After nearly being derailed by familial infighting earlier this year, the sale of the nation’s largest subsidized housing complex closed last week for $905 million.
Brooksville Company and Rockpoint Group finalized their acquisition of the Spring Creek Towers, the 5,881-unit complex formerly known as Starrett City, completing an eight-month process that withstood regulatory approvals and legal challenges from the property’s former shareholders.
Cushman & Wakefield served as the exclusive advisor for the transaction. Douglas Harmon, the chairman of firm’s capital markets division, said the sale makes a lot of sense for all parties involved.
“The prime location of this asset, coupled with the fact that there will be significant investments and improvements made, was clearly a win-win for both parties,” Harmon said.
“At the end of the day the residents and the people of New York City will benefit greatly from this transaction and that was our first and foremost priority.”
“We are honored to become a part of this community,” Brooksville President Andrew MacArthur said. “We have long believed in the need to protect and preserve affordable housing in New York City and are committed to the long-term health of this community.
“We have worked closely over the last several months with community leaders, elected officials and regulators to ensure that this transaction fulfills and continues the original vision of Spring Creek Towers and we are grateful for the efforts of all stakeholders to make this transaction possible.”
To win the support of federal and local regulators, Brooksville and Rockpoint promised to preserve affordability at the 46-building site. The joint venture promised to extend federal Section 8 protections at the complex, which apply to 60 percent of the units, for 20 years to 2049, and to continue the state’s Mitchell Lama program at the other 40 percent of the homes for 15 more years, until 2054.
The real estate investment firms have also committed $140 million to capital improvements within the community, which spans 153 acres and also includes several commercial properties as well as a standalone power plant.
“Our firm has a long history of investing in New York City, and the acquisition of Spring Creek Towers gives us the opportunity to make a meaningful investment in one of the city’s iconic housing complexes for the benefit of residents and the broader community,” Rockpoint co-founder Keith Gelb said.
“We plan to invest in the property’s infrastructure, which residents have indicated should be a top priority, and look forward to working together with Brooksville to make additional upgrades and enhancements as we assume stewardship of this important residential community.”
Top priorities for the community include adding a back-up power supply at the aging power plant and overhauling the area’s underground pipe system.
Brooksville and Rockpoint reached a tentative deal for the property with the former owner, Starrett City Associates, last September. Within weeks, the decision was challenged by a collection of minority stakeholders — primarily the California-based affordable housing company Belveron Partners LLC and several children of Disque Deane, the project’s original financier.
Belveron offered to pay $25 million more for the site and argued that the general partners were violating their fiduciary duties by not taking the best offer on the table. The four adult Deane children were believed to be in disagreement with their stepmother, Carol Deane, who serves as general managing partner of Starrett City Associates. The injunction requested by the dissenting parties was denied in January.
“The commitment by Brooksville and Rockpoint to invest in the infrastructure of the site, insuring the delivery of essential services for many years to come, and in maintaining the quality of life residents have enjoyed and expect, and, importantly, to extend the affordability, for the 15,000 residents who call Spring Creek Towers home was a major factor in moving ahead with the sale,” Carol Deane said. “We wish the residents and the new owners all success as together they take Spring Creek Towers into the future.”
The Starrett City Associates attempted to sell the property for $1.3 billion in 2007 but the offer was rejected by regulators who felt the price was too high to keep the property affordable. In 2009, the property was refinanced and the units’ affordability was extended through 2039.
With a balloon payment coming due on the property in 2020 and the number of shareholders dwindling from 200 to roughly 90, the desire to sell resurfaced last year.
In addition to the residential units and the power plant, the property includes its own 90-person public safety force, a 100,000 s/f fitness and community facility, 125,000 s/f retail space and more 100 acres of parks and green space.