Let me be the first.... Stuy Town

“We have spent the last few weeks negotiating in good faith to restructure the debt and ownership of Stuyvesant Town/Peter Cooper Village,” said the statement by the partnership. “Over the last few days, however, it has become clear to us through this process that the only viable alternative to bankruptcy would be to transfer control and operation of the property, in an orderly manner, to the lenders and their representatives.”

---------------

over the last few days it has become clear to them what everybody and their dog knew all along. they paid way too much.

Tishman is still in business. How is this different than efficient breach or a strategic default?

well, color me shocked. SOMEboby paid way too much for a large parcel of red brick buildings in a fairly marginal location at the peak of a bubble. and put very little down as well. i hope that TS has a very black mark on its credit rating for at least seven years. what? no?

jingle mail, jingle mail, jingle all the way,
oh what fun it is to ride on a downward market sleigh, HEY!

limericks, anyone? haiku?

TS considered
decided to walk away
hello fannie mae

With rents in the city falling and no shortage of Rental stock in Manhattan, they should consider allowing the new owner to sell part and use the proceeds to make improvements.

what improvements? it's not like the place needs new boilers or anything. they've been "improving" the place relentlessly so that they can pass on the MCI costs in the rents.

landscaping could use a dollar or two, but that's about it at the moment.

you are lacking poetry, RS.

there once was a landlord, TS,
who found itself under duress,
in a moment of clarity,
which was indeed quite the rarity,
they said fuck it, who needs the stress.

AR.....should I be happy because now they will start renting the non-renovated apartments or will it be business as usual?

julia, do i seem like a fannie mae to you?

probably happy. it all depends, but methinks that anything that speeds this train wreck along is probably for the best. if the debt is restructured there won't be the overwhelming need to maximize rental income, and it may be in their best economic interest to not renovate certain units. which is kind of shocking, if you think about it.

there once was a gal named julia,
who was tired of looking on trulia,
she didn't want frills,
just more money for bills,
she said release the damn units, will ya?

sorry, but julia's kind of tough.

What happens when Fannie Mae gets abolished... I could picture an RTC style resolution where they sell their non-residential u.s. portfolio

“The committee will be recommending abolishing Fannie Mae and
Freddie Mac in their current form and coming up with a whole new
system of housing finance,” Frank, a Massachusetts Democrat and
chairman of the House Financial Services Committee, said at a
hearing in Washington today. “That’s the approach, rather than a
piecemeal one.”

who knows? who cares? RS, you're my landlord, i'm my landlord, god forbid w67th is my landlord (i'm fairly certain he'd skimp on the landscaping). the USofA owns this unwanted lump of land and buildings, whatever the name of the agency is.

i feel a soooong coming on!

Wonder how it would've played out had MetLife taken the tenant group's offer of $4.5 billion or whatever it was.

I like that limerick. Clever rhyming "julia" with "trulia."

Yes, more cheap rentals on the market to compete with still vastly overpriced real estate. Along with the thousands of new-dev rentals on the market, the flippers who can't flip & are forced to rent at massive losses, and more bankrupt developments.

The bubble has burst.

I'm a grt ll. I wouldn't charge you extra for mildew in the grout.

AR...did someone put something in your orange juice this morning???

stevejhx...thanks for the hope.

Get me that PCV 2 br -now - great moving day guys - pouring and winds. AR I'll see you later

Interesting that the NYT article didn't mention the court ruling, which was probably the coup de grace for TS et al.

It would seem that a lot of apartments will be released into the market, which is a good thing, though it would also be appropriate if income levels for applicants for below market apartments were put in place (as they were/are for Mitchell Lama housing)

Only negative is that govenment has never prven to be a very good landlord (look at city run housing in NYC and Chicago, for example). AR has mentioned in the past problems with non-functioning elevators, washing machines, hall lights, etc. - may get worse going forward.

Interesting that TS was offered a management contract, which they wisely declined (as if the fee would have made a real difference to them).

The rental site shows the Suy town apartments to be 10 feet wide units. I could see people gladly payingan extra hundred or two per month to live in something nicer.

