The 75-year-old woman had lived in a rent-controlled apartment at Peter Cooper Village in Manhattan for 16 years. Then, earlier this year, she got a series of notices in the mail from her new landlord, New York City-based real estate owner, developer, and investor Tishman Speyer. The notices told her she was violating her rent-control agreement. Their contention—that Peter Cooper wasn't her primary residence because she was listed on the deed to a house her brother owned in Florida.
“I had to give them my driver's license, bank statements, income tax forms, voting records, car registration, auto insurance cards, money market statements, and annuity statements,” says the woman, who preferred not to be identified for fear of reprisal from her landlord. “Then I got a lawyer for $3,500.”
Eventually, she got a two-year lease renewal at the rent-controlled rates. She says many of her neighbors also wasted time and money flghting to keep their rent-controlled units. After hearing from several of these residents, City Council Member Dan Garodnick has taken up their cause, asking Tishman to suspend sending notices to renters until December 2008, to not pursue residents who successfully fought their change in status, and to reimburse the legal fees for those residents they pursued in error. So far, he says Tishman has agreed not to go after residents who have already been pursued.
“Tishman Speyer has been aggressively pursuing rent-stabilized tenants with a hope of turning their apartments to the market rate,” Garodnick says. “The problem is that perfectly legal and legitimate tenants are getting caught up in their dragnet.”
Tishman's attempts to raise rents in Peter Cooper and neighboring Stuyvesant Town isn't really surprising news. When the firm, along with New York City-based investment management firm BlackRock Realty, bought the 11,232-unit apartment communities in October 2006, speculation was that it would have to free up rent-controlled units to get substantial returns on the $5.4 billion it paid for both complexes. Since December 2006, it has refused to renew 870 of the 6,679 rent-controlled units in the complex, according to the New York Times. The company told the Times that 87 percent of the rent-stabilized units have been renewed without question.
Some of those who track the industry don't have an issue with Tishman, however. “They're going out of their way to do the right thing by their tenants,” says Dan Fasulo, managing director for Real Capital Analytics, a New York City-based company that tracks apartment transactions, adding that “improvements have been noticeable everywhere—spruced landscaping, retail, better security .”
But those updates, along with Tishman's efforts to convert rent-controlled units to market-rate ones—560 apartments in 2006 and 670 units in 2007, according to Commercial Mortgage Alert—have been costly. Commercial Mortgage Alert reports that Tishman's revenue for the two complexes fell from $113.1 million in 2006 to $108.3 million in 2007.
But Fasulo isn't alarmed by this revenue fall off. “I think Tishman always viewed this as a long-term play,” he says. “I don't think they ever imagined a magical upward rise in rents forever.”