Looking for thoughts,

They say Stuy town is currently worth 1.8B. In 2006 the tenants bid
4.5B. Why dont the tenants rebid 2.5-3B?

Fanny Mae is the senior debt holder, they could float everyone 5% 30
year mortgages/get repaid, would be around 250K give or take, make 20% of the units affordable housing.

Is my plan too easy? I think this can/should happen

A) Taxpayers get repaid
B) Affordable housing is preserved
C) Current tenants get a great deal on a purchase/owning
promotes a less transient community.

What do others think?

So, Clipper Equity is SOL? If so, good!

nfw

Let's see. You got 4400 apts that going to be kicked down to just over $2K a piece 'cause that's presumably how much "renovation" was put into them. So that's a rent roll of something just north of $105M a year. Then, you got 6850 apartments that are still RS at who knows what rent. Let's be generous and call it something like $1500, so $103M a year.

So you got gross rent roll of $200M, and things are stuck there until 2020 given then J-51 ruling, or until you die or whatever if you make under $175K. Give the place a generous 10x gross rents, maybe you get to $2B. Then you got the matter of $300M owed in back-rents, so maybe $1.7B.

Why the hell would you bid $2.5-3B? Because Stuy Town residents are suckers?

On your points:

A) Taxpayers get repaid
Taxpayers are already going to get repaid at $1.8B 'cause that's all Freddie/Fannie are in for, and they're at the front of the line. The property will probably go for something like that.

B) Affordable housing is preserved
Affordable housing is already preserved, for longer than what was intended given the recent ruling.

C) Current tenants get a great deal on a purchase/owning
At $2.5-$3B, the tenants get a crappy deal. The bubble-high price assuming aggressive destabilization was $5.4B. First, remove "aggressive" as that didn't work out. Then, remove "destabilization" altogether as that was deemed illegal. Then, add $300M in back-rents. Then, add a 30% fall from bubble-high prices. That gets you to $1.8B, which is where the market is at right now. Then, add any fundamental long-term valuation metric you may think is appropriate.

C) ... promotes a less transient community.
Uh, the complex was built 40's and 60% of the units were STILL rent-stabilized prior to the recent ruling. I don't think the community is transient.

Longer-term, I think there is tremendous value in the acreage. I don't like how Stuy & PCV are "walled" off from the street grid. If the tenant group buys it, there could be huge potential in redeveloping the land parcel (because presumably tenants would act in enlightened self-interest).

It would be cool to reconnect the complexes back to the street grid and have new buildings of different densities & more retail frontage, while still preserving some green space.

inonada...i don't know who you are but I'm signing up because you're brilliant!!

Julia: I love you too, man! Comments like that make all the life I've wasted here with my dysfunctional SE family worthwhile. *sniff*

w67th: The difference is that you've shed your id and thrown off the shackles of society, spewing ranting tirades bordering on mad geniusness in those fleeting moment of clarity. I'm still stuck by the bounds of society. I envy and admire you. You ever see the Simpsons episode where Barney is explained with how Homer introduced him to Duff's?

hfs: I hope so! She'll throw a big party, we'll build a big bonfire out of Tishman Speyer dealbooks, Blackstone paper, and taxpayer dollars, dance around and chant until dawn. You bring up a good point, that $300M liability is potentially $900M. More likely to settle for less, so let's call it $450M?

"C) ... promotes a less transient community.
Uh, the complex was built 40's and 60% of the units were STILL rent-stabilized prior to the recent ruling. I don't think the community is transient."

Let's put it to our resident expert, actually. AR: does the local Duane Reade stock more Pampers or Depends?

(I'm feeling a fleeting hint of that w67-style moment of clarity. Damn, it's now gone.)

Yoohoo! Party's on!

Thank you for the kind words. It's been a slow week, I guess. Had too much downtime between all the holiday parties.

P.S. Would it be bad form if I brought hfs as my "plus one"?

Possibly a too simple question - but if the complex is looked at as a coop/condo conversion, I would think the purchase value would immediately go much higher than the $1.8 billion, (which is based on current rental return.