River - the PCV site shows 2BR/Bth units at about 1,070 sq. ft, which is larger than a lot of the new condo garbage, so if rental rate is good many people would go for that, even if it's in a "fairly marginal location" (to quote AR)

I think the 2br 2bth is bigger than that.

of course it's fairly marginal, or at least many of the PCV apartments are in a fairly marginal location. Lower ST apartments are in a GREAT location, but i wouldn't exchange the space for the location. but nobody in their right mind would say that 21st and C is at the top (i'm not at that wretched location, btw).

if you compare the floor plans at PCV to coop floor plans, it is generally consistent with an apartment larger than 1070 sf, but frankly, it doesn't matter. they are very livable spaces, nicely renovated, and some of them now are very cheap. i certainly like it enough here to stay, even if market approaches my rental cost. for many reasons it works for us. as i said earlier, maintenance has been much better recently. ph41, the gov't doesn't have a large stock of apartments with rents at this level. i'm sure we'll be fine.

julia, actually i have a stomach virus. just trying to keep the spirits up.

more like 1200-1250, the one bedrooms are like 950-70.

http://www.petercoopernyc.com/#/floorplans/two-bedroom/modern

http://www.corcoran.com/images/media/ListingFloorplans/1268263.1.gif

Over $8500 to live on RSB in less space (listed as 1080 sf) than my apartment, which costs me a bit more than $3000 a month.

we should start the game of guessing who's next. many big landlords had never seen a positive cash flow eihter, and the expectation of that changing or price appreciation is mostly gone. whose jingle mail will follow?

savoy and riverton in harlem? vantage in washington heights?

AR pick your phone up

cccharley - re: PCV - look at the website and click under floorplans - pretty easy calculation as the apartment is basically a rectangle.

you have to include closets and baths and there are no dimensions. ANyway they are large.

AR - that's exactly the problem that " the government doesn't have a large stock of atpartments with rents at this level" . They'll handle like the "projects" they currently run because they don't have the necessary experience.

sure they will. give me a break. they'll hire a manager. rose associates did a decent job for metlife. the rental roll can certainly sustain the gov't's debt level, maintenance and a manager.

just take a look-see at the two floorplans and tell me which one is larger.

my floor plan is the same but with one more pet (walk in closet) and a balcony but without the window in the kitchen :-(. amazingly similar floor plans though.

btw, the feds running NYC projects? since when?

Right - no eperience at all - so much better than city and state - right? (where people fall down the elevator shaft because elevators aren't working properly)

any potential for the apartments to be converted to condo in the near future?

ph41, i live here and i'm not concerned. i'm sure you just have my best interests at heart, indeed the best interests of all the tenants here, when you bring up the elevator issues. but i'll just wait and see what happens before getting all hysterical and what not. obviously it's a good thing you're happily ensconced elsewhere, the stress might be driving you crazy if you were FORCED to live in such slum-like conditions.

cccharley - go to petercoopernyc.com - dimensions ARE on the website - they have a 2br/2bth and 1BR shown. Hard to believe that they built a LOT of different floorplans for what was designed to be working/middle income housing.

ph41, i already put up the link to the 2/2s on this very thread. and i also linked to a 1080 sf apartment at the Avery. have fun comparing.

Did compare - as I said condo garbage is condo garbage - compare to older units in those other much despised 1960's buildings which usually ARE =/>1,200 sf. and often 1,400 sf for a 2br/2bth

But you're right - that condo also has a somewhat marginal location

1000 sqare foot as a two bedroom is pushing it. Extell did some two bedrooms in Rushmore at 900 square feet. Can't imagine an under 1100 square foot two bedroom being very desirable or holding up. You really need a minimum of 1200 to 1500 square feet in a two bedroom for it to feel like a home.. And you really want to toward the higher end of that range too.

I mean that in an endearing way.

Rvsidrr. Just get rid of your creepy Victorian doll collection. Therez your 300 xtra sq Ft.

i have to wonder HOW in the world i manage to feel comfortable here? when ph41 and RS are convinced it's WAY too small.

ph41, you're the one who brought up the initial comparision to new development condo garbage.

w67th, you're quite endearing.

