Stuyvesant Town leasing office (Photo by Sabina Mollot)
By Sabina Mollot
A federal court judge has decided that the lawsuit against CWCapital by a group of junior lenders involved in Stuyvesant Town should be handled by a state court, as the lenders had been hoping.
It was on Monday when United States District Judge Alison Nathan remanded the litigation to the New York State court where it was originally filed.
In the decision, Nathan wrote that “this case invokes no comparable federal interest, scheme or agency. Rather it is a contract dispute between private parties, turning almost entirely on construction of a private contract, and failing to present any dispositive question of federal law.”
The lawsuit was filed last summer after CWCapital took ownership of Stuyvesant Town and Peter Cooper through a deed, rather than holding a planned foreclosure sale on mezzanine debt. A group of lenders represented by Centerbridge Partners had hoped for a chance to buy a key piece of the mezzanine or junior debt and accused CW of violating an intercreditor agreement. The deed-in-lieu of auction wipes out the value of the junior debt, they’d argued, allowing CW to reap an “unearned windfall” when the property is sold.
They also accused CW of inflating the interest it was owed to calculate the total senior debt at $4.4 billion.
However, in its arguments, the lenders said that even though they believe CW’s figures are wrong, they still stand to “reap windfall profits regardless of how the interest rate is calculated on the senior loan.”
Even when using CW’s “incorrect and vastly overstated senior loan payoff amount of $4.4 billion, the value of Stuy Town is still worth hundreds of millions of dollars more,” the lenders said.
News of the court action was first reported on Tuesday by Law360, a legal news service.
Michele de Milly, a spokesperson for Centerbridge, declined to comment on the latest court action. Brian Moriarty, a spokesperson for CWCapital, didn’t respond to a request for comment.
Last month, the total amount of debt as calculated by CW reached $4.7 billion, a figure announced at a Tenants Association meeting by Council Member Dan Garodnick. He explained the amount was due to interest and fees. It’s also the amount that was reportedly being prepared as a bid by CWCapital’s parent company, Fortress. The Tenants Association has since said it is still hoping for a tenant-led condo conversion with partner Brookfield.
Following the suit being remanded, Susan Steinberg, chair of the ST-PCV Tenants Association said it basically just means more waiting around for would-be buyers.
“The decision to remand the case back to state court means that if CWCapital is waiting to settle with Centerbridge et. al. before proceeding with plans to sell, it will have a longer wait,” said Steinberg. “Ultimately, so will would-be buyers, including the tenants here. Whether the remand is a good or a bad thing for either the plaintiffs or the defendants will depend on which judge the case comes before. We will stay tuned.”
Stuyvesant Town leasing office (Photo by Sabina Mollot)
By Sabina Mollot
On Monday, CWCapital tried to get a lawsuit that had been filed by representatives of a group of junior lenders last month tossed on the grounds that it was “a story-book portrayal of events.” In this latest court action, CWCapital and co-defendant Wachovia also accused hedge fund Centerbridge Partners, who is representing the lenders, of forming “shell entities” in order to buy into junior loans two months ago, for the sole purpose of suing the owner, the website law360.com first reported.
At that time, CWCapital had taken ownership of Stuyvesant Town/Peter Cooper Village through a deed instead of holding a previously planned auction sale on some of the property’s mezzanine debt. The lenders, once unable to purchase a key piece of mezzanine debt, filed suit in which the company also accused CW of giving themselves a near $1 billion windfall while junior lenders received nothing. Centerbridge had called CWCapital’s takeover “executed on the flawed premise that the amount owed on the senior loan was greater than the value of the property.” CW represented that $4.4 billion was owed on the mortgage when the amount was really $3.45 billion, the lenders said.
But on Monday, CW and Wachovia countered that the plaintiffs were not junior lenders “at any relevant time,” Law 360 quoted the companies as saying in their brief. “Rather, plaintiffs are shell entities that acquired their junior loan positions after, and with full knowledge that, the senior lender had pursued the DIL [deed in lieu transaction], which automatically terminated the ICA (inter-creditor agreement).”
