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More Than 12 Expected to Bid for Complexes
By CHARLES V. BAGLI
Published: October 4, 2006
More than a dozen groups, including one aligned with the tenants at Stuyvesant Town and Peter Cooper Village, are expected to deliver bids tomorrow to buy the sprawling complexes for anywhere from $4.3 billion to more than $5 billion in what promises to be the largest real estate deal in American history.
The opportunity to buy 80 acres and 110 buildings overlooking the East River has drawn widespread interest from investors. But the pending sale of this leafy enclave for generations of teachers, graphic artists, police officers and Con Edison workers has also become a lightning rod for public anger over skyrocketing housing prices in recent years, which have put Manhattan apartments outside the grasp of so many middle-class New Yorkers.
Metropolitan Life, the largest life insurer in North America, built the complexes for returning veterans in 1947 and announced earlier this year that it would auction them off. The announcement upset many of the 25,000 residents. Nearly three quarters of the apartments still have regulated rents at roughly half the market rate. Tenants fear the changes that will come with a new owner seeking more higher-paying tenants.
The plain, red brick buildings along First Avenue, between 14th and 23rd Streets, are more “meat and potatoes,” as one bidder put it, than gleaming real estate trophies like Rockefeller Center, the General Motors Building or the Chrysler Building.
But the chance to gain control of such a large block of apartments and a wide swath of land in an international city of rising rents has many prospective buyers salivating. The deal is in fact so big that every bidder has had to take on partners.
“It’s a one-of-a-kind purchase,” said Richard S. LeFrak, chairman of the Lefrak Organization, which is bidding in partnership with two financial institutions. “Any transformation is going to occur over a long period of time.”
“It has a very exciting potential,” said William L. Mack, a principal at Apollo Real Estate Advisors, which is bidding in partnership with ING Clarion Partners, an investment fund. “These things don’t come up very often.”
MetLife, which has told potential buyers that it is willing to retain a stake in the complexes, is hoping to close the deal by Nov. 15, a quick goal for such a large transaction. The company plans to review the bids and ask a smaller group to make a second, noncontingent offer by Oct. 15.
The tenants association at Peter Cooper and Stuyvesant Town is also putting together a bid of more than $4 billion based on a plan that involves selling some apartments at market and below-market rates, while preserving about 20 percent of the units as rentals affordable to middle-income families. But the offer is dependent on MetLife’s willingness to accept less money from the tenants if bids escalate to $5 billion and beyond.
“I hope the tenants are able to swing this,” said Sonny Fink, a Peter Cooper tenant for 45 years. “We want to buy this thing. It looks very good, if they give us any kind of break at all.”
But other bidders have different goals. The Lefrak Organization owns about 20,000 rent-regulated apartments in New York City. In recent years, Apollo has been one of the more aggressive buyers of New York apartments and would double its holdings. Other probable bidders include Related Companies; Stellar Management; Vornado Realty Trust, which owns the Bloomberg Building on the Upper East Side; and Tishman Speyer, which controls Rockefeller Center. Buyers based in Saudi Arabia, Israel and Qatar are also in the mix, executives say.
Even as the condominium market has slowed, investors have increasingly bought pedestrian rental buildings, which are seen as relatively safe investments with potential windfall profits when the apartments no longer qualify for rent regulation. It is a long-term strategy with a small return in the early years, given a high purchase price, bidders say.
Under rent regulations, an apartment can be decontrolled after it becomes vacant, or if the rent reaches $2,000 a month and the existing tenant’s household income rises above $175,000 for two consecutive years. Owners can also pass on to tenants part of the cost of capital improvements, pushing rents toward the $2,000 level.
In recent years, MetLife has sought to open up apartments by ousting illegal subtenants and people whose primary residences are elsewhere. Today, about 27 percent of the 12,232 apartments rent at market rates. The sale documents anticipate that 600 more units will be decontrolled next year and 1,000 more in 2008.
But the pending sale has become a political issue. Middle-income neighborhoods are fast disappearing in Manhattan. Critics contend that MetLife built Stuyvesant Town and Peter Cooper Village with tax breaks and other subsidies for middle-income residents.
“It’s becoming clear that middle-class families can’t find a place to live,” said Brad Lander, director of the Pratt Center for Community Development. “But here MetLife is intent on making billions more by selling to a buyer who displaces middle-income people with higher-income people. But it’s not in the city’s interest to displace middle-class families.”
MetLife executives say they do not have a continuing obligation to provide subsidized housing. They say the company’s 25-year agreement with the city to provide affordable housing expired in the 1970’s.
The Bloomberg administration, which has long trumpeted its plans to preserve and expand affordable housing for low- and middle-income families, has been grappling with the pending sale. Officials say they have talked to bidders, including the tenants group, and are trying to assess the relatively high costs of preserving Stuyvesant Town versus the lower cost of building affordable housing in Brooklyn, Queens, Staten Island or the Bronx.
Some bidders say the city could face a lawsuit if it provides tax abatements or tax-free bonds exclusively to the tenants.