Well, W67th - it's the kind of thing that would let you have your 2nd child live in a BR that's bigger than a closet.

You can't take 1000 sqft in a Trumpy building and think it's the same as 1000 sqft in a postwar co-op or PCV/Stuy. Measure the dimensions of each room, and Trumpy will come up short.

Ph41: yes, it will be interesting to see who will manage the buildings. Sadly, the tenant population of NYCHA buildings are not as cohesive, well-educated, and as white as the tenant pop. of Stuy/PCV - so my bet is that they will be managed better in the short term. Long-term, who knows?

Ph41: yes, it will be interesting to see who will manage the buildings. Sadly, the tenant population of NYCHA buildings are not as cohesive, well-educated, and as white as the tenant pop. of Stuy/PCV - so my bet is that they will be managed better in the short term. Long-term, who knows?

ph41, gee, maybe that's why it works so well for me. one child. plenty of people here do fine with two. many people all over this city have less space than they'd like, renting and owning. hardly newsworthy. bottom line, this is a cheap decent option. and that really seems to bother you.

Doesn't bother me at all - seems to bother you more (now that you lost that extra 300 feet from your "1,400 sf. PCV apt."

Minty, I grew up till I was 15 in a 2 bdrm. On a top bunk bed with bro and sis. The fact my kids have their own room is a step up generationally speaking (I think).

And now my kids want a bunk bed and sleep in the same room. Funny.

where did i say 1400 sf? hearing voices?

NO, you posted it a while back when talking about your reasonable rent.

find it. but if i did, it was a typo. i've always said this unit is comparable to most coops listed at around 1200 sf.

Oh please, you post so much it would take MONTHS to find it. But even 1,200 is about 150-200 sf (or a good sized room) more than even PCV is claiming, so not comparable to a 1,200 sf. 2br/2bth

nice. very. troll listings why don't you. here's one to get you started.

http://streeteasy.com/nyc/sale/486165-coop-64-east-94th-street-carnegie-hill-new-york

"You really need a minimum of 1200 to 1500 square feet in a two bedroom for it to feel like a home.."

RS, I have to agree. i'd never buy a 1000 2br/2bth but renting one for a while work for us. is it true that renters tend to settle for smaller space than owners? in our case, it's too small, it doesn't feel permanent at all.

RS, what's the minimum square footage for a livable 3 bedroom?

admin, are you an organized sort? it may seem easier to me because we have a large second home. but even before we did, the chelsea condo seemed sufficient at 1300 sf (not new development), and it seemed only slightly larger (very large master bedroom and bath made up almost all of the difference).

AR - very strange comp - definitely larger than 1,060 sf., and right off 5th - is that like the comp an out of town appraiser would make, the ones that NY'ers are complaining about?

There is no standard for calculating square feet.

ph41, don't be dense. i wasn't using it as a comp. just the floorplan. which, if you do the math, the living area is significantly smaller.

RS, you're right. which is why i said it felt like coops routinely listed at a certain size. i've been in the 1100-1700 sf 2/2, 3/2 market for 14 years. i've looked at hundreds of units, and thousands of floor plans.

admin, for three bedrooms most new construction would need to be around 1600 at least, if you're feeling cramped now. older condos, some at 1400 sf would probably work. most coops around 1500 sf would be my guesstimate.

RS - there is no standard for CLAIMING square footage (unfortunately), but it is fairly simple to calculate actual square footage, which does have to include interior walls and on the conservative side goes to the interior window line (yes, including window sills). A lot of SE'ers don't like to include interior walls in measurements.

anyway. isn't this just a lovely message being sent by TS to the children? we f'd up and we'd like to give you the keys.

admin, i'll take riverton.

Corporations and private borrowers both f'd up. This is what the the strategic defaulters in non-recourse states point out as hypocracy. I don't blame Tishman, I blame the lenders who approved the loans. If Fannie provided funding on mezz-financing then it shows how stupid our gov't is. The beurocrats at Fannie Mae are worse than private lenders since they always knew the gov't would bail them out.

They should bring hav the "loan officer" or person who signed off on the Stuyvesant loan at Fannie go to congress and the finanical crisis hearing to testify. The first question he should be asked, "What were you thinking?"

