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.

Here we go again: Stuy Town reported to be for sale

ST buildings

Stuyvesant Town buildings

By Sabina Mollot

Over five years after taking control of the property, CWCapital is preparing Stuyvesant Town/Peter Cooper Village for a sale, Bloomberg news reported on Saturday.

The article went on to name Blackstone Group LP as a likely bidder, with others possibly in the mix, though not Brookfield Asset Management. That company, which had announced a partnership with the ST-PCV Tenants Association four years ago with a plan for a non-eviction condominium conversion, is no longer involved, a rep for Brookfield said.

Meanwhile, it’s possible a future deal could secure $5-$6 billion. The latter figure would be more than the historic $5.4 billion paid by Tishman Speyer and partner BlackRock in 2006, with the article citing a strong residential market in Manhattan.

Additionally, the report said, “Blackstone’s real estate chief, Jon Gray, said this month that he was bullish on Manhattan rentals because it’s too costly for many residents to buy.”

Peter Rose, a spokesperson for Blackstone, did not immediately return a call requesting comment. Brian Moriarty, a spokesperson for CWCapital, did not respond to a request for comment.

UPDATE: 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.”

The statement from DePlasco didn’t elaborate on the terms of the settlement.

However, CW’s effort to sell has 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.

A spokesperson for EastDil didn’t immediately return a call requesting comment.

Susan Steinberg, the president of the ST-PCV Tenants Association, was out of town on Monday, and not available to be interviewed. Council Member Dan Garodnick, a Peter Cooper Village resident, was also unavailable for an interview on Monday morning.

However, he’d previously told Bloomberg, “The tenants are going to insist that the owners work directly with them and with the city to develop a responsible plan to protect the long-term affordability of the place.”

Garodnick has previously met with Mayor Bill de Blasio on a plan to maintain affordability in ST/PCV, that is, in the roughly 6,000 units that are still affordable. On Monday, Wiley Norvell, a spokesperson for the mayor, said the mayor still wanted to preserve affordability.

“Protecting this community’s legacy as a home for New York City’s middle class is a top priority for Mayor de Blasio,” Norvell said. “We will press any owner to preserve affordable housing.”

Andrew Willis, a spokesperson for Brookfield, confirmed that the company was “no longer in the process” of bidding, although he said he didn’t know the reason for the decision.

Johann Hamilton, a spokesperson for the Real Estate Board of New York, whose chair is Tishman Speyer president and CEO Rob Speyer, declined to comment.

This story will be updated.

City exploring options to maintain affordability in Stuyvesant Town

Senator Chuck Schumer with other elected officials at a rally in Stuyvesant Town in 2010 (Photo by Sabina Mollot)

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.