Stuyvesant Town-Peter Cooper Village, the largest apartment complex in Manhattan, is expected to be sold for more than $5.3 billion, an agreement that will preserve nearly half the 11,232-unit complex for middle-class families, according to officials involved in the negotiations.
The sale, to the Blackstone Group, a Wall Street investment firm and one of the country’s largest landlords, includes an unusual regulatory agreement with the administration of Mayor Bill de Blasio that would ensure that a block of 5,000 apartments would be affordable for the next 20 years for families of teachers, construction workers, firefighters and others who have traditionally made their homes at Stuyvesant Town.
The agreement, which covers a high-profile complex that symbolized the rapidly changing nature of New York City housing, represents a victory for Mr. de Blasio, who has made affordable housing a central tenet of his administration. Up to now, tenant activists and elected officials have feared that Stuyvesant Town’s 65-year history as a middle-class bastion was ending.
“This has been a priority for us since Day 1,” Mr. de Blasio said in a statement released on Monday afternoon. “We weren’t going to lose StuyTown on our watch.”
The 110 plain redbrick buildings that make up the complex have been at the center of a roiling debate over housing in a city where prices have sailed beyond the reach of not only the poor but also many middle-income New Yorkers.
The Blackstone deal, expected to be signed by Tuesday morning, stands in stark contrast to the last time the complex sold, in 2006, for a record-setting $5.4 billion. That sale set off an outcry over the loss of affordable housing to speculators in New York, as the buyers sought to replace longtime, rent-regulated residents with tenants who paid far higher rents. The debt-laden owners ultimately lost the complex to their lender when they ran out of money.
Under the new agreement with the de Blasio administration, 4,500 apartments would be reserved for middle-income families. A family of three earning up to $128,210 a year, for example, would pay a rent of $3,205 a month for a two-bedroom apartment. An additional 500 apartments would be set aside for families making less. For example, a family of three earning up to $62,150 a year would pay about $1,553 in rent for a two-bedroom.
Still, more than half the apartments in the complex, which sits east of First Avenue between 14th and 23rd Streets, now lease at market rents, or more than $4,200 a month for a two-bedroom apartment, a prohibitive sum for many middle-class families.
In return for maintaining the affordable block, the city agreed to waive $77 million in mortgage recording taxes and to provide Blackstone with a $144 million low-interest loan through the Housing Development Corporation. Blackstone also agreed not to pursue a condominium conversion or to build new towers on the tree-lined property.
It turned out to be a far less costly subsidy than the long-term property tax exemption that the city had debated last year during talks with the seller, CW Capital. “This package is night-and-day compared with what we had been talking about,” Deputy Mayor Alicia Glen said. “We’re saving taxpayers a lot of money.”
The deal came together rapidly in the last few weeks, as Blackstone, whose real estate division manages $93 billion in assets, made clear to city officials that the purchase was a long-term investment. The company told CW Capital that it would do a deal only if the city and tenants approved.
The sale of the complex posed a challenge for a mayor who has vowed to build or preserve 200,000 units of affordable housing in a city where the median price of an apartment in Manhattan has reached nearly $1 million.
New York City is in the midst of a real estate boom fueled by a seemingly insatiable demand for housing. With young people, immigrants and empty nesters seeking an urban home, the city’s population has soared to higher levels than ever before.
At the same time, international investors and pension funds view the city as one of the world’s safest markets and their interest has spawned a string of slim, ultra-tall towers along a stretch of 57th Street that has become known as Billionaires’ Row, where penthouses sell for $100 million or more.
Stuyvesant Town-Peter Cooper Village was built after World War II by MetLife for returning veterans. In return for a large property tax break and the city’s power of condemnation, the insurance company kept rents low.
At the height of the real estate boom in 2006, MetLife sold the property to the highest bidder. Tishman Speyer Properties, which owns Rockefeller Center and operates on four continents, and its partner BlackRock paid $5.4 billion, a sum that many housing experts found shocking and unsustainable.
The new owners, who put in very little of their own money, infuriated tenants as they showered hundreds of residents with eviction notices. They renovated vacant apartments and rapidly raised rents.
But Tishman Speyer was unable to increase revenue fast enough to cover its enormous $4.4 billion in loans. From the first day, income at Stuyvesant Town covered only 40 percent of the annual debt payments. After the partners ran out of money in January 2010, CW Capital took control on behalf of lenders.
In a testament to the inflated and debt-fueled nature of the price in 2006, Blackstone is paying virtually the same price nine years later, even with lower interest rates and nearly twice as much income from the property as nine years ago.
Last year, CW Capital hired Douglas Harmon of Eastdil Secured to sell the complex.
In light of the debacle in 2006, the de Blasio administration, Senator Chuck Schumer, Gov. Andrew M. Cuomo and other elected officials were determined to prevent another speculative buyer from purchasing Stuyvesant Town and turning it into a luxury complex.
About five weeks ago, word circulated in real estate circles that CW Capital was on the verge of a settling a dispute with Centerbridge Partners, a hedge fund that held some of the debt on the property. In response, a number of developers and investors made written offers to buy the property.
According to several people involved in the negotiations, Blackstone was the only company willing to work with the city and the tenants, immediately offering to preserve a large block of apartments for middle-income tenants.
Jonathan D. Gray, who heads Blackstone’s real estate business, has been especially bullish on New York City, buying residential and commercial properties. Given the high cost of condominiums, he has said that rental housing presents an important investment opportunity.
Blackstone, in partnership with a Canadian pension fund manager, Caisse de Depot et Placement du Québec, is using a multibillion-dollar investment fund for long-term investments, which typically do not generate the double-digit returns of more opportunistic funds. The partners will also provide equity for about 50 percent of the sale price.
Under the terms of the deal, Blackstone would phase in market-rate rents over five years for an additional 1,200 apartments when certain tax benefits wear off in 2020.
“This deal achieves our core goals of preserving the community as a stable home for New Yorkers today and into the future,” said Daniel R. Garodnick, a city councilman and lifelong resident of the complex. “This time, the buyer not only has a more patient and stable investment structure, but goes to great lengths to preserve long-term affordability.”
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