Sale value, IMHO, would be a whole different ballgame.

"i think to achieve a w67th-style moment of clarity..."

I know, I'm grasping for straws. I'll never be w67.

"but these days there are the frat kids as well"

But wait, aren't they the biggest consumers of Depends? You know, be self-packing for a night out drinking. That's how we rolled back in the day, anyways.

How so, ph41? ALL the apartments are rent stabilized until 2020 (even the ones improperly destabilized in the past), and longer if the tenant makes less than $175K. How can you convert anything before at least 2020 unless you buy them out?

"is it bad form if i "roast" a guest?"

LOL too funny. Ah crap, you've done it now. Do you know how much pennance were all going to have to pay now by hearing hfs go on and on about that little outburst and your need for anger management?

"the frat kids are packing depends?"

No clue; seems plausible, though. I was just taking artistic license to further the discussion.

AR - I totally agree with your post, which, in a way, was what I was suggesting; ST/PCV will be a valuable property in the future. Current value will reset to rental rate of return. However, I suspect that government will have to step in to help untangle this whole situation, and with NYC and NYS finances in dire straits right now, any sort of "handouts" to existing tenants to purchase units at distressed pricing could cause a serious backlash. And getting that many tenants, many high on the recent court ruling, to agree on anything would probably require a miracle. I think even if tenants were presented with "reasonable" prices to purchase their apartments they might behave as union workers in a company teetering on the edge, asked to be reasonable in their salary/benefit demands: union workers refuse, company folds or moves, union workers no longer have jobs.

As in you might really expect to buy a 2br/2bth apartment in Manhattan for $275,000 or less?

Because "list" price in this case would be quite a bit higher than what the tenants would think is "list" price(or discounts quite a bit lower than they would expect. (And don't know if any tenants in the relatively recent past, really got 50% off).

Whoever takes over this complex is probably not going to bend over and allow themselves to be f***ed in the a**. At new complex purchase price, the rents may be economically viable for a purchaser to hold.

AR - but don't you think the it would require some sort of government "aid" (not entirely sure what form) to enable the tenants to take over the complex? Which, in this environment would be a really tough sell.

If the government "eats" a great portion of the debt in order to facilitate a tenant buyout, might not be seen that way by the press and general public.

AR - how would tat be at the expense of the tenants? Who already are in line to profit pretty well from the court decision

The aid given would be to keep the complex operating at an acceptable level, no? Wouldn't that be helping the tenants as well? Who now face, even with the treble damages, what may be a rapidly deteriorating housing situation.

"As in you might really expect to buy a 2br/2bth apartment in Manhattan for $275,000 or less?"

ph41, what would you pay for AR's apartment? Its rent is going to be just above $2K for the next decade, modulo any RS increases which will at best go up with inflation. Assuming higher inflation, they will surely go up less than inflation. "Irregardless", you can hedge the inflation risk in the markets and more or less fix the increases at 2-3%, or whatever the market is pricing the next decade of inflation at. That's a $24K annual rent roll. Oh, and by the way, you're going to have to pay AR (I'll assume she's been there 2 years) somewhere between $50K and $150K in back-rent, depending on how much of treble damages gets settled. All this in hopes that in about a decade, you get an apartment that is market-rate. And what's market rate for it? Probably somewhere in the mid-3's right now, I'm guessing.

And that's the best-case apartment. You got other 2BR/2BA that are renting for $1200 + RS increases for the next decade. How much would you pay for that? That one does have the advantage of not being encumbered with $50-150K owed in back-rent.

My point here is that if you're guaranteed the place until you (or maybe your children) die, you have a monthly cost that is locked in for life like an ARM mortgage if you choose not to hedge the inflation risk or like a fixed mortgage if you do, and you're never planning on leaving, what's the upside of buying unless it's attractive financially? At the 200x (if you have a bad rental deal) to 300x (if you have a good rental deal) monthly rent that the "regular" market trades at, which is what I assume you meant by "reasonable" price, it simply isn't.

