Stuyvesant Town Tenants Are Offered Co-op Plan
By CHARLES V. BAGLI
Two investors who are vying for control of the financially troubled Stuyvesant Town and Peter Cooper Village complexes in Manhattan have proposed a partnership with the 25,000 tenants there that would create an affordable housing co-op and allow the investors to reap a profit.
A raft of issues would have to be decided before the partnership is finalized, including who controls the fate of the buildings. But if successful, the investors hope to outmaneuver a rival lending group and conduct the largest co-op conversion in the country’s history at what is still considered to be a real estate gem: an 80-acre complex in the heart of Manhattan that has historically served as an affordable enclave for the middle class.
The partnership that bought the complexes in 2006 for a record $5.4 billion defaulted on a $3 billion senior mortgage in January and $1.4 billion in secondary loans.
The investors vying for control are themselves a partnership of Pershing Square Capital Management and Winthrop Realty Trust and hold the secondary loans; they are now in court trying to wrestle control of the complexes from the company representing the senior mortgage holder, who is seeking a foreclosure sale.
After weeks of discussions, the investors sent a letter on Sunday to the Stuyvesant Town and Peter Cooper Village tenant association proposing an alliance in which tenants would get a “substantial equity” stake in the sprawling property, the ability to set apartment prices and the power to veto major decisions made in the course of converting the 11,226 apartments to a co-op. The letter was signed by Michael L. Ashner, chief executive of Winthrop, and William A. Ackman, chairman of Pershing Square. People on both sides of the talks said the tenants could be offered as much as 50 percent ownership.
“Working together,” they wrote in the letter, “we believe that we will be able to effectuate an affordable non-eviction conversion while protecting the long-term affordability of the property for current and future tenants and ensuring that those who wish to remain rent-stabilized renters can do so.”
The investors, the tenants and CW Capital, the company that represents the senior mortgage holders, are awaiting a decision in State Supreme Court that will determine who will control the complexes in the coming period. And while tenant leaders commended the investors’ approach, they are not rushing into a marriage. The tenant association favors a co-op conversion, but its idea of “affordable” may be very different from that of Mr. Ackman and Mr. Asher.
With the worth of the complexes now well below the 2006 sale price -- $1.9 billion was the conclusion of one recent appraisal -- most investors and analysts figure that a greater sum could be collected through a conversion in which many tenants agree to purchase their apartments.
“We look forward to digging deeper into what they have to offer and to see if they can satisfy the tenants' goals,” Daniel R. Garodnick, a city councilman and lifelong resident of the complexes who frequently speaks on behalf of the tenant association. He said he feared that if too much debt remained on the complexes, the new owners would be pressed to set high sale prices for the apartments. “No matter how you turn it, affordability is non-negotiable,” he said. “Rents and home ownership must remain in reach for current and future residents.”
After being treated as an afterthought during the 2006 sale, the association has emerged as a potent political and legal force, and any investor or lender who has its cooperation could have a significant advantage in the battle over the complexes’ ownership.
The association has the support of Mr. Garodnick, Senator Charles Schumer, and other elected officials. And it won hero status among tenant advocates for its successful lawsuit stopping the current owners from converting thousands of rent-regulated apartments to market rates.
CW Capital has also been courting the tenant association, most recently in an Aug. 25 letter vowing to work to preserve the long-term affordability of the complex and establish a viable ownership and financing structure.
The maneuvering shows “that this time around people are paying attention to what the 25,000 people at Stuy Town want,” said the city’s housing commissioner, Rafael E. Cestero. “You now have the two big players reaching out to the tenants and saying, ‘We want to work with you.’ ”
But Mr. Cestero said the city was concerned about taking so many apartments out of the city’s rental inventory through a co-op conversion. “Most important,” he said, “you don’t want to pull these complexes out of the hands of the middle class for future generations.”
“There are many hurdles to overcome before this is actually a good deal for the tenants, or for the city, but it is worth exploring, and we will give it a hard look.”
A raft of issues would have to be decided before the partnership is finalized, including who controls the fate of the buildings. But if successful, the investors hope to outmaneuver a rival lending group and conduct the largest co-op conversion in the country’s history at what is still considered to be a real estate gem: an 80-acre complex in the heart of Manhattan that has historically served as an affordable enclave for the middle class.
The partnership that bought the complexes in 2006 for a record $5.4 billion defaulted on a $3 billion senior mortgage in January and $1.4 billion in secondary loans.
The investors vying for control are themselves a partnership of Pershing Square Capital Management and Winthrop Realty Trust and hold the secondary loans; they are now in court trying to wrestle control of the complexes from the company representing the senior mortgage holder, who is seeking a foreclosure sale.
After weeks of discussions, the investors sent a letter on Sunday to the Stuyvesant Town and Peter Cooper Village tenant association proposing an alliance in which tenants would get a “substantial equity” stake in the sprawling property, the ability to set apartment prices and the power to veto major decisions made in the course of converting the 11,226 apartments to a co-op. The letter was signed by Michael L. Ashner, chief executive of Winthrop, and William A. Ackman, chairman of Pershing Square. People on both sides of the talks said the tenants could be offered as much as 50 percent ownership.
“Working together,” they wrote in the letter, “we believe that we will be able to effectuate an affordable non-eviction conversion while protecting the long-term affordability of the property for current and future tenants and ensuring that those who wish to remain rent-stabilized renters can do so.”
The investors, the tenants and CW Capital, the company that represents the senior mortgage holders, are awaiting a decision in State Supreme Court that will determine who will control the complexes in the coming period. And while tenant leaders commended the investors’ approach, they are not rushing into a marriage. The tenant association favors a co-op conversion, but its idea of “affordable” may be very different from that of Mr. Ackman and Mr. Asher.
With the worth of the complexes now well below the 2006 sale price -- $1.9 billion was the conclusion of one recent appraisal -- most investors and analysts figure that a greater sum could be collected through a conversion in which many tenants agree to purchase their apartments.
“We look forward to digging deeper into what they have to offer and to see if they can satisfy the tenants' goals,” Daniel R. Garodnick, a city councilman and lifelong resident of the complexes who frequently speaks on behalf of the tenant association. He said he feared that if too much debt remained on the complexes, the new owners would be pressed to set high sale prices for the apartments. “No matter how you turn it, affordability is non-negotiable,” he said. “Rents and home ownership must remain in reach for current and future residents.”
After being treated as an afterthought during the 2006 sale, the association has emerged as a potent political and legal force, and any investor or lender who has its cooperation could have a significant advantage in the battle over the complexes’ ownership.
The association has the support of Mr. Garodnick, Senator Charles Schumer, and other elected officials. And it won hero status among tenant advocates for its successful lawsuit stopping the current owners from converting thousands of rent-regulated apartments to market rates.
CW Capital has also been courting the tenant association, most recently in an Aug. 25 letter vowing to work to preserve the long-term affordability of the complex and establish a viable ownership and financing structure.
The maneuvering shows “that this time around people are paying attention to what the 25,000 people at Stuy Town want,” said the city’s housing commissioner, Rafael E. Cestero. “You now have the two big players reaching out to the tenants and saying, ‘We want to work with you.’ ”
But Mr. Cestero said the city was concerned about taking so many apartments out of the city’s rental inventory through a co-op conversion. “Most important,” he said, “you don’t want to pull these complexes out of the hands of the middle class for future generations.”
“There are many hurdles to overcome before this is actually a good deal for the tenants, or for the city, but it is worth exploring, and we will give it a hard look.”
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