Mortgage giant Fannie Mae recently announced that it will be backing Blackstone and Ivanhoe Cambridge’s acquisition of Stuyvesant Town and Peter Cooper Village with a $2.7 billion credit guarantee.
The government-backed company made the announcement last Monday, The Real Deal first reported, noting that to finance the acquisition, an affiliate of Blackstone will secure the loan from Wells Fargo’s multifamily division, one of Fannie Mae’s lenders. This mean that Wells Fargo will originate the acquisition loan and pass it on to Fannie Mae, then sell it off to investors in the form of commercial mortgage-backed securities.
The agreement means that the federal government will effectively back Blackstone’s $5.3 billion acquisition, on top of the $225 million subsidy from the city for the buyers.
The loan carries a 10-year term, although Fannie Mae did not disclose its interest rate.
The recently announced one percent RGB increase is a small step toward putting the “stable” back in rent stabilization.
As tenants, we all need to support this action by selecting the one-year option when we renew our leases. This will send a clear message to the RGB and Albany that we want to preserve our community and affordable housing for all New Yorkers.
It will also reject the risky business model followed by the equity predators. This business model is named for its last two words: “It doesn’t matter how much you pay, you can always sell it later to a bigger fool.” The problem with this model is who is going to be the next bigger fool?
Not the current tenants. We realize that the choice of a 2.75 percent two-year increase is the equivalent of selecting a 1 percent increase this year and a 3.5 percent increase next year! While landlords deserve to cover realistic cost increases, we will not pay for yet another round of replanting because the previous round was done wrong.
Not the future tenants. The equity predators are all targeting recent graduates and other newcomers to the housing market to fill current and future vacancies. But saddled with large student loans and entry-level salaries, the only vacancies they can fill are the empty bedrooms in their parents’ homes.
Not the equity lenders. They have been burned once by the Tishman Speyer default and other failed large real estate deals. They will be following the model established by Fannie Mae and Freddy Mac. (Thank you, Senator Schumer.) The equity predators will have to prove the viability of their projections with more than just an “I said so.”
In other words, the times they are a-changin’ (with apologies to Bob Dylan.) Gone are the days where equity predators can entice bigger fools with frivolous, self-congratulatory costs like the vanity plates on the PCVST security vehicles.
Gone too are the days when the mayor turns a blind eye because, “It’s a private matter.” If the equity predators continue to believe their own hype (the cardinal sin committed by Tishman Speyer), they will find that they are the biggest fools.
Responsible parties within the real estate industry have already shown signs that they are adjusting to accept a different business model based on realistic income forecasts and controlled operating costs.
Let us all give our support to these leaders by overwhelmingly accepting the one-year, one percent increase and rejecting all rent increases that exceed true cost increases. Bill Huebsch, ST Resident for 36 years
Mayor didn’t deliver on rent freeze
To the Editor:
Mayor de Blasio is now batting with two strikes against him here in Stuyvesant Town.
First, he sandbagged Councilmember Dan Garodnick, by actively campaigning for Dan’s opponent for City Council speaker.
Then, the mayor capitulated to the real estate industry and disavowed his supposedly ironclad campaign pledge of a rent freeze.
Sandbagging tenants like this has a real cost. A rent increase of one percent will cost ST/PCV residents a total of $3,236,680 every year – calculated as an average rent of $2,000 over 11,235 apartments. Plus, everyone’s base rent is now raised in perpetuity.
This $3,236,680 is money that tenants could have used to support our local community. Or, tenants could have strengthened their retirement savings. Instead, it will go to line the pockets of the hedge fund that controls the property.
The mayor needs to decide whether he is on the side of tenants or the side of hedge funds. Name Withheld, ST
Can we give Citi Bike hogs the boot?
The following is an email sent to Citi Bike by John Marsh, president of the ST-PCV Tenants Association, shared with T&V.
Subject: “Reserving” or Booting a Citi Bike By For Your Exclusive Use
I wanted to formally bring to your attention the following unfair practice of reserving your own Citi Bike by putting a lock on it, or effectively booting it so other riders can’t take it out.
I came along at 8:20 a.m. on Thursday, June 19th delighted to see a lone bike at the E. 20th and FDR station in Dock #34. After inserting my Citi Bike key in I was surprised to see that a U-Lock had been placed around the back wheel of bike number 06656. I immediately re-docked the bike, took these photos and called the incident into Citibike Customer Support number.
Whomever (whichever member) successfully undocked and rode this bike next to another Citi Bike station should be warned or disciplined in some manner for this inappropriate behavior.
Senator Chuck Schumer with other elected officials at a rally in Stuyvesant Town in 2010 (Photo by Sabina Mollot)
By Sabina Mollot
One month after CWCapital’s beginning of the foreclosure process of Stuyvesant Town, city officials as well as U.S. Senator Charles Schumer have announced ways they were trying to help tenants in maintaining affordability.
One possibility is offering a tax exemption in which the owner would commit to a 40-year agreement for affordability. That possibility, first reported in the New York Times, could preserve as many as 6,000 apartments for families of four earning between $65,000 and $135,000 a year. This is just one option, however.