“We’re waiting to see how this unfolds,” Deputy Mayor Daniel L. Doctoroff said.
City Councilman Daniel L. Garodnick, who lives in Peter Cooper Village and has been promoting a tenant bid, said this was a “defining moment in city history.”
“It’s a question of whether we will take a stand in defense of housing for the middle class,” Mr. Garodnick said. “It’s very important for the city’s economy that we do so. That’s why it’s generated so much interest, not just locally, but nationally. We expect to make a competitive bid here, one that will allow MetLife to make a profit and also honor the tradition of affordability in that community.”
Copyright 2006 The New York Times Company
TheDeal: Timeline of Stuyvesant Town sale
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October 12, 2006
Council Tries to Buy Time for Stuyvesant Town Tenants
By CHARLES V. BAGLI
The City Council jumped yesterday into the middle of a raging debate over the loss of middle-class housing in Manhattan, with a bill aimed at stalling the multibillion-dollar sale of two vast complexes on the East River.
Proponents acknowledge that the legislation, which was sponsored by 32 council members, cannot derail what promises to be the biggest real estate auction of a single property — the Stuyvesant Town and Peter Cooper Village complexes — in recent American history. The complexes have been an affordable redoubt for firefighters, teachers and utility workers over six decades.
But the sponsors hope it will highlight the issue and increase political pressure on Metropolitan Life, which hopes to reap $5 billion from the sale, and on Mayor Michael R. Bloomberg, an advocate of affordable housing who critics say has failed to intervene on behalf of the tenants.
Residents and tenant advocates fear that a new owner will move aggressively to transform the two complexes, where nearly three-quarters of the 11,232 apartments along First Avenue, between 14th and 23rd Streets, have regulated rents at roughly half the market rate.
“What’s at stake here is a lot of people’s lives,” said Judy Greene, 64, who has lived in Stuyvesant Town for 43 years and visited City Hall yesterday to support the bill. “You’ll lose a lot of people who are the backbone of the city. New York is pricing out middle-class, and even upper-middle-class, families.”
The complexes’ fate is a family issue for Mrs. Greene, whose daughter and son-in-law also live in Stuyvesant Town. Her parents live in Peter Cooper Village. But the sale of the complexes has also become a cause célèbre at a time when the average apartment in Manhattan sells for more than $1 million and even a studio apartment rents for more than $2,000 a month.
Senator Charles E. Schumer has urged MetLife’s chief executive, C. Robert Henrikson, to take a bid by tenants seriously. “I made the argument that the highest offer is not necessarily the best bid,” Mr. Schumer said. “He agreed with the concept.”
A group aligned with the tenants has submitted a $4.5 billion offer intended to preserve at least 40 percent of the complexes as middle-class housing, for buyers or renters. But it falls about half a billion dollars short of higher bids from some of the biggest names in real estate, including Apollo Real Estate Advisors and the Dermot Company, Tishman Speyer, the Related Companies, the Kushner Companies and Vornado Realty.
The legislation, introduced by Councilwoman Rosie Mendez, would require the owners of large-scale apartment complexes where more than half the units are rent-regulated to provide 120 days’ notice of a sale. The city’s housing department, in turn, would asses the impact of losing large numbers of apartments for low-, moderate- and middle-income tenants.
It is doubtful that the bill would be approved before MetLife completes the sale. The company, which built Stuyvesant Town and Peter Cooper Village in 1947 for returning veterans with the help of city subsidies and the use of eminent domain, wants to close the deal in November. It has asked the final bidders, including the tenants, to submit their noncontingent offers by Monday.
Councilman Daniel R. Garodnick, who lives in a market-rate apartment in Peter Cooper and is a leader of the tenant bid, and others hope to create a climate in which MetLife would take a lower offer from the tenants, or that other bidders would preserve at least some of the apartments for middle-income families.
Some bidders have opened discussions with the tenants through the Council’s speaker, Christine C. Quinn. Given the political uncertainties, one real estate executive involved in the bidding said a buyer would be foolish not to have a strategy for dealing with the issue of affordable housing.
Mayor Bloomberg has so far rejected pleas to assist the tenant bid with property tax breaks or bonds. Bloomberg administration officials have told reporters on background that it would be cheaper to build housing in Queens, the Bronx or Brooklyn than to preserve the units at Stuyvesant Town.
“MetLife owns it, and they have a right to sell it,” Mr. Bloomberg said during his radio program on Friday.
Yesterday, State Senator Liz Krueger disputed the notion that it would cost more to preserve the apartments than to build new ones. “Somebody needs to go back to math and economics class,” she said. “Losing 11,000 units all at once destroys the math of the mayor’s plan.”
Now, the Republican mayor must decide whether to veto the bill, although the Council may have enough votes to override him. He also has to consider a pledge by City Comptroller William C. Thompson Jr., a Democrat, to invest city pension funds in the tenant bid. Both men, as well as union leaders, have seats on the city’s five pension boards. The Central Labor Council has said it will provide mortgages for tenants who want to buy their apartments.
