Blackstone, Ivanhoe Cambridge take ownership of Stuy Town

Jon Gray smile

Jon Gray, Blackstone global head of real estate (Photo by Sabina Mollot)

 

By Sabina Mollot

On Friday, Blackstone and Ivanhoé Cambridge announced that they closed on the $5.3 billion deal to purchase Stuyvesant Town and Peter Cooper Village. This means that the companies have assumed ownership and CWCapital, the special servicer since 2010, no longer has any ownership interests in the property.

“We are proud to have entered into long-term partnership with the PCVST community and the City of New York,” said Jon Gray, Global Head of Real Estate for Blackstone, in an official statement. “We look forward to working together with them to preserve what makes this community so special.”

Daniel Fournier, chairman and CEO of Ivanhoé Cambridge said, “We are honored to share with Blackstone the responsibility of the future of PCVST. This investment is a win-win for the community of 30,000 residents, for our investors and for New York.”

The deal, touted as “the mother of all preservation deals,” by Mayor Bill de Blasio, will preserve affordability at 5,000 of the complex’s apartments for the next 20 years. There are also some protections for the 1,400 “Roberts” tenants while for market rate residents, the deal maintains the status quo.

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Residents have mixed reactions to affordability plan

Jonathan Gray listens to tenants. (Photo by Sabina Mollot)

Jonathan Gray listens to tenants. (Photo by Sabina Mollot)

By Sabina Mollot

At the big announcement on Tuesday, residents who’d skipped work that morning as well as a number of retirees made up most of the crowd (along with a gaggle of reporters, photographers and cameramen).

Many seemed shocked by the news, and not all were thrilled.

One man, as he walked home along the First Avenue Loop, stopped Deputy Mayor Alicia Glen to tell her she had done a beautiful job explaining the situation. However, he then added, “It doesn’t impact me because I’m market rate, so I’ll be killing myself this afternoon.”

He then walked away, as Glen responded, “Please don’t do that.”

Residents also gave Blackstone’s Jonathan Gray an earful after the press conference. When one resident asked if CompassRock would continue to maintain the complex, he asked, “What do you think of them?” The tenant then said, “Get rid of them,” before several other tenants also began descending on him with their own complaints.

A resident of 30 years who was standing nearby, Lawrence Scheyer, simply said, “I hope Blackstone will be good stewards of this property.”

Scheyer, a real estate attorney and member of Community Board Six’s Transportation Committee, said he also wondered how the tax breaks offered to the owner in exchange for preserving affordability in 5,000 units would impact funding for the MTA. “They get a fair amount of revenue from (mortgage) recording taxes,” he explained.

Rosemary Newnham, a mom of two in Peter Cooper who does some freelance medical writing, said she didn’t think the new arrangement would help her. Her husband is a doctor and she guessed they probably bring in just over $130,000 a year. But, she added, “What is middle income in Manhattan?” She guessed it was closer to $200,000, due to costs like babysitters and daycare. She added that the last articles she wrote, “I paid for because I had to hire a sitter.”

Newnham added, “My husband does important work, saving people’s lives and we barely have any money after we pay our rent.”

Her two-bedroom in Peter Cooper, where her family’s lived since 2008, rents for close to $6,000. After the “Roberts” settlement, the couple got a check for around $100, if it was even that much.

So that new deal “is not going to change our situation as far as I can see,” Newnham said.

John “Butch” Purcell, a resident of Stuy Town since 1968, seemed more optimistic about the future.

“I think it’s a great move in terms of the 20-year thing,” said Purcell, who’s retired from a career in drug treatment counseling. “I think de Blasio stepping in was a very good move. It’s a good situation. Most people are feeling relaxed although not too relaxed because we don’t know what’s coming after this, anything that’s unsaid. What’s coming down the pike we don’t know but it’s a lot better than it was.”

Marina Metalios, a 25-year resident, was also cautiously enthusiastic. Metalios is a tenant activist who also works for UHAB, an organization that helps tenants convert their buildings to affordable co-ops, among other assistance for tenants.

“I want to see the next generation have an opportunity to live here,” she said. “I have a niece and nephew born in Stuyvesant Town/Peter Cooper and I wonder if they could stick around when they’re adults. It seems the plan for those 5,000 units to be targeted by income might create an opportunity for that. I like that, but what happens in the 20th year? Year 20 is troublesome for me. I want something that is permanently affordable or affordable for a very long time. I don’t see how this plays out after year 20.”

The Tenants Association meanwhile issued an official statement, praising the commitments made by the owner.

“After years of fighting to deliver a more stable and affordable future for our community, today we can celebrate an important success,” said Tenants Association President Susan Steinberg.

“We have eliminated the incentives that have existed for landlords to try to kick rent-stabilized tenants to the curb, and provided security for ‘Roberts’ tenants when the J-51 tax abatement expires in 2020. We welcome Blackstone and Ivanhoé Cambridge’s commitment to protecting our valued open spaces, keeping Stuyvesant Town and Peter Cooper as a unified whole, and endeavoring to create an environment that is most suitable for long term tenants seeking to develop roots here.

“We also strongly support the steps being taken to assist the senior population in our community. This deal is the result of years of advocacy, and we welcome the opportunity to work with Blackstone and Ivanhoé Cambridge to bring stability back to this community.”

Linda Ayache, a longtime resident, said her concern was about the students in the community or specifically frathouse antics she said she recently witnessed.

Last week, Ayache said a bunch of “young people jumped into the fountain and the women were rubbing themselves like it was a wet t-shirt contest.” Security didn’t respond right away, she said. Security itself was another issue Ayache hoped would be a priority for a new owner.

“Last night a gang of boys accosted a female at 9 Oval at 5 p.m.,” she said.

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.