Even as its proposed $22.2 billion acquisition of Denver-based REIT Archstone-Smith Trust inches toward reality, multifamily newcomer Tishman Speyer is feeling the heat. The company has found itself in the midst of resident turmoil at the 110-building Stuyvesant Town and Peter Cooper Village—a New York City complex that the company purchased from MetLife last year.
On May 30, ongoing resident concerns regarding rent-stabilized units at the project culminated in a gathering of some 7,000 protestors. The group surrounded the 110-acre project in a human chain and subsequently marched to nearby Union Square in an appeal for greater protection of tenant rights under New York's rent-stabilization laws.
At issue is an indeterminate number of nonrenewal letters sent to some of the 8,000 residents living in rent-stabilized apartments (the Associated Press puts the number in the hundreds; Tishman Speyer declined to provide a figure). The units in question are subject to a monthly rent below $2,000 and rent can only be raised to market rates if the resident moves out, attains an annual income threshold above $175,000 for two consecutive years, or does not use the unit as their primary resident for more than six months of the year. The letters issued to residents cited just such violations.
Real estate attorneys say the only way for a property owner to document and prove infractions is by searching public records or conducting private investigations—both fairly common and completely legal processes. Residents at Stuyvesant Town, however, counter that the effort is akin to a campaign of fear and espionage, and have hit the streets to gain support for their cause.
Still, experts on both sides of the issue say that Tishman Speyer is on firm ground legally, is acting appropriately and is in accordance with the city's rent-stabilization system. Unfortunately, the company has been pegged as the poster child for a practice that is standard operating procedure for property owners throughout the Big Apple.
“Why should the landlord get ripped off? It is in their best interest to maintain their units,” says Neil Garfinkel, partner in charge of real estate practices at New York City-based Abrams Garfinkel Margolis Bergson, and residential council to the Real Estate Board of New York. Although Garfinkel typically represents residents in rent stabilization disputes, he sympathizes with property owners simply trying to run a business. “They will pursue [nonrenewal] based on economics and income thresholds, and they absolutely have the right to do that. It makes sense, and in my experience, landlords across New York are commonly engaged in that practice.”
At stake for Tishman Speyer is thousands of dollars per unit per year if they allow infractions to continue, says Jeffery Woo, an attorney in the real estate litigation and counseling practice at San Francisco-based Sedgwick, Detert, Moran & Arnold. His firm has represented property owners in leasing and related landlord–tenant matters for over 20 years.
“It is a big deal,” says Woo, who raises an eyebrow at media reports of shadowy reconnaissance in the hallways at Stuyvesant Town. “Normally what investigators look at are public record searches for property ownership and homeowners exemptions. People assume that street-level tailing is the first thing we do, but it is not; it is the last thing we do. It is very expensive to do that type of investigation.”
Representatives for Tishman Speyer did not return requests for comment. When the acquisition of the properties was announced in October 2006, company president and CEO Jerry Speyer went to great lengths to characterize his firm as a steward of the property and a business with “deep roots” in New York City. “We are committed to working closely with residents, elected officials, and community leaders to help ensure a dynamic and vibrant future for this New York community,” Speyer said in the announcement. “The thousands of tenants in rent-stabilized apartments are completely protected by the existing system. No one should be concerned by a sudden or dramatic shift in this neighborhood's makeup, character, or charm.”
Apparently that won't include residents who might be breaking the law.