A spokesman for the mayor said the city is reviewing the legislation.
The Bloomberg administration has intervened in “private” deals in the past, including one for the West Village Houses. In return for the owner’s agreement to sell apartments to the tenants at a discount to fair market value, the city forgave $19 million on a city loan and provided a tax exemption. The agreement, the mayor said in 2004, would preserve affordable housing “in a neighborhood where tenants might otherwise have been priced out.”
Tenant advocates say the city’s housing programs create apartments for low-, moderate- and middle-income tenants by the dozens, while the sale of Stuyvesant Town raises the possibility of losing thousands of affordable apartments over time. An apartment can be decontrolled after it becomes vacant, or if the rent reaches $2,000 a month and the existing tenants’ household income rises above $175,000 for two consecutive years. The Tenants Political Action Committee estimates that as many as 300,000 affordable units in the city have been lost to decontrol in the last decade.
“We have a huge issue here: the continuation of middle-income housing in New York City,” Mr. Thompson said. “Giving credit to the mayor, the city has done more to focus on low-, moderate- and middle-income housing than anyone in years. But we’re eroding units at almost the same rate as we create them.”
Copyright 2006 The New York Times Company
MetLife sells Peter Cooper Village/Stuyvesant Town for $5.4 billion
By Associated Press
Tuesday, October 17, 2006 - Updated: 01:41 PM EST
NEW YORK - MetLife on Tuesday said it has sold Peter Cooper Village/Stuyvesant Town for $5.4 billion, ending a high-stakes bidding war that included protests from residents who wanted to stop the middle-class apartment complex in Manhattan from falling into the hands of developers.
MetLife Inc., one of the nation’s top insurers, sold the complex to Tishman Speyer in a joint venture with BlackRock Realty, the real estate arm of BlackRock, Inc. The sale is expected to close later this year.
“Peter Cooper Village/Stuyvesant Town is an extraordinary asset and we are very pleased with the market reaction we received to this sale,” said Robert Merck, head of real estate investments for MetLife. “This property has been a prominent asset in MetLife’s real estate portfolio for nearly six decades.”
The properties together make up the largest apartment complex in Manhattan, totaling over 11,000 units, spread over 80 acres.
The complex was built in the late 1940s as housing for returning World War II veterans, and the vast majority of the units are rent-stabilized, meaning the tenants pay below market value. Peter Cooper Village/Stuyvesant town has been called the last bastion of middle-class housing amid the super-charged real estate market of Manhattan.
“As a business with deep roots in New York City, we have a sincere appreciation for these cherished neighborhoods, and we are honored to become stewards of the property,” said Tishman Speyer president and CEO Jerry I. Speyer. “We are committed to working closely with residents, elected officials and community leaders to help ensure a dynamic and vibrant future for this New York community.”
Speyer said the residents of rent-stabilized apartments are completely protected by the existing system.
“No one should be concerned about a sudden or dramatic shift in this neighborhood’s make-up, character or charm,” he said.
October 18, 2006
$5.4 Billion Bid Wins Complexes in New York Deal
By CHARLES V. BAGLI
The Peter Cooper Village and Stuyvesant Town apartment complex Tuesday in New York.
Jerry I. Speyer, who controls some of the city’s most prominent landmarks, from Rockefeller Center to the Chrysler Building, yesterday signed the largest American real estate deal ever, agreeing to pay $5.4 billion for Stuyvesant Town and Peter Cooper Village, a vast corridor of 110 apartment buildings along the East River.
Mr. Speyer, the chief executive of Tishman Speyer Properties, and his partner, the BlackRock investment bank, outmaneuvered more than a half-dozen other bidders, including a group aligned with tenants who had hoped to preserve the two adjoining complexes on First Avenue between 14th and 23rd Streets as enclaves of middle-class housing.
But these are not typical real estate trophies. Built by Metropolitan Life for returning veterans in 1947, with the help of tax breaks and the government’s powers of eminent domain, Stuyvesant Town and Peter Cooper Village have served as an affordable redoubt for generations of police officers, teachers, nurses and other middle-class New Yorkers.
The unremarkable brick buildings, with 25,000 people living in 11,232 units, are nestled among trees and fountains on 80 acres of some of the most valuable real estate in the world.
With rents and housing prices soaring in recent years, the pending sale turned the issue of affordable housing into a cause célèbre among New York politicians, including members of Congress, state legislators and City Council members. And the tenants feared that a new owner would transform the complexes into a luxury enclave.
But Mayor Michael R. Bloomberg stayed on the sidelines, and MetLife was intent on selling for the highest possible price. At $4.5 billion, the tenant offer lagged behind bids from some of the biggest names in real estate, from Apollo Real Estate Advisors in a joint offer with the Dermot Company, to the Related Companies with Lehman Brothers; the Millstein brothers; and Vornado Realty Trust.
An elated Mr. Speyer appeared well aware of the complexes’ place in the city’s culture and the political sensitivity of the sale.