What else but "The Real Estate market only goes up" as per J Dimon

Um, RS, it's not at all apparent that fannie will necessarily lose a cent here.

How did Fannie come to invest in this. Does mezzanine debt to do an LBO of a housing project fill its mandate or something? or did Black Rock pull strings here...

http://www.businessweek.com/news/2010-01-25/tishman-to-hand-over-stuyvesant-town-to-its-lenders-update3-.html

Biggest Lenders

Tishman Speyer and BlackRock each invested $112.5 million out of total equity financing of $1.9 billion. They took out a $3 billion mortgage from Wachovia Bank and $1.4 billion of mezzanine debt. The mortgage was packaged with other commercial- property loans and sold as securities. The biggest holders are Fannie Mae and Freddie Mac, the U.S. government-owned home-loan finance companies.

Other investors include the Government of Singapore Investment Corp., manager of more than $100 billion of the city- state’s foreign reserves; the Florida State Board of Administration, the California Public Employees’ Retirement System and the Church of England.

rs, it appears as though fannie and freddie bought half of the Wachovia debt in the form of CMBS, at what point i don't know, or whether it was necessary to get the deal done initially. they do NOT have mezzanine debt. they are on record as saying, as recently as november, that they do not anticipate losses from these loans. for what it's worth.

nice, so we'll end up paying for this after all.

btw, its funny how Kudlow screams and yells that folks aren't just supposed to walk away from their mortgages.... except he is amazingly quiet when its a 100x or 1000x deal being walked away from, and Morgan Stanley, Black Rock, or Tishman are the ones doing it...

swe, the gse's have a pretty good place at the dinner table, so to speak. i doubt this place is really only worth $1.8 billion. it depends on what goes down, but i wouldn't say a loss is baked in yet.

There's a definite double standard. Of course it's irrepsonsible to borrow more than you can afford, but to claim that corporate borrowers can exercise a put but resi borrowers are not honoring their obligation is hypocritical.

It's not a loss if the GSE'S don't mark to market.

It sounds like Fannie Mae is now equity investor now, but I could be wrong. I wonder what the accounting rules would be if they were followed.

> i doubt this place is really only worth $1.8 billion

I think the inability to raise rents could have kills tons of value.
For arguments sake, if the cost of upkeep is $500 mil and rents were $600 mil, planning on being raised to $800 mil, thats a 3x cash difference...

Considering how big a deal this was, perhaps that much money went down the drain that quickly.

swe, right now most of the RS rents are close to market, believe it or not. and it's only until 2017. upon vacancy if they choose to renovate they can get many units close to market. some are MORE expensive with the RS calculations than market.

this place is worth nothing close to $5.4 billion. but i wonder about the $1.8 billion number also.

> swe, right now most of the RS rents are close to market, believe it or not.

hmmm... i don't know if I do. All the folks I know there pay a fraction of...

AR, in all fairness, that Avery listing is at a nutty price no one is willing to pay. I measured out your floorplan, and it's 1200-1300 sq ft. For comparison, here's a NE corner 1400 sq ft 48th floor penthouse that went for $5000:

http://streeteasy.com/nyc/talk/discussion/18094-let-me-be-the-first-stuy-town

Or here's a 27th floor corner 1400 sq ft w/ a direct river view asking $5500 (no-fee) with no takers for 3 months now (investor bought it 4 months ago for $1.375M):

http://streeteasy.com/nyc/rental/591802-condo-200-riverside-boulevard-lincoln-square-new-york

I'm guessing they'll take $5000, if not less. Both these units have a little more space, and in my eyes they are somewhat "nicer" than ST in terms of location / views, etc. My point being that your $3000 rent, or any post-renovation RS units, just don't seem that below-market any more.

I guess I am disagreeing w/ your Avery comp, but agreeing with your "RS are close to market" comment.

Avery doesn't have the best lay-outs, but it's on the water, on the upper west side in a brand new building with doormen, concierge etc. I can't see rentals in Avery comparing to Stuyvesant Town.