Further, CW argued, “Through this litigation, Centerbridge does not seek to recoup any alleged loss, but rather to earn more than $1 billion in profit on a highly speculative investment in litigation that it made with eyes wide open after the DIL and the termination of the ICA. New York disdains the commercialization of litigation, and its champerty statute is a full stop to what Centerbridge is trying to do here.”
When canceling the mezzanine auction that had been set for June 13, CW also entered into talks with the ST-PCV Tenants Association and the de Blasio administration on a plan that would preserve affordability at around 6,000 apartments. Although the 60-day deadline on those talks has since passed, all parties have agreed that the conversation would continue.
In a mid-July meeting between Mayor de Blasio, the Tenants Association and local elected officials, de Blasio said the TA’s idea of maintaining affordability by going condo would be considered. However, the TA also said it was told by the mayor at that time that his “main thrust is affordable rentals.”
A spokesperson for CWCapital and a spokesperson for Centerbridge did not respond to a request for comment by Town & Village’s press time.
Update: In response to the court action, the Tenants Association issued the following statement.
“We are carefully monitoring this lawsuit because its outcome may affect the stability and long-term affordability of thousands of apartments people call home. Of course the elephant in the room is the multibillion-dollar debt saddled on this great community by speculators and predatory equity. We remain determined to prevent that from happening again.”
Stuyvesant Town leasing office (Photo by Sabina Mollot)
By Sabina Mollot
Last week, CWCapital was sued by holders of Stuyvesant Town’s mezzanine debt who claimed that the new owner cheated them out of hundreds of millions of dollars.
The lawsuit, which was first reported by Bloomberg, is being led by Centerbridge Partners, which is representing six limited liability companies who are named as plaintiffs.
The suit follows a decision by CW last month to take title to Stuyvesant Town/Peter Cooper Village through a deed rather than hold a foreclosure sale that had been scheduled for June 13.
By doing this, Centerbridge accused CW of a “continuing pattern of misconduct” to keep control of the property and “reap an unjust windfall of $1 billion” that should go to lower level lenders, who’ve received nothing.
The report went on to say the lenders, in their complaint, called CWCapital’s takeover “executed on the flawed premise that the amount owed on the senior loan was greater than the value of the property.” CW represented that $4.4 billion was owed on the mortgage when the amount was really $3.45 billion, the lenders said.
A spokesperson for Centerbridge, Michele de Milly, said the lawsuit shouldn’t impact the tenants.
In an official statement, Centerbridge said, “We believe that Stuyvesant Town is and will continue to be a unique and extraordinarily important property, both for the City of New York and for the thousands of tenants who make it such a robust community. This legal matter is an inter-creditor dispute and we do not expect it to affect Stuyvesant Town or its residents. Funds affiliated with Centerbridge Partners, which have owned mezzanine loans of Stuyvesant Town and Peter Cooper Village, have been forced to commence this lawsuit because of the actions taken by CW Capital, in violation of an inter-creditor agreement.”
CWCapital, however, denied this and called the suit “without merit.”
“The assertions made in the lawsuit are utterly baseless and without merit,” spokesperson Brian Moriarty said. “The fact that the complaint centers on a deed in lieu transaction completed before the plaintiff acquired their position exposes the plaintiff’s specific intent to wrest a quick profit from ‘purchased litigation.’ Centerbridge acquired this position at a deep discount in hopes of reaping a windfall at the expense of the bondholders we represent and residents who deserve a timely resolution that will provide certainty and a path forward for the community.”
The litigation, which also names commercial-mortgage trusts set up by Wachovia Bank, may slow down a sale process. However, it shouldn’t stop the city from its current plan of trying to work with CW to maintain affordability at the property while satisfying the bondholders.
When CW canceled the foreclosure auction it also agreed to hold off on a sale for two months while working with the de Blasio administration along with local elected officials representing ST/PCV to come up with a plan. According to Council Member Dan Garodnick, this litigation doesn’t change that.
“This is largely a dispute between lenders and it does not affect our strategy,” he said. “The only question is whether this has the effect of slowing things down further, which is not at all clear at this moment.”
A New York Times story on June 11 had quoted Deputy Mayor Alicia Glen as saying a plan was being explored that would keep as many as 6,000 units in ST/PCV affordable in exchange for a tax exemption.
However, as of late June, Garodnick told Town & Village there aren’t yet any numbers figured out and city officials stressed that was just one possibility.
