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Stuy Town Market-Rate Units Return to Rent Control

APARTMENT FINANCE TODAY • January/February 2010

BY Chris Wood

ATTORNEYS REPRESENTING Tishman Speyer and residents of Manhattan’s Stuyvesant Town/Peter Cooper Village complex reached a partial settlement in December that will ultimately see the return of some 4,400 units back to rent stabilization.

While the settlement goes a long way toward resolving Tishman’s legal issues with residents, it does little to help the company make payments on its $3 billion mortgage, which was transferred to special servicing with CWCapital in November. In fact, Tishman announced in January that it would be unable to make its mortgage payment on the Stuy Town complex, which would put the firm in technical default on its mortgage.

Under the terms of the settlement, residents who elected to be part of the class action suit will pay either estimated stabilized rents or their current negotiated rent, whichever is less, in January and February 2010. A special consultant will determine the longer-term stabilized rents for those units.

The rent reductions could also chase off any interested purchasers, since local politicians have pledged to hold new owners accountable to the terms of the settlement.

In 2006, Tishman and BlackRock Realty acquired the complex for a whopping $5.4 billion, hoping to convert most of the rent-controlled units to market rates. But subsequent litigation brought on by residents alleged that a number of units had been wrongfully deregulated, since Tishman was receiving city tax abatements for the property.