“As a business with deep roots in New York City, we have a sincere appreciation for these cherished neighborhoods, and we are honored to become stewards of the property,” Mr. Speyer said. “We are committed to working closely with residents, elected officials and community leaders to ensure a dynamic and vibrant future for this New York community.”
His son, Rob Speyer, a senior managing director at Tishman Speyer, also tried to reassure tenants, emphasizing, “There will be no sudden or dramatic shifts in the community’s makeup, character or charm.” But he would not commit to preserving a large block of apartments as affordable housing, which the tenant group had sought.
MetLife said that the Speyers and BlackRock, a New York-based firm that is a major national real estate investor, would be “fine stewards of the property in the years to come.” Although Tishman Speyer is best known in New York for its commercial buildings, rather than residential development, the company has built housing in France, Germany, Brazil and soon, India. It built an apartment house in the late 1990’s on the Upper West Side and has another residential project in San Francisco.
Tishman Speyer and BlackRock were among about eight companies invited to make final bids for the complexes on Monday afternoon. Apollo, the No. 2 bidder, came in at $5.33 billion. MetLife and its broker, Darcy Stacom of CB Richard Ellis, negotiated with Rob Speyer into the early-morning hours, then signed a contract at 10 a.m. yesterday. They plan to complete the deal in a month — three times faster than most buyers close on a single house.
MetLife executives were not unfamiliar with the Speyers. Last year, his company bought the insurer’s 58-story skyscraper at 200 Park Avenue, at 45th Street, for $1.72 billion. “Clearly, Tishman Speyer has a proven track record with MetLife,” said Scott Rechler, chairman of Reckson Associates, who lost out in the bidding on that deal, despite a slightly higher offer.
Michael McKee, treasurer of the Tenants Political Action Committee, called the sale a “dark day for affordable housing.”
Many of the two complexes’ residents fear that their homes are destined to become luxury housing. Nearly three quarters of the apartments have regulated rents at roughly half the market rate. In recent years, MetLife has dislodged illegal sublettors and tenants whose units were not their primary residence.
Rent-regulated tenants cannot be forced out. Under the rent laws, however, an apartment can be “decontrolled” — and rented at the market rate — after it becomes vacant and the rent reaches $2,000 a month. The same can happen if the rent rises to $2,000 a month and the current tenant’s household income rises above $175,000 for two successive years. MetLife says that rents for 27 percent of the apartments are now at market rates. The company has suggested that another 1,800 units will be decontrolled over the next two years.
Nanette Ross, 45, recalled moving into Stuyvesant Town more than 20 years ago and thinking, “I’m in heaven,” even without air conditioning or a dishwasher. “The future for the lives of 25,000 people is at stake,” said Ms. Ross, who has two children and owns a pop art gallery with her husband, Jeff. “I find it very hard to believe that someone who would come up with $5 billion to buy a property like this wouldn’t be trying to make money, and the only way to make money on a property like this is to turn it into luxury housing.”
Daniel R. Garodnick, a city councilman who lives in Peter Cooper and helped organize the tenant offer, expressed disappointment that a symbol of middle class housing would be lost: “Eventually, I think what you will see is a market-rate, gated community, which is what MetLife was pitching to all the potential bidders.”
The tenant bid was intended to preserve about 20 percent of the apartments for middle-income families who rent and another 20 percent for residents who want to buy. Most of the remaining apartments, under that plan, would have been sold at market rates. In an attempt to bolster their offer, the tenants had sought tax breaks and exemptions from the Bloomberg administration.
But the mayor took a hands-off approach, saying, “MetLife owns it, and they have a right to sell it.”
Many tenant activists and urban planners criticized him for that.
“Stuyvesant Town was a national model for middle class people in an urban setting,” said John H. Mollenkopf, director of the Center for Urban Research at the Graduate Center of the City University of New York. “It wouldn’t have happened without eminent domain and favored tax treatment. It’s disingenuous to say there’s no public interest in what happens to this housing.”
Deputy Mayor Daniel L. Doctoroff said it was a matter of the best use of scarce resources. He said it would have cost the city nearly $500 million to provide the tax incentives the tenants’ wanted. For the same money, nearly $107,000 per unit, the city could build a new middle-income apartment, and possibly, preserve another affordable unit elsewhere.
Indeed, the city was expected to announce a deal tomorrow with the Port Authority of New York and New Jersey to build low- and moderate-income housing at Queens West, a waterfront development in Hunters Point, according to a Port Authority executive.
Born in Lower Manhattan nearly 140 years ago, MetLife was once a major force in the city’s economic and civic life. In the 1940’s, the company built thousands of apartments in a city hungry for housing, including Parkchester in the Bronx, Riverton in Harlem and Stuyvesant Town and Peter Cooper Village, on the rubble of the old Gashouse District.
In return for the government help, MetLife agreed to limit its profit to 6 percent a year for 25 years and maintain below-market rents. The company barred blacks from living in Stuyvesant Town for many years, and its president at the time, Frederick H. Ecker, once said, “Negroes and whites do not mix.”