I think the biggest advantage that stuy town has is the property outside of the buildings. Its playgrounds and sporting facilities are great for kids. Its good for those who like to spend time outdoors. I like being able to play bocce, basketball and paddle tennis near my building. And have my kids ride bikes, scooters within the complex. Playing a game of chess or reading outside my building is pretty nice too.

That's one thing other a lot of luxury manhattan buildings are missing, is the park-like atmosphere stuy twn, pcv has. I just wish they'd make more progress on the park besides the east river, it just doesn't compare to the west side hwy. And it'd be really nice if the roof was accessible to tenants too, especially around the 4th of July. i guess you get what you pay for

the flip side to that open space is... you have to walk across it all to get to the subway.

Anybody who doesn't live on 1st or 14th.... its not fun to talk that onto already long trips to elsewhere in manhattan.

I think they have a jitney or something which goes through the complex

nada, the avery floor plan was just the first one i found that was extremely close to ph41s 1070 sf. i agree it is overpriced. rental to rental, i have a good deal, but not not enormously so anymore, except that i also have ostensibly stability and a cap on increases. but it is still not easy to find a renovated real 2/2 for $3000. and as i don't mind the location, it's worth the savings. it was harder when our daughter was younger. then whenever we went out to dinner she, of course, went too. hard to make a 10 year old leave homework in the dead of winter to traipse down to the east village. now, not an issue.

rental vs. purchase? well, that's a different story.

swe, i don't mind the walk. some would hate it, but i walk almost two hours most days. i like it so it meets my needs, and it is indeed lovely certain seasons. i actually need the first avenue bus, so it works for me.

swe, i meant the post-vacancy RS rates. those can still be increased above $2000. the ruling doesn't affect the rents of the long-term RS tenants, except to the extent that the ll doesn't have quite the same impetus for getting them out.

AR,
thought about you first thing this AM when the story broke!
going to be interesting.
Hope all the dreams come true.

PCV and Sty Town have so much potential to be the premire gated community of Manhattan which is where I thought Tish was going. I did not know all the details but, I envisioned high walls and card swipeing gates. Ho-hum....back to the drawing board.

AR,
Thought about you all morn.
Hope all your dreams come true.

that sounded positively disneyesque falco! i don't know that i have any more dreams when it comes to housing in the near to medium-term. even long term. i may become a vagabond, renting here and there for three month periods. most likely i'll move to seattle. lovely homes available in seattle. no income tax (yet).

but at the right price if this went coop/condo i'd buy for the kid's sake. i doubt it will, however, and that makes me feel oddly relieved.

interesting. asking whether highly publicized large CRE defaults make it more socially acceptable to default on residential loans.

http://www.calculatedriskblog.com/2010/01/cre-and-moral-and-social-constraints-to.html

Hey Jimmy, I really liked your little ruse yesterday.

jimmy's posts are disappearing very quickly this evening. and after he named himself after my toilet and everything.

So now the hawks are circling, (Wilbur Ross/Lefrak) seem ready to bid on the property.

What would the tenants have to bid to beat outside investors. Why would the property be
worth more than $2B to an outside investor. Scary thing is Lefrak has a recent history
of overbidding for trophy properties and not caring, stating they are in it for the long term.
They could bid over $2B for the property even though monthly cash flow does not make that
seem viable.

What would the tenants have to bid to ensure a successful bid? $2.5B?

Would be a really dumb outcome if the tenants got to buy their apartments. Flies in the face of the court ruling, since this would turn out to be a one time lottery for a few lucky people.

In most cases the rolling back of rents to rent stab rates still equate to
rents of $2,300 for a one bedroom. The point of stuytown is middle class housing,
which is not happening at $2,300 for a one br, $3K for a two br.

True, but the majority of the people living there are still "traditionally" rent stabilized tenants, with very few of those tenants having regulated rent over 2k at this point. And the portion of traditionally stabilized tenats with rent over 2k AND income over 175k is probably very small. I think roughly 60-65% of the people living there are still traditionally rent stabilized.
On my floor there are 3 market rate tenants and 5 stabilized.

A-g, I agree your 60-65% statement.