"The aid given would be to keep the complex operating at an acceptable level, no?"

Uhh, the place has a rent roll, even after the decision, of on the order of $200M. You buy the place for $1.8B, put up $300M of equity, and keep the GSE debt at 5%, so $75M to pay the $1.5B debt. Say the heat is a generously-allocated $250 per apt for 6 months of the year for 11K apartments, so let's just round that up to $20M, oh screw-it, $25M. You still got $100M, or $9K of lolly per apartment, to spread around to pay the staff, fix the elevators, fancy up the yard, and keep a little for yourself.

Magic things happen when you take a $5.4B over-priced asset based on stupid valutions and make it a $1.8B asset with reasonable valuation.

"Also, please factor into the equation that the aboutready family tends to destroy things in the apartment like the toilet seat and blame the landlord. So if you own the apartment, you'll have to pick up that expense."

Let's make a deal. You pay me $1M today. I'll pay you whatever AR's apartment rents for, minus expenses, for the rest of time. Toilet seats included.

Need advise...my new lease arrived with a rider that the LL wants me to sign..the LL admits they're receiving J-51 benefits currently but they claim the courts have not decided whether it was retroactive or whether it would be prospective in its application...they state my current lease is based on rent stablization increases...

I'm assuming they're basing it on a rent of $2,000...and the new lease is $2125..of course my '09 lease is $2500...does it make sense for me to stay at least for another year. Help I need to send in the lease by 12/31.

AR and inonada - as AR herself so eloquently pointed out re: sale to tenants "depends on who gets control of the complex, and how they structure any sale, whether its coop or condo, etc. and remember, financing won't be easy, nor will conversion. plus, it will not be possible to do anything without the cooperation of a huge body of RS tenants, so either nothing will happen in terms of purchase or something very accommodating will occur. i don't see anything in between that would allow ("convince") enough units in any given building to convert to allow financing."

AR - please don't be so touchy and hyper sensitive.

AR is one of the most thoughtful, knowledgable and supportive posters on SE...and a happy holiday to everyone.

Julia, I think $2125 probably is indeed the RS amount for your place. Assuming a 1-year lease and the owner paying the heat, they'd be entitled to a 3% increase this year from last year's RS base. That would put last year's RS base at $2063, which is not unreasonable because they probably didn't do renovations to hit the $2000 destabilization point exactly. In other words, the vacancy increase and renovations probably kicked the apartment's RS base up to $2063 for your lease last year, and now they're increasing it by 3% to $2125 as legally allowed. Of course, it's your choice on whether or not you pay that: the RS base is merely the maximum that may be charged.

So what's the best alternative you've seen?

"my new lease arrived with a rider that the LL wants me to sign"

Woa-woa-woah. Hold on there a minute. What's in the rider?

Hey hfs, are you going to start quoting me too or are we copacetic? I try to be polite & righteous, but who knows, maybe I've said a thing or two I shouldn't have. I did get into it a little once with Rhino, if you're interested in digging that up. You might be entertained.

AR - invite them all for a country weekend.

hfs, see http://streeteasy.com/nyc/talk/discussion/15461-what-if-im-wrong. It's post #113 (or so) where I think I'm being less than perfectly amicable.

That's wrong: stevejhx is a gay translating comedian accountant. Everybody knows that!

I'm glad I could brighten your otherwise dark and lonely existence down in the basement. Trolls are people too, you know.

"why are you feeding this nut job?"

Perhaps it's because I think we can groom him into an upstanding, dysfunctional SE denizen like the rest of us. Have you noticed that in about 5% of recent posts, he has actually expressed an opinion? Progress.

So hfs, we all got flaws here. Some of us are quick to attack, some of us are quick to judge, some of us are full of ourselves, and some of us behave like trolls. Why the big fuss? I sometimes think I'm stupid for sitting here all day conversing away, but sometimes I give/get useful information, and I feel like I'm socializing with interesting people with different viewpoints. What do you get out of just pointing out people's flaws all day? Is it worth your time?