“The numbers that have been floated were hypothetical and not based on the substance of any negotiation,” Garodnick said.
Lenders Fannie Mae and Freddie Mac have already committed to not financing a deal that would be unacceptable to the tenants or the city.
Stuyvesant Town leasing office (Photo by Sabina Mollot)
By Maria Rocha-Buschel
CW Capital formally took ownership of Stuyvesant Town and Peter Cooper Village in a move to prevent a “mysterious investor” from taking control of the property, the New York Times reported yesterday.
The paper noted that an unidentified company notified the loan servicer that has controlled Stuyvesant Town and Peter Cooper Village since 2010 that it would be exercising its right to buy a key loan on the property. As CW assumed this was the first step in the unknown company’s attempt to seize control of the complex and force bankruptcy, after which a new owner would then try to buy the property for a low price, the company moved to file the deed on Tuesday and finalized the deal in court on Thursday. As a result of the deal, CW Capital paid $117 million in taxes to the city and $19.8 million to the state.
In an official statement, CWCapital confirmed it had acquired title to Stuyvesant Town and Peter Cooper Village on Tuesday through a deed in lieu of a foreclosure, canceling the auction that was planned for June 13.
“CWCapital Asset Management (CWCAM) determined this action to be in the best interest of the certificate holders and provided the greatest stability for the community,” the company said. “This ‘deed-in-lieu’ will have no impact on residents or on property operations. CWCAM has previously said that it would begin to evaluate disposition alternatives in the latter half of 2014. That estimate has not changed.”
Although the identity of the company is unknown, the Wall Street Journal noted that the Government of Singapore’s real estate investment arm, GIC, has held a part of the mezzanine debt for years and it would have been possible for more junior holders of the debt to make a move to control the property by buying the piece owned by CWCapital, which controlled the senior most portion of the debt. It is not clear if GIC still owns that piece of the debt.
City Council Member and Peter Cooper resident Dan Garodnick said he’s optimistic about the foreclosure’s cancellation.
“This eliminates the circus that could have unfolded at a mezzanine foreclosure sale,” he said. “It is the right next step that will give time for a more considered process that can protect not only the bondholders, but also the tenants and the city.”
As T&V reported on June 5, Garodnick and other local elected officials are drafting emergency housing legislation that will be introduced at the city and state level. The legislation was mentioned in an email from the ST-PCV Tenants Association sent on Tuesday as a response to the expected foreclosure, although the council member declined to discuss details. Since the news of CW’s court action, Garodnick said he still expects to move forward with the legislation.
State Senator Brad Hoylman, who is working with Garodnick on the legislation in addition to Assemblyman Brian Kavanagh, was also hopeful that the city would protect affordability in Stuyvesant Town.
“The 25,000 resident population of Stuy Town-Peter Cooper is larger than many cities in New York,” Senator Hoylman said. “Imagine the response if, say, Kingston or Glens Falls or were being sold off to real estate investors! We can’t make the same mistake twice by sitting idly by as thousands of homes are being sold out from under middle-class tenants. I’m encouraged by the City Administration’s stated goal of ‘using every tool at its disposal’ on a solution that protects affordability at Stuy Town-Peter Cooper. This is a critical test of our will and ability to change direction and make preservation of affordable housing a priority.”
Although the auction for next Friday has been cancelled, the ST-PCV Tenants Association is still planning to hold a rally in front of City Hall that day because they are continuing to fight to acquire the property with Brookfield Asset Management.
“A tenant-led purchase is the only defense against a predatory equity takeover,” the TA said in an email blast to neighbors on Thursday after the news broke that CW Capital had taken ownership of the site. “We could be sold to the highest bidder or even to CW’s parent company, Fortress Investment Group. That’s why our rally for June 13 is as important as ever.”
ST-PCV Tenants Association President John Marsh, pictured in May, 2013 with local elected officials and tenants, protests a mid-lease increase. (Photo by Sabina Mollot)
By Sabina Mollot
Following reports that Stuyvesant Town/Peter Cooper Village’s special debt servicer, CWCapital’s own parent company, Fortress, intends to bid on the property on the day of a foreclosure sale, the ST-PCV Tenants Association has organized a rally to protest the way business is being quietly conducted.
