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NYC Taxpayers Big Winner in Stuy Town Debacle

By
Real Estate Agent

Stuyvesant Town Apartment complexAs many of you have read in the media the largest property purchase in US history went into default. The group led by Tishman Speyers that purchased the 110 buildings and 11,000 apartments that make up Manhattan's Stuyvesant Town and Peter Cooper Village will be turned over to creditors who financed the $5.4 billion deal in 2006. The property is now estimated to be worth $1.8 billion.

The plan was to aggressively convert thousands of rent-regulated apartments occupied by middle-class families into luxury units that would rent or sell for top dollar. 

The strategy failed as NYC's housing market cooled. Even in the hottest market turning a 70 year old brick housing project complex from affordable middle class housing into high-end luxury rentals fetching high rents was a big stretch.

Met Life built the apartment complex in 1940 for WWII veterans and for decades due to tax breaks and incentives maintained affordable rents.

Just look at the picture. I have friends and relatives that grew up in Stuyvesant Town. While they are nice spacious apartments, all the renovations and up scale marketing in the world, IMHO could never turn Stuy Town into Trump Place. Manhattan already has many luxury rentals including several brand new construction luxury buildings.

So while two California State Employee Pension Funds, the Florida state pension fund and the Church of England lost their shirt (hundreds of millions of dollars) speculating in NYC real estate, The taxpayers of NYC made out quite well.

NYC collected taxes of more than $300 million because of the $5.4 billion deal. The city collects transfer taxes every time a property is transferred. The inflated sale price and inflated market value brought in property taxes of about 48 million per year. NYC uses a multiyear assesment so they will remain high for a few years.

Most likely the property will be sold to a new owner. Lefrak is interested in the property. So NYC will get those transfer taxes once again perhaps another $100 million. Hopefully the 25,000 tenants will still have affordable apartments.

We can use the money. Thanks speculators!

 

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Hugh Krone
Weichert Referral Associates - Hamburg, NJ
Realtor, Sussex County NJ

That is good news

Jan 27, 2010 11:50 AM
Mitchell J Hall
Manhattan, NY
Lic Associate RE Broker - Manhattan & Brooklyn

Thanks Hugh, At least the city benefitted from this scheme.

Jan 27, 2010 01:49 PM
Steve Shatsky
Dallas, TX

Hi Mitchell... It's nice to see someone benefit from this plan gone bad... even if it is only the city!  And from the way it looks this could be the gift that keeps on giving!

Jan 27, 2010 02:47 PM
Terry Haugen STAGE it RIGHT! 321-956-2495
Stage it Right! - Melbourne, FL

Mitchell, for once a happy story about speculators!  Usually they jump in and drive up prices, and make housing unaffordable to many.  Great post, featured in BP!

Jan 27, 2010 11:50 PM
Mitchell J Hall
Manhattan, NY
Lic Associate RE Broker - Manhattan & Brooklyn

Steve, Hopefully the city will be able to balance it's budget

Terry, Thanks for the feature. I hope it works out for the tenants.

Jan 28, 2010 01:52 AM
Hannah Williams
HomeStarr Realty - Philadelphia, PA
Expertise NE Philadelphia & Bucks 215-820-3376

Mitchell..what an interesting story..and a terrific post!  Thank you for keeping us in the News

HelpfulHannah

Jan 28, 2010 05:31 AM
Patricia Kennedy
RLAH@properties - Washington, DC
Home in the Capital

Mitch, a friend of mine's dad lived there and they tried to work something out to help him buy the place.  They were stunned at the numbers and gave up.  Oh, well.

Jan 28, 2010 05:39 AM
Paul Warkow
Paul Warkow-D.G. Weber Law Associates - Hauppauge, NY

I did not realize the Church of England was involved.  I thought gambling was frowned upon.  In addition, isn't the church supposed to help the people, not kick them into the street.  I guess they received devine retribution.

Jan 28, 2010 09:06 AM
Mitchell J Hall
Manhattan, NY
Lic Associate RE Broker - Manhattan & Brooklyn

Hannah, Thank you

Pat, The tenants actually bid $4.5 billion but $5.4 billion from Tishman Speyers, Black Rock and investors such as pension funds and The church of England was a better bid.

Paul, Great point. Devine retribution. lol

Jan 28, 2010 09:50 AM
Ron Brown NMLS #270845
NMLS ID: 40831 - Federal Way, WA

While the NYC, and the Stuy residents are in a better position, and can be seen as the winners here, let's not forget who is truly footing the bill.  The investment bank is walking away from this virtually unharmed, like the high roller in Vegas who loses the equivalent of a years wages for the average Joe.  The only folks who are real losers here are those who believed they could retire with an honest pension.  They are the ones who are really paying for the win.

Jan 29, 2010 04:59 AM
Mitchell J Hall
Manhattan, NY
Lic Associate RE Broker - Manhattan & Brooklyn

Ron, I agree. I think it is horrible that a pension fund from middle class workers would take such a risk and speculate with the employees pension money. I think state pension funds would be better off investing in municipal bonds. They might not make a killing but it would be a conservative investment that could also help their state.

Jan 29, 2010 05:22 AM
Will Nesbitt
Nesbitt Realty at Condo Alexandria - Alexandria, VA
Nesbitt Realty is a family-run brokerage.

Ron is on the money again.  Thanks for posting Mitchell.

Jan 29, 2010 11:41 PM
Jennifer Fivelsdal
JFIVE Home Realty LLC | 845-758-6842|162 Deer Run Rd Red Hook NY 12571 - Rhinebeck, NY
Mid Hudson Valley real estate connection

Mitchel sounds like a good deal for the City of NY, just keep transfering the deed and the cash will come in :)

Jan 31, 2010 02:33 PM