After nearly three years of veritable civil war between two powerful real estate executives and thousands of tenants, the owners of the historic downtown residential complexes, Stuyvesant Town and Peter Cooper Village, will appear in court again today.
Landlords Jerry and Rob Speyer, and their partner, private equity giant BlackRock Realty, will face an Albany appeals court judge in an attempt to overturn a March verdict which said that the landlords owed hundreds of million dollars in rent rebates.
At issue in the case is whether Tishman Speyer (the company headed by Rob and his pop, Jerry) was allowed to deregulate apartments that had been rent-stablized for thirty years…
Landlords who buy properties with a certain number of rent-stabilized units receive special tax breaks. Tishman Speyer received the tax breaks, but then immediately began deregulating the apartments and selling them at market rate.
On March 5, a State Supreme Court said that Tishman Speyer couldn’t do that: since the company had received beneficial tax breaks for buying rent-stabilized properties, in what are known as J-51 buildings, they couldn’t turn around and deregulate them.
Until the judge decides, tenants who have eviction notices are being told to sit tight. The case has potential implications for literally hundreds of thousands of tenants throughout New York.
The $5.4 billion real estate deal to buy 110 apartment buildings was the biggest in New York City history and required $4.4 billion in loans (Yes, the numbers are in billions). Yesterday, the Times reported that Tishman Speyer is on the brink of defaulting on that enormous loan. The company may have the cash to hold out until September or February.
Defaulting on the loan might not be so terrible for everyone else involved. If you take the case of the Sheffield57, an Upper West Side luxury condo conversion that collapsed under poor management and tenant lawsuits, the residents were delighted when the owner Kent Swig defaulted on his loan. The well-heeled residents ended up getting a new owner, and said they were delighted.
In the case of other private equity-backed real estate projects that have fallen into disrepair and even foreclosure this year — such as the Ocelot Capital projects in the Bronx — the city has stepped in to oversee the purchasing process and ensure that tenants won’t get shafted a second time around.
We all wonder where they were the first time, but the answer to the question of what could actually have been done isn’t so obvious.
If you compare the Stuyvesant Town and Ocelot cases, you’ll find some important differences that make it hard to predict what the city’s role in Stuy Town will be: Unlike Stuy Town, the Bronx buildings are designated affordable housing, and the city has an obligation to keep it that way. But housing commissioner Rafael Cestero told the Times that he’s keeping a close watch on Stuy Town too.
As Wayne Barrett pointed out in his excellent piece on the relationship between Bloomberg L.P. and the city government run by its former owner (that’d be ours), the Speyers have very close ties to the Bloomberg administration. Bloomberg appointed Rob Speyer to be the chair of the Mayor’s Fund to Advance New York City by Bloomberg.
Jerry Speyer, the patriarch, was considered the prime mover at the New York City Partnership, the elite business group that adopted Bloomberg as its pet mayor from the outset and would, in the words of Barrett, “become the sledgehammer for a term-limits extension and another four years for Mike.” While there is no proof that the administration helped Tishman Speyer purchase Stuy Town, there’s plenty of circumstantial evidence in Barrett’s story.