"I agree, it is kind of dark this evening."

Screw all -- it's 4:30, the sun's set, and we're talking about "evening" already. Good news is it's all uphill from here, I guess.

"my new lease arrived with a rider that the LL wants me to sign"

Julia,
If this is a new rider, a rider that is different from one you signed during your prior renewal or vacancy lease, then you do not have to sign that particular rider. Question is whether this rider " constitute material changes to the terms and conditions of the vacancy lease".

http://www.dhcr.state.ny.us/Rent/FactSheets/orafac4.htm

The renewal lease must keep the same terms and conditions as the expiring lease unless a change is necessary to comply with a specific law or regulation. Those lawful provisions that would change the expiring lease should be attached to the Renewal Lease Form. (See Example #2 below).

Example #2

Two years ago, Mrs. Cooper signed a vacancy lease which contained no clauses or riders regarding lead paint, recyclable materials, late fees, or pets. Upon expiration of her lease, the landlord offers a renewal lease which includes several riders:
1. Rider 1 (Prevention of Lead-Based Paint Hazards) requests that Mrs. Cooper advise the owner if a child under 6 years old resides in the apartment.
2. Rider 2 specifies how certain materials such as paper, cardboard, cans, bottles, etc. must be recycled.
3. Rider 3 states that the tenant will be liable for a $20 late fee if rent is received by the landlord after the 10th of the month.
4. Rider 4 prohibits the harboring of pets in the apartment.

In this situation, Riders 1 and 2 constitute lawful provisions to the lease because they are necessary to comply with New York City lead paint and recycling laws.

Riders 3 and 4 are provisions that cannot be added to the renewal lease because they constitute material changes to the terms and conditions of the vacancy lease, which did not include a late fee or a pet clause. Mrs. Cooper can sign the rider without waiving any rights and may file a lease renewal complaint.

Happy Holidaze Everyone!

"Maybe not, oh well."

Heh.

Bringing it full circle to the topic of the thread and an "opinion" you've expressed, what do you think should be done on the J-51 situation? What parts of the ruling do you agree / disagree with? The notion that the apts should not have been deregulated and need to go back into stabilization? The notion that back-rent is due? The notion that treble damages may be due? The notion that the beneficiaries of these are not the intended audience of the RS program?

dwell, the issue in Julia's case is that she never signed a vacancy lease: she simply signed a market-rate lease. The RS status of her apartment is probably at best murky, and who knows how the standard RS rules will apply.

Oops, sorry. I thought Julia was a RST. Well, that's another ball of wax. With a market lease, L doesn't have to renew on same terms & conditions. Sorry, kiddo.

dwell -- because of the J-51 ruling, the LL likely illegally made Julia's apt market-rate and it should have been kept RS if the Stuy Town ruling is applied elsewhere. Hence, maybe she does have the right to renew on the same terms & conditions, modulo the RS price, but who knows?

hfs -- good luck with that, and knock yourself out! I'll still poke a little fun at your anonymous persona every now and then, all in good jest. Hope you don't mind ;).

inonada - is it possible that the new rider in some way is getting Julia to accept an illegal conversion to market-rate rent? I think she really has to read it very carefully before signing (if she chooses to stay)

Julia - don't know how long the rider is, but possibly if you post it here you might get some interesting interpretations/viewpoints

"what do you think should be done on the J-51 situation?"

inonada:

My random thoughts:
Big picture, this is a huge clusterf*ck. It will be dragged out in the courts for years, leaving many in limbo. The people who will benefit most are the lawyers, as they rack up legal fees. For these reasons alone, I think the decision was really bad.

Personally, I always interpreted the J51 regs as per the Ct of Appeals: If you take tax benefits, you're subject to the RSL: this makes sense.

But, DHCR came up with their own rather funky interpretation and one could almost envision that one day, DHCR's interpretation would be invalidated.