Because the Fortress bid has been reported to be $4.7 billion, according to Bloomberg, TA President John Marsh said at that price, the pressure to make a profit is likely to create a repeat scenario of the Tishman Speyer purchase with its business plan of evicting tenants paying lower rents.
“Right this instant we all need to start talking about what we are going to do about Fortress and the other sharks circling us,” TA President John Marsh told neighbors on Facebook. “The writing is on the wall. It’s about to happen again. Tishman Speyer redux. The financial press is speculating, full of scenarios providing detailed financial road maps to our demise.
Another issue is the debate over whether a purchase by Fortress is a conflict of interest, which Susan Steinberg, chair of the Tenants Association, said is difficult to answer without looking at a contract that’s confidential.
“So nobody can read the clauses, and I think that would have been very helpful if some attorneys would have been able to take a look at it,” she said.
“To me,” Steinberg added, “it looks like insider trading. That’s my perception. But without having access to a basic document, it’s really hard to make a judgment call.”
She also said she thought it was disingenuous of the special servicer to refuse to talk business with the TA, after initially saying the company just wanted to wait until the “Roberts v. Tishman Speyer” negotiations were concluded. “They were stringing us along,” said Steinberg.
The Tenants Association announced its own intention to bid, with partner Brookfield Asset Management, in 2011. The TA/Brookfield bid has never had a dollar amount attached to it and that has not changed. However, the TA has stressed that the bondholders would be made whole.
A spokesperson for CWCapital has previously declined to comment on the reported Fortress bid and was not immediately available for comment on the upcoming rally.
The purpose of the rally, the TA said, is to show any potential owner the political might of the tenants.
“It’s to let them know if they think we’re going to sit down and let them roll over us, they’re wrong,” said Steinberg. “If they think we can’t create trouble for them, they’re wrong. We expect the elected officials to continue to support us.”
Marsh added, “We need a responsible owner, who takes the long view and not just someone looking to make a quick buck, getting in and getting out.”
On May 13, CWCapital announced it would begin foreclosure proceedings on a chunk of the mezzanine debt that’s reportedly worth $300 million and set a sale for June 13. By doing so it will be able to take over the property, at least temporarily.
The TA’s rally will begin that day, a Friday at 10 a.m. on the steps on City Hall. Local elected officials are expected to attend and the TA is asking tenants to show up as well.
Tenants Association attorney Tim Collins at a meeting on Saturday (Photo by Sabina Mollot)
By Sabina Mollot
On the heels of the MCI settlement between CWCapital and the ST-PCV Tenants Association, around 250 tenants attended a meeting on Saturday to learn more about what the deal meant for them.
As usual almost all in attendance at the TA meeting, held at the Simon Baruch Middle School, were seniors. A bunch came armed with questions regarding the MCIs as well as quality of life and general affordability issues. However, those with unique circumstances were herded into another room at the school where there were tables to set up to help people understand the figures on their leases and with other problems.
Meanwhile, Tim Collins, the attorney for the ST-PCV Tenants Association addressed the crowd. First, he responded to some “grumbling” the deal has gotten since for most non-“Roberts” tenants, there’s only five percent removed from their monthly payments. Collins argued that as with any settlement, “you have to make deals. You have to trade something.” “Roberts” tenants wound up getting the higher reductions or full eliminations of the monthly payments because, said Collins, “they’re already paying very high rents.”
As a result of the deal, all tenants have had the retroactive portion of their MCIs (major capital improvements) eliminated. As for the monthly or permanent portion, “Roberts” tenants paying the full legal rent get a 5 percent credit. “Roberts’ tenants paying either the maximum modified legal rent or the maximum “Roberts” preferential rent get a 50 percent credit (as determined by the class action settlement). “Roberts” tenants paying less than the modified legal rent or “Roberts” preferential rent get a credit of 100 percent.
SCRIE/DRIE tenants are also exempt from having to pay the MCIs at all.
Non-“Roberts” tenants paying the full legal rent get a 5 percent credit. Non-“Roberts” tenants paying less than the full legal rent get a credit of 100 percent. The credits are retroactive to January of this year and appear as two separate credits on tenants’ rent bill from May (one for May, one for the other four months).
