks NYU as the 6th most expensive university of all private and
    public universities in the U.S. in 2012

    NYU was ranked 6th nationally in student debt of all private and public universities in
    the U.S. by TIME Moneyland in 2011

    “The average student-loan debt of borrowers in the college class of 2011 rose to
    about $26,500, a 5 percent increase from about $25,350 the previous year, according to a report by the Institute for College Access and Success’ Project on Student Debt,” wrote Tamar Lewin in “Student-Loan Borrowers Average $26,500 in Debt,” NYT (October 18, 2012).

    Our own numbers?

    Average debt of graduates 2011: $36,351 [$10,000 above the national average -- but I don't have to tell any of our students how high tuition is in the first place and thus how much NYU students and their families pay before even taking out loans]

    Our graduating class of 2010 left school owing $659 million, according to the Dept. of Education – the highest sum in the entire country, excluding a tiny number of for-profit institutions.

    During the City Council public hearing on NYU 2031 this past summer, Pres. Sexton was asked to respond to the sobering reality that many NYU undegrads are working
    not one or two but three jobs and internships. His answer: “They are industrious.” My fellow faculty and I in attendance practically fell out of our chairs. Industrious, sure — but also dead BROKE and bone tired!

    I would urge everyone to give the following article, which just came out a few days ago, a read: Lynn O’Shaughnessy’s “Look Who Doesn’t Deserve Financial Aid at NYU” (CBS Money Watch): http://www.cbsnews.com/8301-505145_162-57589900/look-who-doesnt-deserve-financial-aid-at-nyu/

    The reason behind our President’s and the trustees’ utter tone-deafness to the crisis that our students and faculty — adjunct and other contract faculty in particular – are now facing can be summed up by a single quote. It appears at the conclusion of Ben Hallman’s Huffington Post piece last week, “NYU’s ‘Toxic’ Expansion Prioritizes Marketing over Debt-Saddled Students, Professors Say.” In a 2003 interview with the NYT, Sexton was asked if his early attempts at raising NYU’s profile were about marketing. His reply? “Yes. Mythology, salesmanship, branding – it’s all
    the same thing.” What other explanation does one really need for what’s been happening here on the Square?

    Our academic mission has become completely inverted. No longer is our institution being run for the intellectual enrichment of our students. It is fast becoming a global brand and is being run for the personal enrichment of the top 1% of the upper-administration and its cronies. As the 5 faculty Votes of No Confidence this spring have expressed loud and clear, things absolutely must change — and soon.

  2. Jessica Henton says

    I agree with the person who posted above. I’d like to add, though,
    that, according to google, John Sexton is 70 years old (the average life expectancy of a male in the U.S is 76 years old). This sounds incredibly cruel (although J-Sex is acting pretty cruel, so I guess things even out), he’s not gonna live much longer. It is sad that I have to keep myself calm by reminding myself that J-Sex’s death is inevitable- I’m really not a horrible person, I’m just extremely logical- but this fact does keep me calm. Not to mention, 2031 or not, most of NYU’s past presidents were only in office for about 10 years on average. As this article points out, John Sexton has held his position since 2002, so logic/math says that ANY NYU president at his age/considering his reign, will be leaving soon.

    I just thought that might make us all feel better :)