Conversion would allow NYU tenants to buy
To the Editor,
A letter in your Sept. 18 edition says conversion of PCVST to condos can serve to end dormitory living here by NYU undergraduates. The opposite could happen. In a conversion, existing leaseholders have the right of first refusal to buy the apartments they are leasing.
If NYU holds leases on the apartments occupied by students, NYU would have the right to buy those apartments in a conversion. Also, NYU would be able to buy any apartments not purchased by other leaseholders. NYU obviously needs student housing in this area. A conversion could result in an increase in the number of apartments occupied by undergraduate students.
There are efforts to keep, or make, PCVST affordable housing. That’s consistent with having undergraduate students as neighbors. Students need affordable housing. NYU undergraduates will disappear from PCVST when NYU builds more dormitories, or when rents rise to a level where the owner finds it more attractive to rent to someone other than students.
Another letter in the same issue wonders what happened to the concept of converting PCVST to condominiums. The beginning point of a conversion is either a purchase of PCVST by a new owner who will pursue conversion, or a decision by the present owner to do a conversion. If the property isn’t for sale, there can’t be a new owner. So the basic question is: How likely is it that the existing owner will sell, or convert, the property?
PCVST was built and owned by MetLife as an income producing property, because MetLife wanted a reliable source of income. When MetLife sold the property, the largest source of financing for the buyer was first mortgage bonds purchased by large institutions. They bought those bonds, because they wanted a reliable source of income, and the bonds provided that.
When the owners of the bonds took over ownership of PCVST, they acquired a property that provides the reliable source of income they want. Ownership of PCVST meets their investment objective.
The amount of income the owners can earn from the property is limited by rent stabilization, until the low interest rate J-51 financing on the property matures in June 2020 (or earlier if the J-51 financing is prepaid). Then apartments can move to market rents as provided by New York law. Thus, in six years the owners will be able to start increasing their rental income.
The owners are large, deep pocket, institutions. For them, six years is a reasonable wait.
As the total rental income increases, the value of the PCVST will increase. The increase in rental income will occur gradually over a considerable number of years, and the property’s value will continue to rise during those years. At some point, the owners may want to cash out, either by sale or conversion. But right now the property is meeting the owners’ investment objectives, and future of the property is positive. It will be a lot of years before the present owners sell or convert.
Floyd Smith, PCV