While discussing the settlement, Collins tried to discourage residents from filing individual PARs (petitions for administrative review) since that could unravel the settlement for all tenants, a clause CW insisted on. Those hoping to score a better deal, warned Collins, would have less standing as individuals with the Division of Housing and Community Renewal (DHCR) than a coalition like the TA has. He also pointed out that the TA had been at work for months in the hope of getting the best possible deal.
“I think we accomplished that,” said Collins.
He also shared with tenants that the settlement almost didn’t happen, with the talks breaking down twice. He declined to explain why, but admitted he wasn’t happy about having to agree that tenants would have to give up the option to file PARs.
But in trying to see it from the owner’s side, Collins said, “They wanted there to be finality. They wanted to have peace. They don’t want to fight 500 or 1,000 PARs that disrupt the deal.”
The deal does however make exceptions for tenants who want to file a PAR in unusual circumstances, such as the room count of their apartments being incorrect, since MCI costs vary based on the number of rooms in a unit.
Collins also reminded tenants that even before the negotiations, the TA had managed to convince the DHCR to knock 23 percent off the amount then-owner Tishman Speyer asked for in 2009. The challenge that followed came about after tenants received notices of the approved MCIs last fall and Collins saw that none of his arguments made in 2012 against the improvements, such as shoddy workmanship, had been considered.
The attorney also echoed the sentiment often made by local politicians that MCIs are not just a problem for tenants in Stuy Town, but a result of a law that favors landlords by allowing them to charge in perpetuity for building improvements.
“The main problem is in Albany,” he said.
Collins’ advice: Sign a one-year lease, not two.
Collins concluded his talk by urging tenants who have lease renewals coming up before October to take a one-year lease rather than a two-year one.
The reason, said Collins, who served as the executive director/counsel for the Rent Guidelines Board from 1987-1994, is that the RGB is expected to vote for a lower increase this year than what was handed down in previous years. Even a rent freeze is possible based on the preliminary vote last week. However, the increase voted on won’t go into effect until October.
Collins added that in recent years, the board’s increases amount to “nothing less than a scandal.”
The reason, he said, is that arguments made in support of owners involved projected operating cost increases that were much higher than what they actually turned out to be. At the same time, household incomes were dropping. Collins admitted that when he worked for the board, he took a somewhat hands-off approach, telling its members, “It’s not your job to make every apartment affordable or every building profitable for owners.” But over time, he started to feel like landlords were being given too much and advised the board to implement a rent freeze.
“This year I’m asking for a rollback,” he added.
Following his comments, TA President John Marsh chimed in to say Collins was speaking for himself and not on behalf of the TA, since what kind of lease to sign is always a gamble.
Council Member Dan Garodnick also spoke about the RGB, to recommend that tenants to participate in this year’s vote process by speaking at public hearings about their MCIs. With a new chair and new mayor, Garodnick pointed out that tenants have a better shot at swaying the board this year than they’ve had in the last 20 years. “I would encourage you to make your voices heard,” he said. “It’s quite an opportunity for tenants in this city.”
(Editor’s note: In a recent editorial, T&V also recommended that tenants tell the RGB about their MCIs, in the hope that hearing about unexpected increases tenants are made to pay mid-lease will have an impact on the board’s decision on the annual increase.)
The next public hearing in Manhattan takes place on June 16 at the Emigrant Savings Bank at 49-51 Chambers Street from 2-6 p.m.
ST-PCV Tenants Association President John Marsh speaking at a Tenants Association meeting on Saturday, with Assemblyman Brian Kavanagh, Comptroller Scott Stringer, State Senator Brad Hoylman and Council Member Dan Garodnick (Photo by Sabina Mollot)
Support for tenant-led purchase of ST/PCV
Another issue discussed at the meeting was the future sale of ST/PCV, with Garodnick saying a tenant-led deal has the support of the city’s housing commissioner.
Later, he told Town & Village that along with HPD (Department of Housing Preservation and Development) Commissioner Vicki Been, he’d also spoken with the deputy mayor for economic development, Alicia Glen.
“My sense from them was that they wanted to find a way to be supportive of tenants in our initiative if they can,” he said.
On the other hand, CWCapital has remained unwilling to talk business.
