A settlement over rental rates at Stuyvesant Town-Peter Cooper Village removes a major hurdle to a sale of Manhattan's largest apartment complex, almost three years after the property's previous owners ceded it to lenders.
"The importance of this evening's announcement should not be diminished," Harris Trifon, a credit analyst with Deutsche Bank in New York, wrote in a note after the law firm for the plaintiffs announced the deal on Monday.
"It has removed the last significant obstacle which needed to be cleared before a sale could take place."
The ownership of the 32-hectare complex has been in limbo since early 2010, when Tishman Speyer Properties and BlackRock Realty defaulted on their debt, in part because a legal challenge from tenants prevented them from raising rents as much as they anticipated. By removing the overhang of litigation, future cash flow can be more easily determined to establish a value for the property.
The settlement calls for CWCapital Asset Management, which controls the entity that now owns Stuyvesant Town, to set aside US$68.75 million to reimburse tenants and former tenants at the rent-stabilised property who had been overcharged since 2003.
MetLife, which sold the complex to Tishman Speyer and BlackRock in 2006, will contribute US$10.5 million of that sum.
CWCapital also agreed to forgo additional rent that could have legally been charged over the past three years, a sum that plaintiffs estimate at US$75.7 million.
The deal, which covered 4,300 apartments, also established what CW and any eventual owner can charge for the units between now and June 2020, when they may revert to market-rate rents.
The cash paid to each of the some 21,000 tenants covered in the lawsuit will amount to about US$3,200, according to the plaintiff's lawyers.
CWCapital represents investors in the defaulted US$3 billion senior loan on the complex, which spans from 14th Street to 23rd Street on Manhattan's East Side. As the so-called special servicer, it is advancing interest payments on the loan to investors as it manages the property, according to data that was compiled by Bloomberg.
Tishman Speyer and BlackRock paid US$5.4 billion for Stuyvesant Town, a record New York commercial real-estate deal at the time.
Tenants sued MetLife and Tishman Speyer in 2007, claiming the companies improperly forced at least one-fourth of the complex's residents to pay market rents while the owners received more than US$25 million in tax breaks.