Blackstone Group LP is leading a deal to buy New York's Stuyvesant Town-Peter Cooper Village, a transaction that would put Manhattan's biggest apartment complex in the hands of the world's largest private equity firm and maintain some affordable housing at the property.
Blackstone, working with Canada's Ivanhoe Cambridge Inc., will acquire the 80-acre (32-hectare) enclave for about $ 5.3 billion, the company and city officials said Tuesday. That's just under the record $ 5.4 billion that prior owners Tishman Speyer and BlackRock Inc. paid almost nine years ago before walking away from the mortgage in 2010, marking one of the biggest collapses in the last decade's real estate boom.
The sale ends five years of uncertainty over ownership of the complex, home to about 30,000 residents and traditionally a housing haven for middle-class New Yorkers. The deal includes an agreement that would keep almost half of the more than 11,000 apartments affordable for 20 years. For Blackstone, it extends a push into owning rentals and makes it one of the largest residential landlords in Manhattan.
The transaction was formally announced at a press conference Tuesday featuring New York City Mayor Bill de Blasio, Blackstone real estate chief Jon Gray and City Councilman Daniel Garodnick, a lifelong resident of Stuyvesant Town-Peter Cooper Village.
"For generations, Stuyvesant Town has been a home to working and middle-class families," de Blasio said in a statement. "Working with Council Member Garodnick, the tenant association, Blackstone and Ivanhoe Cambridge, we will preserve this community's affordable housing for decades."
Apartment Demand
Stuyvesant Town-Peter Cooper Village, located between 14th and 23rd streets on Manhattan's east side, was built in the 1940s by MetLife Inc., with city assistance, to house World War II veterans. Tishman Speyer and BlackRock handed the property over to lenders after its value plunged in the financial crisis and tenants successfully sued to stop a dramatic increase in some rents. Since then, it has been under the control of CWCapital Asset Management, which represents bondholders.
Now, apartments have led the five-year recovery in U.S. commercial real estate values, while Manhattan rents have surged. Prices for multifamily buildings are 33 percent higher than they were at the previous peak in 2007, according to Moody's Investors Service and Real Capital Analytics Inc.
Stuyvesant Town is "so big, it's so well located, there's still so much upside in it that someone is still going to make a lot of money if you hang in there," said Peter Hauspurg, chief executive officer of brokerage Eastern Consolidated, who isn't involved in the deal.
Garodnick said that about 5,000 of the units will be preserved as “affordable” for 20 years, with a five-year phase-in of the rent increases. Another 1,400 units that have their rents regulated until 2020 will now be regulated until 2025.
"Unlike recent history, this deal does not demand the rapid turnover of rent-stabilized units," he said in a statement late Monday. "In contrast, it puts current and future tenants in a far better position than they are today."
Five hundred of the 5,000 units would be reserved for families making no more than $ 62,000 a year, with a monthly rent of about $ 1,500 for a two-bedroom apartment, Wiley Norvell, a spokesman for de Blasio, said late Monday. The other 4,500 units would be for families making as much as $ 128,000 a year, which would translate to about $ 3,200 a month. The 1,400 units that will gain another five years of rent protection will see annual increases of no more than 5 percent under the agreement, he said.
Blackstone Deals
Blackstone — which earlier this year led the biggest real estate transaction since the financial crisis, the $ 23 billion purchase of properties from General Electric Co. — made its first multifamily purchase in Manhattan in September, leading a venture that acquired 24 buildings for $ 690 million. Gray said this month that he was bullish on the borough's rentals because it's too costly for many residents to buy.
The Stuyvesant Town purchase will be made through Blackstone's first fund for core-plus real estate, said a person with knowledge of the matter, who asked not to be named because the details are private. The open-end fund can hold assets for decades, unlike the firm's traditional property funds, which have a finite life and typically require holdings to be sold and money returned to investors in seven to 10 years.
Blackstone has about $ 8.5 billion of core-plus assets under management, President Tony James said on Oct. 15. Such properties are typically high-quality buildings that require light renovation or leasing to boost returns.
The Stuyvesant Town transaction should be completed by the end of the year, Gray said at the press conference.
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