MetLife has been a shrinking presence in New York since the 1960’s, when the company counted 17,000 employees here. There are fewer than 2,500 employees today. In recent years, the insurer sold its three major buildings in Manhattan for $3.3 billion, including its landmark 50-story clock tower and two towered headquarters on Madison Avenue.
After announcing the auction of these complexes earlier this year, MetLife executives insisted they had long ago met any obligation to preserve middle class housing.
“I knew they wouldn’t give it to us,” said Arthur Kellebrew, 44, who grew up in Stuyvesant Town and now has a family of his own. “It seems like now all they want is money. It affects the whole city, because middle class housing — you can’t find it any more.”
Damien Cave and Cassi Feldman contributed reporting.
Copyright 2006 The New York Times Company
October 18, 2006
For Real Estate Deal Maker, a Residential Venture
By WILLIAM NEUMAN
Jerry Speyer and his wife, Katherine Farley, at the opening of Zankel Hall at Carnegie Hall on Sept. 10, 2003.
He controls 77 million square feet of real estate around the world. He is developing Yankee Stadium for George Steinbrenner. He is a vice chairman of the Museum of Modern Art. But one thing Jerry I. Speyer is not known for, at least in New York City, is running apartment buildings.
Mr. Speyer, 66, has built his reputation as a savvy real estate deal maker who in recent years has put together investment groups that have snapped up some of the city’s signature properties, including Rockefeller Center, the Chrysler Building and the former Pan Am Building at 200 Park Avenue.
His company, Tishman Speyer Properties, was the developer for the eye-catching addition to the Hearst Building on Eighth Avenue and 57th Street, which was designed by the architect Norman Foster. The company is also serving as the developer on the Yankee Stadium project, which is due to be completed in time for the 2009 baseball season. (Mr. Speyer has what he describes as a small ownership interest in the team.)
Tishman Speyer has also joined with Steve Swindal, a partner in the Yankees and the son-in-law of the team’s principal owner, George Steinbrenner, in making a bid to run the state’s thoroughbred racing franchise.
Mr. Speyer is also known as a prominent philanthropist with an interest in the arts. He helped spur the recent expansion of the Museum of Modern Art and he displays his own collection of artwork by such artists as Jeff Koons and Frank Stella at a large town house he built for himself in the East 70’s.
But, before yesterday, when he emerged at the head of the investment team in a $5.4 billion deal to buy Stuyvesant Town and Peter Cooper Village, Mr. Speyer’s residential portfolio in New York was empty.
The sale of the 110-building complex has brought criticism from tenant groups and been a source of anxiety for many residents. Mr. Speyer tried to allay tenant fears yesterday, saying he plans to run Stuyvesant Town and Peter Cooper Village with the same professionalism with which he has managed his commercial properties.
“Were going to take the tension out of this,” Mr. Speyer said. “Because we’re going to be great landlords for the families that live in this place.”
Before yesterday’s deal, Mr. Speyer’s most recent residential foray in the city was at 101 West End Avenue, a 500-unit rental building it built in 2000 at a cost of about $146 million. One-fifth of the apartments were offered at below-market rents, which allowed Tishman Speyer to secure tax-exempt financing for the construction. The company sold the building two years later for $209 million.
Mr. Speyer said that outside New York, his company has extensive experience in residential real estate. That includes a 1,400-unit condo complex that is under construction in the Rincon Hill neighborhood of San Francisco and many condos and rental properties in France and Germany. The company has also embarked on residential development projects in Brazil and India, Mr. Speyer said.
While he has a reputation for shying away from the limelight, he also has long experience in the powerful circles of New York business and politics. He has served as a chairman of the influential Real Estate Board of New York, a lobbying group that represents the real estate industry.
Mr. Speyer started the company with his father-in-law, Robert Tishman, in the 1970’s. Their partnership survived Mr. Speyer’s divorce from Mr. Tishman’s daughter, Lynne Tishman, in 1987.
It also weathered the hard times that hit the New York real estate market in the late 1980’s. When other companies in New York were struggling, Mr. Speyer began focusing on real estate investments in Europe. Success there left him well positioned to take advantage of the gradual recovery in New York and he was part of a group that took control of Rockefeller Center in the mid-1990’s.
In 1991, Mr. Speyer married Katherine G. Farley, an executive at his firm.
Real estate professionals who have worked with Mr. Speyer said that he had been so successful in his recent high-profile acquisitions in part because of his knack for attracting deep-pocketed partners.
“I think Jerry just has had a unique ability to bring together for any particular deal the right resources and to be able to structure something where everybody believes they can derive value from the transaction,” said Geoff Wharton, a former managing director of Tishman Speyer. “He’s unique in the sense of people having confidence in a very long track record of success.”
Last year, Mr. Speyer teamed up with two pension funds, the New York City Employees’ Retirement System and the Teachers’ Retirement System, in the $1.72 billion deal for the former Pan Am Building.