“Not just with us but with anybody,” Garodnick said at the meeting. “We all suspect that a sale is somewhere on the horizon, but we’re not sure when.”
(Three days after the meeting, the plan to foreclose on the Stuy Town’s mezzanine was made public.)
Tenants at the meeting at Simon Baruch Middle School (Photo by Sabina Mollot)
Why tenants are pretty much doomed thanks to Albany and City Hall
As always, there was also much depressing talk about the politics governing rent laws at the event. Local elected officials took turns at the podium explaining why tenant-friendly bills never get anywhere.
State Senator Brad Hoylman reiterated a point he’s made before, saying that until there’s campaign finance reform, the State Senate, which is controlled by Republicans, will remain a place that’s more friendly to landlords than tenants. He noted that many of the Republicans get millions in campaign contributions from real estate interests and also often live in upstate districts where there are few renters. The Olean, NY-based Cathy Young, who chairs the Senate Standing Committee on Housing, Construction and Community Development, has blocked campaign finance reform from even being discussed on the Senate floor, Hoylman said. This, he explained, is why Senate members have been reduced to arguing about yogurt.
“Her district is closer to Detroit than Manhattan,” said Hoylman of Young, who’s also legislatively tried to undo “Roberts v. Tishman Speyer.” “We need to continue to fight for campaign finance reform,” Hoylman added. “It is fundamental to changing the power dynamic in Albany.”
Assemblyman Brian Kavanagh then spoke about how the state housing agency’s new Tenants Protection Unit was in danger of being de-funded by the State Senate.
Also at the meeting was Comptroller Scott Stringer who said that the mayor’s housing plan aimed at building or preserving 200,000 units of affordable housing won’t be enough to make up for the amount of affordable units that are getting lost each year. In the last 12 years,
Stringer said, “rent have skyrocketed by 75 percent,” while in the past 16 years, 400,000 apartments that rented for $1,000 or less disappeared. “Two hundred thousand (units), it’s just not enough to deal with the crisis,” Stringer said.
Tenants protest outside the leasing office this time last year. Their signs, along with the Tenants Association logo, read: ST-PCV A community. Not a commodity. (Photo by Sabina Mollot)
On Tuesday, CWCapital dropped the bombshell that it would be foreclosing on Stuyvesant Town’s mezzanine debt and that there would be a sale in one month. A possible bidder who’s since emerged is CW’s own parent company, Fortress, at a rumored offer of $4.7 billion.
Since neither Fortress or CW have been willing to comment on this, it’s still not official or a done deal by any means.
However, when one considers the Stuy Town special servicer’s history of communicating on this issue, rumors wind up being the most reliable thing this community’s got to go on.
As of T&V’s Wednesday press time, even a developer who’s been eager to bid on the property, Gerald Guterman, now has doubts due to the high price. Because even if tenants are eventually given the opportunity to buy, how many current residents would actually be able to afford to?
As of Tuesday, the Tenants Association maintained that it is interested, with partner Brookfield, of owning, and no longer seeing the community get passed around like meat.
But again, there’s the issue of the pricetag. Speculation of what ST/PCV could be worth is what led to the most infamous real estate flop ever, with Tishman Speyer losing its investors’ billions. Is the place really worth $4.7 billion, even in a recovering market? And if a bidder thinks so, how many more (in many cases perfectly legal) efforts will be made to price out tenants in unrenovated apartments paying lower rents? Or even gouge those already paying higher rents? There’s always more “improvements” that could be made on the tenants’ dime permanently.
The new mayor made a campaign trail promise to protect ST/PCV and other places like it from the circling of real estate buzzards like the ones who wrongly thought a complex built for the middle class was the goose that laid golden eggs in 2006. Now it is time to see if he meant it.
Stuyvesant Town leasing office (Photo by Sabina Mollot)
By Sabina Mollot
After years of remaining silent on its plans for putting Stuyvesant Town/Peter Cooper Village up for sale, CWCapital made a move on Tuesday to foreclose on the property’s mezzanine debt and then it was reported that Fortress, CW’s parent company, was preparing a $4.7 billion bid.
Neither Fortress or CWCapital would comment on that report, but in a brief written statement, the special servicer of the property, which also manages a chunk of the mezzanine or junior debt, said that a sale was scheduled to take place on June 13.
