Attorneys representing Tishman Speyer and residents of Manhattan’s behemoth Stuyvesant Town/Peter Cooper Village apartment complex reached a partial settlement in ongoing legalities this week that will ultimately see the return of some 4,400 units at the mega-community back to rent stabilization. Under the terms of the settlement, which was approved Tuesday morning by New York State Supreme Court Justice Robert Lowe, market-rate residents who elected to be part of the class action suit against Tishman Speyer will pay either estimated stabilized rents or their current negotiated rent, whichever is less, in January and February 2010, while a special consultant determines the longer-term stabilized rental rates for the units.
The agreement moves Tishman Speyer even further away from realizing a return on the $5.4 billion it plopped down in a joint venture with BlackRock Realty to acquire the property in 2006 with the prospect of making value-added improvements and deregulating apartments that were vacant or turning between lessors. A tenants group challenged those efforts, arguing in part that units must remain under stabilization in as much as Tishman Speyer and BlackRock were still receiving J-51 tax abatements for the property. The New York State Court of Appeals agreed, ruling on Oct. 31 that rent-stabilized apartments at Stuy Town were illegally decontrolled.
This week’s settlement concerns the return of those units to rent stabilization, with a final deal regarding pricing on the units to be reached by June 2010. “Representatives of the property owner and counsel for the plaintiffs reached an interim agreement to adjust rents in each apartment affected by the recent Court of Appeals decision in Roberts v. Tishman Speyer Properties to an estimated rent-stabilized level for January and February 2010,” attorneys involved in the case said in a joint statement released Monday. “The rent adjustment will be reflected in the January invoices that will shortly be sent to residents. During the interim agreement, each affected tenant will also be afforded certain rights available under the Rent Stabilization Law, including the right of renewal and succession rights.”
Attorneys would not comment further on aspects of the settlement or the underlying legal dispute but noted that a more inclusive, six-month agreement covering a wider range of unresolved issues beyond those addressed in the interim agreement—which likely could include a resolution of the $215 million in overpaid rent damages claimed by residents—is currently being hammered out. The six-month agreement, which is intended to achieve an expedited resolution of the Roberts case, is contingent upon consent by CWCapital, the special servicer acting on behalf of the property’s senior lenders. CWCapital president Michael Berman did not respond to requests for comment.
While the return of StuyTown’s market-rate units to rent stabilization goes a long way toward resolving Tishman Speyer’s legal issues with tenants, it does little to help the company make payments on the complex’s titanic $3 billion secured mortgage now under CWCapital’s management. Rent reductions also impact the asset’s NOI and could chase off any interested purchasers of the property. Likewise, New York City politicians have pledged to hold any new owners accountable to the terms of the settlement in Roberts.
Lifelong StuyTown resident and New York City Councilman Dan Garodnick told the NY1 news channel that Tishman Speyer is running out of funds and that the council will insist any new owner reimburse residents for their grievances, echoing statements he made an outdoor rally at StuyTown last month. “The tenants of Stuyvesant Town and Peter Cooper Village will be protected, no matter what comes next,” Garodnick said. “Today, investors are paying the price for their bad decisions, but tenants should not be in a vulnerable position as a result. No matter what happens to this deal, we will insist on a plan that protects tenants’ interests. As we have shown before, we can shape billion-dollar deals and take control of our own destiny.”