Copyright 2006 The New York Times Company
New York Observer
October 23, 2006
The Biggest Deal: From Stuy Town to Speyer Shire
Massive 80-Acre Complex Sold for $5.4 Billion: Giant Gamble on Middle-Class Housing in City; Tishman Speyer Pomises No Condos in Future
By Matthew Schuerman
For the last 60 years—even when all of New York City seemed broke—the forbidding brick towers and pretty gardens of Stuyvesant Town and Peter Cooper Village have stood as the goalposts of middle-class aspiration in Manhattan.
But in a single day, in the midst of a booming market, the titans of New York real estate were all vying for a piece of the dream.
On Oct. 17, the 80-acre parcel sold for a record-breaking $5.4 billion when the real-estate company Tishman Speyer, along with three investment partners, beat out intense competition from every name in New York real estate’s little black book.
And overnight, the transaction became a referendum on what kind of place Manhattan is becoming.
On the night of Monday, Oct. 16, Rob Speyer and a team of Tishman Speyer executives stayed up all night straightening out the details with the seller, MetLife, and, in the process, knocking out bids that were so high that no single investor could afford to go it alone.
Tishman Speyer’s partner in the deal was BlackRock Realty, an arm of Laurence Fink’s famed Black Rock group, which partnered with CalPERS, the California Public Employees’ Retirement System, to buy 30 Park Avenue, a 20-story rental building, last year for $97 million. BlackRock merged with Merrill Lynch Investment Managers this month and has more than $1 trillion under management. It brought substantial equity to the table—enough to drive decisions about the bottom line and how affordable to keep the complexes. The parties would not detail the ownership arrangement.
In addition, Wachovia Securities and Merrill Lynch served as lenders and advisors on the deal.
Previous history between the principal players in the deal greased the final outcome, according to a source. Last year, the insurance company sold its headquarters at 200 Park Avenue for $1.7 billion to Tishman Speyer.
Meanwhile, the same brokers who repped MetLife this time around—Darcy Stacom and William Shanahan of CB Richard Ellis—also helped sell the insurance company’s marquee building at 1 Madison Avenue in 2000. Ms. Stacom and Mr. Shanahan also repped Tishman Speyer on its partial sale of the Lipstick Building at 885 Third Avenue.
The winning bid came out to $482,000 a unit—a good value if the partnership could easily flip them as condominiums, but on the very low end of what rental properties are expected to yield annually. Right now, rent-regulated one-bedrooms at the complex go for about $1,100, while the market-rate ones rent at an average of $2,400. MetLife, according to a New York Times report based on the sale’s offering materials, predicted that the complex would yield $167 million in income next year—which would come out to about a 3 percent yield on the winning partnership’s investment.
In order to do better than that, the new owners are expected to aggressively move to deregulate the 73 percent of apartments that remain under rent regulation. The big question is just how aggressively.
“This is a responsible group of investors who will abide by regulations, but they will want to recoup their investment,” said Seth Weinstein, a principal at Hannah Real Estate Investors, which has $350 million in residential, commercial and mixed-use projects in the metro region under development. “You can’t have all working people living in the outer boroughs. This used to be an enclave.”
A source close to Tishman Speyer, a 28-year-old company that came out of the original Tishman family real-estate dynasty, said that the partnership wasn’t planning to convert the complex into condominiums.
“It’s not like in two weeks, you are going to see an application to condo-ize it,” the source said. “The rental business is a good business to be in, to boot.”
But the words did not entirely assuage critics of MetLife’s sale, who said they wanted additional assurances. Meanwhile, other observers pointed out that investigations of potential environmental problems clouded the final bidding round.
“We will want to know precisely how Tishman Speyer intends to preserve the long-term affordability of this community, and we expect to see concrete plans,” City Councilman Dan Garodnick, himself a market-rate tenant in Peter Cooper, said at a news conference at City Hall. “We will want to know that Tishman Speyer will be an owner whose benevolence will extend beyond the mere obligations of the law.”
Mr. Garodnick’s bid was handily outdone. Backed by the AFL-CIO and a number of top-flight banks, it came in “north of $4.5 billion,” by his estimation, and would have let occupants of 20 percent of the units buy their own apartments, while keeping another 20 percent of the units as affordable rentals for the middle class. Tishman Speyer also outbid the other leading contender, a partnership led by Apollo Real Estate Advisors.
Kushner Companies was also a bidder; Jared Kushner, publisher of The New York Observer, is the son of Charles Kushner, a principal in Kushner Companies.
Early Tuesday morning, Tishman Speyer jumped on the phone to offer reassurances before its victory became public. Mr. Garodnick got a call; so did Mayor Michael Bloomberg and Public Advocate Betsy Gotbaum.
“We are committed to working closely with residents, elected officials and community leaders to help ensure a dynamic and vibrant future for this New York community,” Jerry Speyer, the chairman and C.E.O. of the company, said in a statement later in the day. (His son Rob, senior managing director, was point man on the deal.) “The thousands of tenants in rent-stabilized apartments are completely protected by the existing system. No one should be concerned about a sudden or dramatic shift in this neighborhood’s makeup, character or charm.”