The company went on to say the action “will have no impact on our residents or on property operations.”
In response to the news, which was first reported in the New York Times, ST-PCV Tenants Association Chair Susan Steinberg said she was tired of seeing the community being treated “like a football.”
“Everything that went into building a unique residential complex for the middle class has been upended in the interest of the bottom line,” she said. “We are being punted towards a goal that isn’t ours.” She added that it was time to have tenants own the place. But that was before hearing about the potential Fortress bid.
The Tenants Association had partnered with Brookfield Asset Management in 2011 in the hopes of buying the complex and going condo. CWCapital had declined to negotiate though saying no business could be discussed until “Roberts v. Tishman Speyer” was settled. But after the settlement, there was still no chatter about bidding or a conversion.
Council Member Dan Garodnick said anyone could bid in the foreclosure, but CWCapital itself could be the winning bidder, using its unique position as debt servicer.
“They could bid billions of dollars without writing a check,” he said, “Because they are owed money here.”
He added that the move to foreclose on the mezz debt wasn’t really a surprise, since technically the property’s already been in foreclosure for years.
“It just hasn’t been formalized because there hasn’t been any action to foreclose on the lenders,” said Garodnick. Ultimately, he said what matters is that tenants’ rights are preserved.
In an official statement, the Council member also said the great bidding war of ‘06, in which potential owners were wrongly led to believe the sky was the limit on what they could charge for rents, shouldn’t be repeated.
“We cannot allow an overheated auction with wild expectations that puts a target on the back of rent-stabilized tenants.” he said. “We have seen that movie before. Tenants, and the City of New York, cannot afford to let that happen again.”
That view was shared by Assemblyman Brian Kavanagh, who said any developer with eyes on this particular prize needs to know that “This is a community that will stand up for itself.” He also said he hoped the real estate industry will have learned from Tishman Speyer’s mistakes of unrealistic expectations and disregard for the Rent Stabilization Law.
“They shouldn’t bank on being able to remove any of the tenants,” said Kavanagh. The “Roberts v. Tishman Speyer” class action suit will keep ST/PCV stabilized until the J-51 tax abatement expires in 2020. On the other hand, with one-bedroom apartments in Stuy Town going for rents that start at close to $3,000, many of the newer residents of the community still consider themselves stabilized in name only.
Developer Richard LeFrak, who bid on the property in 2006, is possibly interested in doing so again, according to the Times piece. Another developer, Gerald Guterman, who’s openly expressed a desire to turn ST/PCV co-op, said that now he’s not sure what he wants to do.
Noting that the announcement by CW only gives potential bidders a month lead time, he quipped, “Fortress makes an offer today. You think it’s because they own CW and they’re not giving outsiders the opportunity? How do you have time to (plan) unless you are familiar with what’s going on?”
As for the reported bid amount, Guterman said he isn’t sure how that sale price could make it possible for current tenants to buy if given the option. He also wasn’t sure if the price is worth it considering all the students and others living in apartments converted with pressurized walls.
“It’s still a number where I could do it but I’m not sure I want to,” he said.
Meanwhile, last August, while still a candidate for mayor, Bill de Blasio penned an op-ed for this newspaper, saying the city should make sure ST/PCV remains affordable.
“While Peter Cooper Village-Stuyvesant Town is privately owned, the city has an obligation to keep its homes affordable for hardworking New Yorkers and their families,” he said. “PCV/ST was created through the power of the city and its use of eminent domain – therefore, it’s the responsibility of the city to ensure that these homes and other affordability housing are never beyond the reach of middle class New Yorkers.”
A spokesperson for the mayor did not respond to a request for comment on this story, but Garodnick said he learned that a tenant-led bid would have the support of the city’s housing commissioner, Vicki Been, and the deputy mayor for economic development, Alicia Glen.
News of the imminent sale comes on the heels of a settlement over five MCIs between CWCapital and the Tenants Association and word that “Roberts v. Tishman Speyer” tenants will finally be paid the money they’re owed by CW.
With Tishman having paid a record-breaking price of $5.4 billion, along with $1.4 billion in mezzanine debt, there was $3 billion in senior debt (the lenders of which are represented by CW) and $1 billion in equity.