As 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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