The state rent-stabilization system, which applies to all large multi-family buildings erected before 1972, permits landlords to increase the rent only by a certain percentage, usually around 3 or 4 percent, each year.
But owners can increase it by as much as 20 percent when tenants turn over, and can also charge a percentage of capital improvements made to the building.
An apartment becomes deregulated when its rent exceeds $2,000 and either the unit changes hands or the present tenants have earned more than $175,000 for two years running.
MetLife told potential bidders that about 5 percent of all apartments would turn over each year, opening up deregulation opportunities. But some real-estate investors doubted those claims.
“That’s an actuarial calculation,” said Richard LeFrak, president and chief executive of the LeFrak Organization, which manages about 20,000 apartments in the New York area. “Everybody evaluating the property is making their own judgment about that, but a person with a $1,200 apartment in Manhattan doesn’t give it up. Generally, with turnover, you have a sticky bottom.
“It’s not 5 percent a year or whatever number that is put out there. It is a decreasing percentage of the population with each year. The way the arithmetic works is, people have normal lifestyle changes. They change jobs. They change family structure. They get divorced. That’s normal demographic activity, but at the end of the day, they are going to do everything they can to hold onto that apartment.”
Besides rent stabilization, some buyers may have had to factor in environmental conditions—especially groundwater contamination at the site.
A spokeswoman for the state Department of Environmental Conservation, Lori O’Connell, confirmed that Stuyvesant Town was the subject of a state investigation for possible contaminations.
The neighborhood, bounded by 14th and 23rd streets, First Avenue and the East River, contained many gashouses that were bulldozed in the late 1940’s to make room for inexpensive apartments for returning World War II veterans.
MetLife was cajoled by the city with tax breaks and guilt to build the housing and prove itself as a good corporate citizen.
“It’s a long-term bet,” said one New York industry expert. “I’m not sure, in this case, if the end winner is going to look so smart. Every move they make will be under tremendous scrutiny, and they have tremendous environmental problems.
“It may be manageable, but when people are running around in white suits cleaning up the groundwater, it will be hard to bring [the complex] to market rent.”
The cleanup would be paid for by Consolidated Edison, the successor company to the owners of the three manufactured gas stations on the site, which may have left behind tar and oil deposits that could harm people through direct contact or contamination of the air, according to a state Department of Health briefing on the investigation. The report on the findings is due at the end of the year.
--Additional reporting by Azi Paybarah and John Koblin
You may reach Matthew Schuerman via email at: mschuerman@observer.com .
copyright © 2006 the new york observer, LLC
Jerry is a animal in business, he wont just sit there and let rents be collected.
If your living in that complex illegally, as up to 35 percent are, my advice is to move before they drag you out. They may not go condo but they will get there fair share of rent from this place by gettting ride of scafflows
Curious: Where did you come by that figure ???Originally Posted by kliq6
teanant association memeber at PCV, a former girlfriend
MetLife real estate deal could be derailed
The $5.5 billion sale of Stuyvesant Town and Peter Cooper Village could be derailed by a provision that limits owner MetLife to make no more than a 6% annual profit on the deal.
By: Anne Michaud
Published: November 15, 2006
The $5.4 billion sale of Stuyvesant Town and Peter Cooper Village could be derailed by a little-known provision that limits owner MetLife Inc. to make no more than a 6% annual profit on the vast Manhattan apartment complex.
Trautman Sanders, a law firm representing the tenant group that lost its bid to purchase the complex, discovered the condition in a 1942 agreement with New York City. According to the agreement, Met Life said it would keep its rents low, earning no more than 6%, in exchange for a 25-year city tax break.
City Councilman Daniel Garodnick, who opposed the sale of the complex to developer Tishman Speyer, has sent a letter to city Comptroller William Thompson, asking him to investigate. Mr. Thompson's office is reviewing the letter.
"We received the councilmember's letter and are taking a hard look at it," said a spokesman for Mr. Thompson. "As you know, in recent months the comptroller has expressed serious concerns about the future of Stuyvesant Town."
John Calagna, a MetLife spokesman, says that Mr. Garodnick's allegations have no merit. "What this is is a last-minute, desperate attempt to interfere with a legitimate sale."
The sale, which is the largest real estate deal in American history, was scheduled to close later this week. A tenants' group had organized to try to buy the 110-tower complex along the East River, in the hope of keeping rents affordable. Residents expect Tishman Speyer to deregulate as many apartments as possible.
Tishman Speyer could not be reached for comment.
Mr. Garodnick says in his letter that MetLife must, by law, dissolve its subsidiary development company that built the apartment complex before it can sell. No dissolution is on record with the city Department of Housing Preservation and Development, the letter says.
Until the agreement is dissolved, Mr. Garodnick writes, any excess profit would belong to the City of New York.
