Stuy Town sold for $5.3B to Blackstone

5,000 apts. to remain affordable for 20 years, with income requirements for new tenants looking for lower-priced apartments

Mayor Bill de Blasio speaks at a Tuesday press conference. Pictured with him are State Senator Brad Hoylman, Assembly Member Brian Kavanagh, Blackstone’s global head of real estate Jonathan Gray (partially hidden), Council Member Dan Garodnick, Manhattan Borough President Gale Brewer, ST-PCV Tenants Association President Susan Steinberg and other residents. (Photo by Sabina Mollot)

Mayor Bill de Blasio speaks at a Tuesday press conference. Pictured with him are State Senator Brad Hoylman, Assembly Member Brian Kavanagh, Blackstone’s global head of real estate Jonathan Gray (partially hidden), Council Member Dan Garodnick, Manhattan Borough President Gale Brewer, ST-PCV Tenants Association President Susan Steinberg and other residents. (Photo by Sabina Mollot)

By Sabina Mollot 
The biggest flop of New Yorkʼs real estate boom was on Tuesday hailed as the biggest win for its working class.

Announcing that investment firm Blackstone and Canadian hedge fund Ivanhoe Cambridge will pay $5.3 billion for the 11,241-apartment Stuy Town/Peter Cooper Village apartment complex, Mayor Bill de Blasio crowed, “This is the mother of all preservation deals.
“This is the one we talked about from day one, to unmake the mistake from a decade ago. It’s a very gratifying day.”

Nearly six years after Tishman Speyer walked away from Stuyvesant Town after defaulting on loan payments on a $5.4 billion deal to buy it, de Blasio, along with other elected officials, tenant leaders and Jonathan Gray, global head of real estate for Blackstone, cheered the new sale as a win for tenants and the city at a press conference inside Stuyvesant Town’s First Avenue Loop.
According to the mayor’s office, the deal will prevent the loss of what had been a rate of 300 affordable apartments each year.

Under the deal, tenants at the affordable units will be able to remain in place, but when they move, new tenants moving in will have restricted rents if they meet certain income requirements.
Of the 5,000 affordable units, 4,500 will be rented to households earning no more than $128,210 for a family of three, and the remaining 500 apartments must be rented to families earning no more than $62,150 for a family of three. None of those tenants will pay more than 30 percent of their income in rent.

Along with ensuring the apartments that are currently affordable remain that way, so-called “Roberts” tenants who are currently in renovated apartments paying higher rents will get five additional years of another kind of rent protection. When the J-51 tax abatement program expires in 2020, their apartments will no longer be rent-stabilized. Under the agreement, rent increases for those 1,400 tenants would be capped at five percent a year for five years.

While there are still many details to be worked out — Gray said he was still learning about a big concern of tenants, which was the property’s population of students­ — some questions have been addressed by the company already on a website, stuytownpetercooper.com.

One question posted online is how the decision will affect market rate tenants, to which Blackstone said it would “maintain the status quo.” The company also said the transition wouldn’t impact the property’s employees’ jobs or their current pay and benefits.

Blackstone has also promised not to build on top of the property’s open spaces.

As for how new tenants would be eligible for an affordable apartment, Deputy Mayor Alicia Glen said a possibility was a lottery, which, she admitted, typically involves a waiting list.
Despite the price paid — $100 million less than Tishman Speyer’s winning bid — Gray said tenants shouldn’t fear that the switch in ownership will lead to a replay of a desperate landlord trying to oust low-rent-paying tenants.

Jonathan Gray (photo by Sabina Mollot)

Jonathan Gray (photo by Sabina Mollot)

“This is a very different situation from back then,” said Gray. “We’re taking a longterm approach to this asset. We have clear rules about affordability. The fact that we signed an agreement with the city of New York with input from the Tenants Association, which obligates us to do certain things, makes us very different from the situation back then.”

