By Sabina Mollot
and Heather Holland
Tenants from the sprawling East Side middle-income housing complex, Stuyvesant Town-Peter Cooper Village, have formed a partnership with Brookfield Asset Management to put together a multi- billion-dollar bid to buy the 11,000 apartments and convert them to condos or co-ops.
The ST-PCV Tenants Association said on Wednesday that it had chosen Brookfield from a field of suitors looking to partner on a deal to buy the complex back from debtors.
The Toronto-based investment firm that is also downtown New York’s biggest office landlord, “shared the goals of tenants,” according to City councilman Dan Garodnick, a former lawyer who now represents the district in City Hall and who has a played a key role brokering the joint venture.
“Brookfield has experience in complicated transactions like this one,” he said. “We felt they were a serious player in real estate and that they shared the goals of the Tenants Association.”
Those goals include a conversion plan that would allow tenants to remain as stabilized residents or to buy their home at an attractive “insider’s price.”
The tenants want the affordability and stability of the community ranked as a priority and have put a premium on maintaining the 80-acre property’s open spaces, improving maintenance and keeping some of the apartments permanently affordable, possibly through funding from government sources, according to Al Doyle, president of the Tenants Association.
“This is our community. These are our homes. This bid is about taking control of our own future, protecting current residents and ensuring that Stuyvesant Town and Peter Cooper Village remain affordable to middle class families for the long haul,” said Doyle.
Garodnick said the tenants were in no doubt they need to put a “serious” offer on the table. At least $3 billion would be needed to satisfy the bondholder trust CW Capital Asset Management LLC represents. CWCapital took control of Stuy Town last year after owners Tishman Speyer Properties and BlackRock Inc. defaulted on their mortgage loan when the global economic collapse turned their $6.3 billion buy in 2006 into one of the biggest busts of the boom.
The way the partnership would work, if a conversion were to occur, is that Brookfield would be the sponsor, putting together the money for the purchase, offering the units for the sale, and then remaining the landlord and manager of the unsold apartments.
Barry Blattman, senior managing partner of Brookfield, called ST/PCV “a fantastic part of New York City” and “the kind of real estate that our company covets.
“We demonstrated (to the TA) that we have the mentality to recognize what the community wants and that we are able to handle the complicated process to come,” he said. “With the economy being how it is, there’s a lot of risk now and that is the reason CW would find it attractive to make a move. There’s a risk in waiting.”
Residents had mixed feelings about the plan. Edward Miller, a Stuyvesant Town resident of over 60 years, said, “I think this is a great idea. I just want an affordable place to live in, and I think it will happen with this plan.”
Michael O’Brien, a born-and-raised Stuyvesant Towner, said, “It’s a long time coming. We’ve endured a lot after Tishman’s default. There’s been no owner and a decrease in service. I look forward to a correcting of these missteps.
“If enough current tenants developed formal stakes in this place, I think it would work. (Currently) they offer redundant amenities to try to lure rich transients into the complex. They’ve been luring everyone but families for the past three years.”
Less optimistic about a conversion was one longtime resident skeptical that tenants who opt out of buying wouldn’t be harassed. The resident, who didn’t want his name published, said, “When have you ever heard a landlord come in and say: Our first order of business is to harass the tenants? I know the law, but I want to know what guarantees there are besides that.” He added, “I wish they could tell me why I’d be better off besides saying I wouldn’t be harassed.”
The Tenants Association said it expects to make a formal bid for the complex within the next few months. A spokesperson for CW told REW he couldn’t comment on the plan since no formal proposal had yet been made.
Brookfield was chosen by the TA with guidance from its financial and legal advisors from the firms Moelis & Company and Paul Weiss Rifkind Wharton & Garrison. Both firms have given their services sans fee to the association with the assumption that they’d eventually get some payment through the completion of a conversion deal.
The tenants aren’t the first to show an interest in buying the complex, built by the Metropolitan Life Insurance Company in 1947 to meet demand for housing from thousands of returning WWII soldiers.
Since it fell into default, Richard LeFrak, one of the city’s largest real estate developers and owner of the eponymous Queens city, Appaloosa hedge funder David Tepper and even Donald Trump have all scoped out Stuy Town.
However, there has been ongoing litigation stemming from the tenants lawsuit against the owners for overcharging on rents after receiving city tax breaks, a suit that evolved amidst an aggressive effort by Tishman to destabilize apartments in an effort to increase return on their investment.
In the landmark Roberts v. Tishman Speyer case, the court sided with tenants and ordered apartments to be brought back into rent stabilization. However, those living in the already destabilized apartments had seen their rents rise by up to nine percent, way over the sum authorized by the city’s Rent Guidelines Board. Lawyers now are arguing that those apartments would never have been on the open market had they not been illegally deregulated in the first place.
And, in a massive class action suit, the tenants continue to demand back rent overcharges that could run into the hundreds of millions, tenants attorneys have said.