Entire contents © 2006 Crain Communications, Inc.
Ups!According to the agreement, Met Life said it would keep its rents low, earning no more than 6%, in exchange for a 25-year city tax break.
November 18, 2006
Sale of Stuyvesant Town and Peter Cooper Village Goes Through Despite Some Tenants’ Efforts
By CHARLES V. BAGLI
Tishman Speyer Properties completed the record-setting $5.4 billion purchase yesterday of Stuyvesant Town and Peter Cooper Village, two adjoining complexes along the East River that have served as a refuge for generations of firefighters, nurses and civil servants.
A group of tenants, who have deplored the loss of middle-class housing, tried this week to disrupt the sale by Metropolitan Life by asking the city comptroller to investigate whether the insurer had complied with state housing law.
MetLife quickly denounced the move as a “desperate” tactic, although the comptroller’s office is going ahead with a review.
In any event, Tishman Speyer and its partner, BlackRock Realty, completed the largest real estate deal in American history in 30 days, closing on 11,232 apartments in 110 buildings — much faster than most people buy a house or a condominium.
The undistinguished red-brick buildings between 14th and 23rd Streets have none of the glamour of other properties run by Tishman Speyer, like Rockefeller Center and the Chrysler Building.
But the complexes have a special place in the hearts of generations of current and former New Yorkers.
“This was a special place,” said Alvin Doyle, president of the Stuyvesant Town-Peter Cooper Village Tenants Association. “It’s the passing of an era, or the beginning of a new era.”
Mr. Doyle has lived in Stuyvesant Town since he was born in 1952. His father, a reporter for The Daily Mirror, was one of the first tenants to move in after MetLife built the complexes in 1947 for returning veterans. His mother, Therese, still lives there.
The sale also marks the denouement of a remarkable chapter in MetLife’s history: It built 24,682 apartments in 180 buildings at four complexes in Manhattan and the Bronx during the 1940s, when the city was desperate for affordable housing, much as it is today. In return for tax breaks and other subsidies at three of the four complexes, MetLife agreed to limit its return to 6 percent and to hold down rents.
MetLife sold its largest and oldest development, the Parkchester in the Bronx, to an investor, Harry Helmsley, for $90 million in 1968 and the Riverton Houses in Harlem to Charles A. Vincent for $12.5 million in 1976.
The prospective sale of Stuyvesant Town and Peter Cooper Village this year set off a frenzy among buyers from New York to Qatar and served as a lightning rod for the rising public anger over housing costs and the continuing loss of middle-class apartments in Manhattan.
Nearly three-quarters of the apartments have regulated rents at roughly half the market rate. Many tenants fear that over time the complexes will become luxury enclaves.
MetLife has said that its obligations to provide lower-cost housing expired in 1974, when its 25-year tax exemption ended. But that same year, the city agreed to grant MetLife an additional 10-year tax abatement and put the apartments in the rent stabilization program.
In recent years, MetLife has sought to remove illegal subtenants and tenants whose principal residences are elsewhere. The new owners are expected to continue the practice.
Tishman Speyer, which has tried to reassure tenants that it does not plan any drastic changes, says it is proud to have been selected as the “steward” for the properties.
Still, housing advocates say that the company will be under pressure to produce a profit, given the extraordinary sales price.
Copyright 2006 The New York Times Company
Stuy Town Follies: Tishman Spies, Plans Sky Gardens?!
Tuesday, May 29, 2007, by Lockhart
Avert your eyes from the above image for a second to feast on the news that Stuyvestant Town landlord Tishman Speyer is allegedly "building tax dossiers on tenants in a massive effort to drive out low-paying families and jack up rents," as the Post reports. Ah, the glory of resident paranoid; always a good time. Memo to Stuy Towners: if you've got another residence somewhere else in the country, quickly switch it to your great aunt's name. Yesterday.
Returning to the above image, feel free to join us in a round of WTF. It comes our way from a Curbed reader who emails, "Look what I randomly came across: conversion plan for Stuy Town with glass penthouses, sky garden and wind turbines!" The renderings are posted at a secret link on the website of überkool LES architecture firm Work, which probably means they were done for a showcase or random design study or something, but we'd rather embrace the darker greener vision: it's the future of Stuy Town, revealed! You'll take your hovering marshlands and like them, mmkay?
· PCVST Study [work.ac]
· Stuy Town Residents Blast 'Spying' [NYPost]
· Stuy Town Follies: Rent Hikes and Secret Destruction Plans? [Curbed]
Curbed
That is one of the most ridiculous things I've ever seen. What the hell are those, skyways connecting some of the buildings? And those parks over the FDR? They would have to be 4 or 5 stories in the air!
This looks more like a design team going "Ok, lets just put some crazy ideas out there and see where they evolve."
I like the newer towers, though their placement seems rather random. The idea of building glass penthouses is pretty good too. I don't see the point of having parks on the top of some of the buildings though. I think these architects are so caught up with the current trend that they fail to see the "towers in the park" for the park.
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