Gray said the amount the company is borrowing to finance the deal is only 50 percent of the cost, “which, in context with buying a house, 50 percent is very low leverage,” he said.

He also said he expected that the rental market in Manhattan would remain strong.
“We expect continuity,” Gray told reporters during the press conference. “The market is tight. There is a shortage of apartments in New York City. That puts upward pressure on rents. That’s why we are interested in New York City, but we don’t expect any dramatic changes.”
His company, he added, is interested in “stable, longterm assets. We’re looking to take on lower return, less risk that take less debt (investments) that have a much longer hold period.”

In a prepared statement, he also said, “It is a tremendous honor and responsibility to become co-owners of Stuyvesant Town and Peter Cooper Village. We intend to own Stuyvesant Town and Peter Cooper Village on behalf of our investors for many years to come.”

Tenants will have the opportunity to ask questions about the new ownership at a town hall meeting set to take place on Saturday, October 24 at 1 p.m. at Baruch College, 17 Lexington Avenue at East 23rd Street.

Meanwhile, on Tuesday, ST-PCV Tenants Association President Susan Steinberg said she was happy with the outcome even though it wasn’t the non-eviction condo conversion the association had wanted to see through with partner Brookfield Asset Management. Brookfield, Steinberg explained, had been the TA’s partner as a bidder in the event of a foreclosure auction. However, this deal did not involve an auction.

She also said tenants’ hopes of owning condos seemed to become bleaker as the property climbed in value in recent years, which would make buying less affordable than originally thought.
“As values of the property soared from $1.7 billion to three times that amount, the idea of ownership became tenuous,” said Steinberg, “as the price per square foot went up.”

However, she added, “We didn’t lose sight of the prize,” referring to tenants’ insistence of preservation of ST/PCV “as a single unit and preservation of open space.
“People forget the reality is we don’t own this place,” she added. “I think we got the best possible deal we could.”

Mayor Bill de Blasio and Council Member Dan Garodnick hug at the press conference. (Photo by Sabina Mollot)

Mayor Bill de Blasio and Council Member Dan Garodnick hug at the press conference. (Photo by Sabina Mollot)

Council Member Dan Garodnick, who, along with the Tenants Association and the mayor, was very involved in the negotiations, echoed the sentiment. He also told T&V that while the current plan didn’t include a conversion, Blackstone has said it would be open to the idea.

As for what happens after the 20-year affordability arrangement ends, de Blasio said that would in all likelihood be a matter for the city’s government at that time.

Blackstone Group LP is the world’s biggest alternative-asset manager.
This summer, it gathered $15.8 billion to invest in global real estate.
According to Bloomberg News, the firm collected more than 90 percent of the pool, its eighth fund for global property, from institutions in about four months, a person with knowledge of the matter said in March. The remainder was raised from individual investors.

New York-based Blackstone has already committed 20 percent of the fund to deals including $14 billion for real estate assets being divested by General Electric Co., and nearly $4 billion to buy Strategic Hotels & Resorts Inc.

In July, the firm acquired a 25-parcel package from the Caiola Family. That $700 million grouping holds about 1,000 apartments which are centered near the Upper East Side and Chelsea. It increased its presence in the boroughs, snatching up Sky View Parc for $400 million in Flushing in June.

But even though the company’s seven previous global property funds have doubled their invested capital, the city isn’t taking any more chances with Stuy Town.

Deputy Mayor Alicia Glen (Photo by Sabina Mollot)

Deputy Mayor Alicia Glen (Photo by Sabina Mollot)

Glen told reporters that if the market does go south and things don’t go the way Blackstone is picturing, even if the company sells the property, the next owner would be bound by the same terms Blackstone has agreed to.

In exchange for preserving affordability, the new owners will not have to pay transfer taxes, saving them about $140 million, and they won’t have to pay a $75 million mortgage tax.

