Do You Know "Irrational Exuberance?"

110-Building Site in N.Y. Is Sold to Speyer



By CHARLES V. BAGLI
Published: October 17, 2006

Jerry Speyer, a real estate investor who controls some of the some of the city’s most prominent icons, like Rockefeller Center and the Chrysler Building, signed a deal today to buy 110 apartment buildings along the East River in Manhattan for $5.4 billion.
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Bill Cunningham/The New York Times

Jerry Speyer and his wife Kathareine Farley at the opening of Zankel Hall at Carnegie Hall on Sept. 10, 2003.

Mr. Speyer, the chairman of Tishman Speyer Properties, is buying a trophy of a different kind in Stuyvesant Town and Peter Cooper Village, two adjoining complexes on First Avenue between 14th and 23rd streets. Built by Metropolitan Life in 1947 for returning veterans, Stuyvesant Town and Peter Cooper Village have served as an affordable redoubt for generations of police officers, teachers, nurses and the like. The unremarkable brick buildings are set among trees and fountains on 80 acres of some of the most valuable land in the country.

Mr. Speyer and his partner, the Blackrock investment bank, outmaneuvered nearly a dozen other bidders, including a group aligned with the tenants at the complexes who hoped to preserve them as relatively affordable middle-class housing, a rapidly disappearing commodity in Manhattan. As housing costs have skyrocketed in the city in recent years, the pending sale of the complexes and the larger issue of affordable housing became a cause célèbre among New York politicians and tenant activists.

But Mayor Michael R. Bloomberg stayed on the sidelines, and MetLife was intent on selling for the highest possible price. The tenant group’s offer of $4.5 billion lagged behind bids from some of the biggest names in real estate, including Apollo Real Estate Advisors with the Dermot Company, Related Companies with Lehman Brothers, the Millstein brothers, and Vornado Realty Trust.

Robert Merck, head of real estate investments for MetLife, said the sale would be completed before the end of the year.

“Peter Cooper Village/Stuyvesant Town is an extraordinary asset and we are very pleased with the market reaction we received to this sale,” he said in a statement. “This property has been a prominent asset in MetLife’s real estate portfolio for nearly six decades.”

Tishman Speyer called tenant leaders to let them know that a deal was done and to say that residents of rent-stabilized apartments are completely protected by the existing system.

“No one should be concerned about a sudden or dramatic shift in this neighborhood’s make-up, character or charm,” Mr. Speyer, the president and chief executive of Tishman Speyer, said in a statement.

“As a business with deep roots in New York City, we have a sincere appreciation for these cherished neighborhoods, and we are honored to become stewards of the property,” he said.

Daniel R. Garodnick, a city councilman who lives in Peter Cooper Village and helped organize the tenant offer, expressed disappointment in the outcome. Nearly three quarters of the 11,232 apartments have regulated rents that are roughly half the market rents and tenants fear that a new owner will bring sweeping changes.

“We want to know how the new owner intends to preserve the long-term affordability of Stuyvesant Town and Peter Cooper Village,” Mr. Garodnick said. “We expect a new owner to not only to honor his obligations under the law, but to come up with a plan that preserves the long-term affordability of this middle-class community.”

Most of the 12,232 apartments in the complexes are now subject to rent regulation. When MetLife announced earlier this year that it was putting the two complexes up for sale, it bridled at suggestions that the company had any continuing obligation to provide below-market housing. Real estate companies leaped at the prospect.

Company executives have suggested to city officials and reporters that many of the 25,000 residents of Peter Cooper Village and Stuyvesant Town made too much money to qualify for any kind of assistance.

In recent years, MetLife has ousted illegal sublettors and tenants whose apartments were not their primary residences. Under city regulations, an apartment can cease to be rent-controlled or rent-stabilized when it becomes vacant, or when the rent reaches $2,000 a month and the existing tenant’s household income rises above $175,000 for two successive years. As a result, about 27 percent of the apartments in the complexes are now leased at market rates. An additional 1,600 units will be freed of rent regulation over the next two years, according to sale documents.

But tenant advocates have said that the city cannot afford to lose its middle class, which is coming under increasing pressure from high prices and rents, especially in Manhattan.