I met someone recently that moved to the complex in 1990, his rent is $1,400. I think
even in his case it would make sense to buy at $2.5B, lets say $250K for the unit/$1,000
maintenance.

At this point I dont understand why a company would bid on the place, they cant
raise rents so whats the point? I guess it would only be a company like Lefrak who can
wait 10 years for any profits. Under rational conditions the only party the property should
be worth anything to is the tenants, thus I dont really trust anyone from the outside to
step in and take anything except a traditional mgmt roll.

The tenants bid in the past, why not bid again, but this time win. Set aside 20%-25% of the units
to continue to be rent stab, maybe the you would have to increase the purchase price.

I actually think tenants have a decent shot here by way of the Winner's Curse.

Given a valuation of $1.8B recently, which can be supported by rents with reasonable rates of increase, what's the most a lender will lend? The lenders have all been burned by too small an equity cushion over-and-over in recent memory, and they have very little capital to deploy since most of it is going to support the extend-and-pretend on the rest of their commercial portfolio. A lender wanting a 30% cushion at the $1.8B valuation would only lend $1.25B. Maybe they'll accept a higher valuation, maybe they'll accept a smaller equity margin, but I can't imagine Lefrak or someone else get into this without putting real equity on the line: e.g., half a billion. Thus, unlike TS & Co., their sensitivity to price is extremely high because it won't be a cheap call option, as it was the case for TS which only put $62.5M of their own money for a disproportionate share of the upside on a $5.4B purchase. Therefore, I cannot see them overpaying by half a billion.

The tenants, on the other hand, have heavy government subsidies on their side: they can borrow cheaply from Freddie/Fannie/taxpayer at 5%, put a next-to-nothing 3.5% down through FHA and get a free option, their lender (taxpayer) has lots of capital to lend, etc. They also have the silliness of owner-occupied home prices being higher then rented home prices to "support" the valuation.

Sure, Lefrak & others are professional, etc. But comparing an infinite-capital lender vs. constrained lenders, a 30% down payment vs. a 3.5% down payment, a 5% interest rate vs. a 7% interest rate, etc. gives the tenants a pretty strong edge. If they can organize, their ability to overpay may overcome the salient disadvantages.

Looks like any renter looking for Mana from heaven is out for a disappointment.

http://www.businessweek.com/news/2010-01-26/freddie-mac-said-to-consider-financing-stuytown-purchase.html

an. 26 (Bloomberg) -- Freddie Mac, the U.S.-backed mortgage buyer that is a creditor of Stuyvesant Town-Peter Cooper Village, would consider providing financing to an eventual buyer of the Manhattan apartment complex, according to a person familiar with the matter.

The 80-acre property, Manhattan’s largest apartment complex, should be sold to a reputable owner who would keep it affordable, according to the person, who asked not to be named because the discussions are private. Freddie Mac and Fannie Mae, the government-backed mortgage finance companies, are the two biggest creditors of Stuyvesant Town.

This does not suggest renters can buy their own apartments.

http://www.observer.com/2010/real-estate/big-winner-stuy-town-you

And then there's the City of New York, which has done quite well for itself off the soured deal, thank you very much.

In all, the complexes' owners have poured more than $300 million into city coffers, thanks to taxes that were affected or triggered by the $5.4 billion sale in late 2006. (The city could use any cash it can get. Amid the recession, it faces a deficit of more than $4 billion for the next fiscal year.)

Most of that $300 million-plus never would have flowed forth without the sale. The transfer and mortgage taxes alone brought in $190 million, according to city records. From there, the inflated sale price sent the complexes' market value soaring 40 percent since 2006, which in turn brought in new property taxes: The total bill was more than $48 million this past year alone, according to property records, a number that will likely stay high for a few years more given the multiyear assessment method the city uses to collect property taxes.

And now that the owners have defaulted on their mortgage, there could be more riches to come.

Should the property be sold again to a new owner, as often occurs in a foreclosure, transfer and mortgage taxes would once again flow to the city. The amount of those taxes? Deutsche Bank analysts estimate it could top $100 million.

What would happen if the tenants own stuytown/pcv...would that mean the apartments become co-ops or continue to stay rentals at lower prices.

I think they have to stay rental.