This arrangement also saves tax payers money, Glen said, by offering a one-time exemption instead of an ongoing abatement. “Normally with an affordable housing project, the owner gets a break on taxes every year,” she said.

Until recently, CWCapital’s effort to sell had been hampered by a lawsuit filed by junior lenders represented by a company called Centerbridge Partners. The lenders had hoped for a chance to buy a key piece of the junior or mezzanine debt and accused CW of violating an intercreditor agreement when the servicer took title of the property through a deed last year instead of holding a foreclosure sale.

Joe DePlasco, a spokesperson for CW, issued a statement on Monday, saying, “We are pleased that we have finalized in principle the settlement of the outstanding litigation. CWCapital retained Doug Harmon at Eastdil Secured to advise throughout the process.”
CW did not respond to a request for comment on the sale.

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9 thoughts on “Stuy Town sold for $5.3B to Blackstone

  1. So what happens after 20 years? Those people who are in their 60s and 70s now and living in the real RS apartments will be in their 80s and 90s (if the planet still exists) at the end of the 20-year period. Will those old, doddery, frail people be kicked out into the gutter if they don’t have the wherewithal to move or pony-up the massive rents? Blackstone and its ilk would do that to their own mothers, so what will they do to STPCV tenants? We know their kind have no heart or soul – it’s all about the money.

    • No, those longtime tenants will continue to have the protection of rent stabilization after 20 years. Their rent will not change in year 20, other than as dictated by the annual Rent Guidelines Board decisions. The crux of this deal is that any unit left by one of those residents within the next 20 years will stay affordable–eliminating all incentive to push longtime tenants out (as has happened over the past 10 years) and ensuring those units aren’t converted to luxury ones.

      • You have absolutely NO idea if Rent Stabilization will be either in force, or have the same protections in 20 years, as this is decided by the NYS Legislature, and not NYC Government. Do you think we have forgotten about Gov. Pataki and Joe Bruno’s gutting of the Stabilization laws, allowing MCI’s and IAI’s in perpetuity ?. 20 years is a cruel joke on current residents approaching retirement.

      • Thanks, City Hall Press Office. However, most of us who have lived here for some considerable time know full well that Mr. Garodnick and the Tenants Association (if you can call it that) are the biggest liars under the sun and that Blackstone is a company in business to make money and make lots and lots of money and that human lives mean about as much to them as they do to Vladimir Putin. We’re not stupid, you know. And we do vote. And we do read. In fact, we read very well and we do know how to do background research, which is something else we do very well. As New Yorkers, we are used to sleazy, duplicitous politicians, but that doesn’t mean that we tolerate them well.

  2. The TA top honchos (Steinberg, Marsh, Salacan, Doyle, et al) and Councilman Garodnick obviously knew about this upcoming sale for a long time, but chose to keep quiet about it. They led tenants to believe that there was still a chance of them buying their own apartments and never once said “That won’t happen, but something else will so stay tuned.” There’s something very dirty and deceitful about this. I don’t think the TA gives a ff about the tenants. They were onboard with the excavation of all the toxic soil and the chopping down of many beautiful, healthy trees in order for management to build that hideous bunker. They didn’t give a rat’s ass about the noise and filth and disruption caused to the tenants in the affected buildings. They don’t give a rat’s ass about anything except what suits them. What is the purpose of the TA? Does it have a purpose other than to pander to politicians who also don’t give a rat’s ass about us?

    • 3% of tenants disagree with you…LOL…membership is around 3% and they think they matter. Sad, really. Same goes for Garodnick.

      • We need a new TA. We need a TA that is focused on the welfare of tenants. What we have now is a faux TA that focuses on pandering to corrupt politicians. The TA has done NOTHING for us and it’s “leadership” is more of a dictatorship.

  3. Read the comments by Vickie. She knows the score. I am disappointed with Mayor de Blasio and Council Member Garodnick. They sold us out and then said that they were on our side and doing us a favor.

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