Nonetheless, DHCR is an administrative agency with the "expertise" to interpret & administer the rent laws. However, isn't J51 a NYC law & DHCR is a NYS agency, so, perhaps DHCR's interpretation isn't as primary. Which agency has primary jurisdiction for administering & interpreting J51? HPD? Well, HPD went along with DHCR's interpretation.

In terms of Adminstrative Law, the adminstrative agency has primary jurisdiction over how a statute should be interpreted & that interpretation must be respected by the courts unless it is arbitrary, capricious & w/o basis in fact or law. Using this standard, was it wrong of the Ct of Appeals to nullify DHCR's & HPD's interpretation & administration of the statute? IMO, I think DHCR's interpretation was funky, but not arbitrary, capricious & w/o basis in fact or law.

But, the worst thing is that DHCR's funky interpretation lulled & mislead owners into a comfort zone, which the Ct of Appeals nullified based on (I believe) the plain language of the statute. IMO, if DHCR were not a gov agency, perhaps owners could claim something like promisory estoppel (ie: ya can't change the rules in mid game), but I don't think one can claim estoppel against the gov.

IMO, I don't think treb damages will apply because there is no bad intent on owner's part; they were just following DHCR's interpretation.

Then, there's the reality of hubric Tishman who totally over paid based on ridiculous projections of potential rent increases & now could default. But, the Ct doesn't care about reality, it supposedly only cares about the law.

I only read the decision once, but, these were the impressions I came away with.

cc - yes, and also to post it - some people can read these kinds of documents better than others - so far Julie hasn't even posted what is in the rider, so possibly she hasn't read it carefully enough to give her second thoughts (other than about the rent $)

cc- bad typing, yes, but, being a nice person, I didn't correct AR "Courier and Ives" to the correct "Currier and Ives"

"dwell -- because of the J-51 ruling, the LL likely illegally made Julia's apt market-rate and it should have been kept RS if the Stuy Town ruling is applied elsewhere. Hence, maybe she does have the right to renew on the same terms & conditions, modulo the RS price, but who knows?"

I would say that Julian cannot be considered a RST at this time & therefore, she cannot now benefit from the protections of the RSL. However, depending on how the case resolves, she may be RS in the future. If so, then perhaps the new rent in the current renewal lease may be reduced via a rent overcharge complaint.

cc: Yes I am a very nice person. Many people on SE would think from your many nasty posted comments that you are the pot calling the kettle black.

I was simply responding to your comment about my misspelling of Julia's name - simple typo that you seized on to make a nasty comment, vs. really wrong spelling of the printmakers' names

cc - and now, to quote you, "Stop, Stop - too ugly"

cc - actually, more to the point, sorry you're so obsessed with me. Attacks on me totally from left field, having nothing to do with anything? (oh yes, anything that questions, in the slightest, AR's opinions, posts becomes a focal point for you - are you her father? her big brother? her knight in shining armor? I think AR is a smart woman who can speak for herself - but obviously you don't think so)

Again, "too ugly, STOP. STOP ) though that may not be an exact quote of CC.

"inonada - is it possible that the new rider in some way is getting Julia to accept an illegal conversion to market-rate rent?"

Who knows? It'd be suspect to me if I were julia.

dwell -- thanks for that analysis as it seems to provide an unbiased report for many of us who have never read the law or the rulings. Truly does sound like a clusterf-k. I wonder how much the bass-ackwards DHCR interpretation was influenced under-the-table by developers. If so, on the one hand, serves them right (developers) for trying to pull that BS. On the other hand, I'm sure hundreds of LLs acted (and paid prices) according to the DHCR interpretation with no ill intent.

Crap: I thought I was going to take hfs as my ward, but I turn away for a couple of hours, and it appears ph41 has become hfs's ward. Can't look away for a minute.

On the word irregardless:

http://www.merriam-webster.com/dictionary/IRREGARDLESS
http://en.wikipedia.org/wiki/Irregardless

Beauty of language is that if enough of us say a word, it gets entered into the language irregardless of whether it was there to begin with or not. Perhaps one day it'll have an "ancient genealogy" like the word "ain't".