New York's Stuy Town Renters Try to Buy Their Buildings
The iconic, 110-building complex, which includes the two adjoining developments, went into foreclosure earlier this year. That was because real estate giant Tishman Speyer, along with BlackRock Realty and other investors, defaulted on debt they took on in 2006 from their controversial, $5.4 billion purchase of the buildings from Metropolitan Life.
Tishman's business plan for the complex was based on converting rent-controlled apartments into market-rate apartments. This raised the ire of many middle-class New Yorkers who saw Stuy Town, as it's known, as an oasis of affordability in a notoriously high rental market.
Now, the tenants association is hoping to purchase the complex. To do that, they need investors -- and they are asking CalPERS, the huge California employees pension system that bet against them as an investor in the 2006 purchase, to join forces.
Is this a historic case of a power to the people, or simply a marriage of convenience? And if successful, would this maneuver inspire others in ailing rental complexes around the country to take matters into their own hands?
CalPERS, which lost $500 million in the foreclosure, recently announced that it was wrong to invest in the original purchase; going forward, the fund said, it will only invest in real estate that protects tenants of rent-controlled apartments.
Daniel Garodnick, the New York City council member whose district includes the complex, said, "We appreciate their new policy, which is why we invited them to come back and talk to us about a tenant-sponsored plan."
In a letter to CalPERS Chief Executive Anne Stausboll, he wrote that the new investment "would send a message to the investment community that you are serious -- and it would help end the uncertainty about the future of our homes." CalPERS has not yet responded to the May 12 request.
The investors overestimated how quickly they would be able to turn rent-controlled apartments into market-rate apartments. And few expected the downturn in the real estate market. That combination did in the investors.
Garodnick, who is also a lifelong resident of the complex, said, "The business plan of the last few years [when Tishman owned the buildings] was premised on the idea that you could get rent-stabilized tenants out of their apartments at warp speed, and that's why it was so surprising that CalPERS had participated." After all, he said, "They represent the working people of California. It's a surprise that they would invest in a business plan that took direct aim at the working people of New York."
But now that CalPERS has had a change of heart, all is forgiven. Besides, the pension fund's new policy speaks to exactly what the tenants association is trying to accomplish by purchasing the complex. "Our goal is to convert the property into a home-ownership model, while allowing tenants to stay as renters if they wish," said Garodnick. "And, to insure the long-term stability of the community, and its accessability to the middle class."
The tenant association is hoping that this time around, with the help of potential investors like CalPERS, it will get the opportunity to finally oversee the iconic property; a chance it lost when it was outbid by Tishman in 2006. Said Garodnick: "We are looking to make something positive about what is a very unfortunate and difficult situation."
While not many apartment complexes are big enough to enlist the help of a financial giant such as CalPERS, Stuy Town's initiative might inspire other renters to come together in the name of controlling their own housing fate.