A city official confirmed today that there are other government programs that could be explored and there have been good faith discussions with CWCapital as well as Council Member Dan Garodnick in an effort to create more transparency going forward. CWCapital’s decision last week to take ownership of the property is being seen as an opportunity to take the time to explore options in maintaining affordability. More specifically, the idea is to avoid a repeat situation of the 2006 sale to Tishman Speyer when tenant affordability wasn’t even a factor. Because any transaction would be considered private, the city has some but not limitless sway on the outcome and currently, the administration is trying to gauge what tenants’ rents and income levels are to determine what their needs are.
Meanwhile, Fannie Mae and Freddie Mac, who provided crucial mortgage financing in the Tishman Speyer sale have committed to not financing a deal that would be “unacceptable to tenants and the city,” the Times quoted Schumer as saying.
In response, Mayor de Blasio called this a “positive step.”
In a written statement, he added, “We are aggressively using all the levers we have at our disposal to protect affordability at Stuy Town. Senator Schumer has been a forceful leader in pushing Fannie Mae and Freddie Mac to make sure the city and tenants have a better shot at shaping this outcome and protecting this community for middle class New Yorkers.”
The administration has also been quick to note, however, that while most buyers would require help from Fannie and Freddie for such a large transaction, there are others that could possibly make a deal without those agencies’ financing.
Still, the news of their cooperation has been greeted with enthusiasm by the Tenants Association, which still plans to hold a rally in front of City Hall on Friday at 10 a.m. The rally will be attended by elected officials, including Schumer.
Susan Steinberg, chair of the Stuyvesant Town-Peter Cooper Village Tenants Association, said the news left the TA “very encouraged. Our voices have been heard and our advocacy on behalf of STPCV tenants is bearing fruit. The need to maintain STPCV as a place where ‘families of moderate means might live in health, comfort and dignity’ is important to New York City, and beyond. Middle class affordability can’t become a thing of the past. We welcome the support and participation of our state and local electeds in helping us protect our homes.”
Garodnick, along with dozens of other local city, state and federal politicians had sent a letter to Fannie Mae, Freddie Mac, the Federal Housing Finance Agency and Housing and Urban Development (HID) on June 10 in an effort to get Fannie and Freddie to not invest in deals that put affordable housing at risk.
Today, he praised the commitment made by Fannie and Freddie.
“This commitment from Fannie and Freddie will help us cut off the oxygen to another predatory deal here,” said Garodnick.
Congresswoman Carolyn Maloney, at a May, 2010 press conference in front of Stuyvesant Town, discusses her Fannie Mae/Freddie Mac legislation. (Photo by Sabina Mollot)
By Sabina Mollot
Two weeks before the scheduled foreclosure sale of Stuyvesant Town’s debt, Congresswoman Carolyn Maloney reintroduced legislation that would prevent Fannie Mae and Freddie Mac from investing in future, similar housing deals that lead to the loss of affordable housing rather than the creation of it.
However, she freely admitted that the bill is not likely to get passed any time soon.
“It is very difficult to get a bill through Congress, but I am continuing to build support behind this important bill,” said Maloney, “and I am looking for opportunities to incorporate the reforms it proposes in other legislation.”
The bill was first introduced in 2010 after Fannie and Freddie got affordable housing goals credits for their participation in the Tishman Speyer purchase of Stuyvesant Town.
Maloney reintroduced the bill on Friday, May 30, following the formation of a coalition of over 40 local elected officials aimed at fighting predatory equity. The Coalition Against Predatory Equity (CAPE) was formed by Council Members Dan Garodnick, Jumaane Williams and Ritchie Torres and one of its goals is to ensure responsible lending by Fannie Mae and Freddie Mac.
Both agencies are mandated by the federal government to help increase affordable housing. However, Fannie and Freddie were parties to the Stuy Town deal in 2006, despite the owners’ business plan of ousting stabilized renters and replacing them with market rate paying ones.
Specifically, the agencies invested in a $22 billion commercial mortgage-backed securities transaction that contained the senior debt on the ST/PCV. Fannie Mae and Freddie Mac’s participation as senior debt holders of $3 billion was critical, as it represented nearly 60 percent of the total cost of the acquisition.
Maloney’s bill, if passed, would prevent Fannie, Freddie or any other government sponsored enterprise (GSE) from receiving affordable housing goals credits when a project’s debt is disproportionate to its income like the ST/PCV venture.
The bill would also require the GSEs to use the same standards for assessing their investments in the secondary securities market as they would for direct investments for the purposes of affordable housing goals credits.
“Part of Fannie and Freddie’s mission is to encourage affordable housing, but some of the deals in which they have invested have caused the opposite to occur,” said Maloney in an official statement. “Affordable housing credits shouldn’t be awarded for investments when the only conceivable scenario for profitability is for rents to rise. That is what’s happening at Stuyvesant Town/Peter Cooper Village, and that’s what my legislation is designed to prevent.”
A spokesperson for Fannie did not respond to a request for comment. A spokesperson for Freddie said he couldn’t comment on legislation affecting the agency.