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Wednesday, June 20, 2012

Selling to Tenants/Brookfield Most Likely Outcome

A new report from JPMorgan Securties claims that selling Stuyvesant Town/Peter Cooper Village to tenants/Brookfield will be the most likely outcome in no less than a year's time and, according to Crain's: "offer the best returns to the holders of the troubled property's first mortgage."

The Crain's analysis continues: "The report said that a 2011 appraisal valued the property at $3 billion, but added that the figure seemed 'aggressive' if the complex were still to be run as a rental building where revenue would only increase substantially as units are deregulated. On the other hand, the report estimated that a partial condo conversion could bring in as much as $4.4 billion. Holders of the senior mortgage are owed $3 billion. Another $1.4 billion is owned to the holders of the mezzanine debt."

This is an obvious morale booster for the TA and Brookfield and will reinvigorate the tenant buyout idea at a time when hopes were lessening.  I still suspect that CWCapital will try auction the place and sell to the highest bidder.

Read more here: http://www.crainsnewyork.com/article/20120620/REAL_ESTATE/120629995

A similar but more detailed article online at Real Estate Weekly suggests that plaintiffs in the J51 case are going to get a bit of screwing, at least that's the way I read this:

In the report, it was also noted that plaintiffs in the J51 case have waived their claim for treble damages and that “the liability associated with rent overcharges is joint and several, meaning it would pass onto any eventual buyer.

“Furthermore since the Roberts plaintiffs have not been certified as a class, other current and former tenants could in principle sue the owners (again with joint and several a class, other current and former tenants could in principle sue the owners (again with joint and several liability), leading to further litigation and potentially greater liability. As a result, CWCapital has been quite clear in their commentary that this case must be resolved before the workout can move forward,” said the report.

43 comments:

Anonymous said...

The $4.4 billion estimate debunks much of what the "conversion guy" has been hawking for months--a cheap insider buy-in that leads to E-Z profits for tenants. This is a max cash grab by Brookfield and one has to wonder what the TA is thinking by jumping on board. Personally, I think it is a combination of stupidity and ambition.

Chris said...

Can you explain why this is a cash grab?

Anonymous said...

Where the hell does Morgan come off jumping into this highly contested situation? This just tells me one thing. The fix is in. It's been in for months.

Anonymous said...

The articles imply that Brookfield is good for the bondholders. I thought that the TA was supposed to be looking out for us.

Anonymous said...

One of the articles is by Sabina Mollot, who writes for T&V.

Anonymous said...

If, IF this ever happens, it will be years away. Too much of a cluster*(#k now.

Anonymous said...

7:42 - I'm down with that. Garodnick is thumping is chest already. What for???? The articles say that Brookfield is good for the bondholders. Isn't Garodnick supposed to be representing us? Oh no...sorry, I forgot. He's mostly representing himself.

Stuy Town Reporter said...

I'm sorry, I don't get it. If Brookfield is good for the bondholders, why does that automatically make the deal bad for tenants?

Anonymous said...

STR, I think the implication is that if Brookfield is good for the bondholders, then they're planning on paying up for the property. We also know that they will then mark it up and try to sell it to us. They are certainly not passing it through at cost!

Interesting that the TA just shot out the same Crains article that you put up hours earlier. By sending it out, they seem to be tacitly endorsing a $4.4 billion purchase price for the property by Brookfield. That would mean a higher price to the tenants in an offering. It would get us very close to what TS paid back in 2006.

What do they say about people that don't learn from history?!?

Stuy Town Reporter said...

Well, if they mark it up, how many tenants will be able to bite? It would seem to be a fail, unless there's something else at work.

Anonymous said...

We'll be right back where we started with TS. They're going to overpay for the place hoping to rip off the tenants. If it doesn't work, they'll be back to harassment and intimidation to get people out that don't want to buy. It's like groundhog day around here.

Anonymous said...

STR- Come on. The handwriting has been on the wall since Garodnick responded to the Guterman letter. If Brookfield wins, the prices will be high enough for them to get the percentage they want & a lot of people will be left out. Look what's happening now. FMRT Rents are getting raised to the point that people may have to move to make room for those who can afford the higher rents. The place is getting fixed up to the max to appeal to higher income folks. There will be a stiff flip tax so that Brookfield can sell without competition. Brookfield will hold the majority on the condo board and it will make up the condo bylaws. Guess what? More students coming if they think that will make a buck for them. More 3-4 rooming in an apartment. Keeping this place for the middle class??? Baloney!!! You're all getting sold a pig in a poke. And the TA is helping to sell it.

Anonymous said...

There's a lot of money to be made on the sale of this place over time using the approach Brookfield is taking. 2-4 Billion. Don't think that Brookfield doesn't have the ability to figure out the pocketbooks of the 40% who are paying market rates. Don't think that CW hasn't calculated the impact of charging the legal rents and getting people to move. These boys know how to play hardball. They will get the percentage of participation they want by dividing the community. And then when you see people forced to move and you see that you & a lot of the long timers here can't really afford to buy your apts, you'll think long and hard about the role that Dan Garodnick & the TA have played in all of this.

Anonymous said...

Pleae explain guys. What does 'good for bondholders' mean? and why is this a bad thing? thanks

Tommyboy said...

Until it happens, nothing happens. Your rights as a tenant will far exceed the rights as a owner. Patience will be golden in this situation.

Anonymous said...

Response to: "Good for bondholders"
means that the complex will be sold for top dollar, (possibly $4.4B) without using any sort of leverage as to incentiving rent stabilized tenants to buy/quickly moving units. This is bad for T's because a price of $4.4B means buying your apartment will be out of reach for most. Yes, TA sold Tenant up the river,(assuming a purchase price of $4.4B)

TAKESHOESOFFLADIES said...

I am also starting to think the proposed conversion will be at a high price for individual units. Of course Brookfield knows how to calculate top dollar. And condo would mean the problem of students remains. What's the flip tax and why?

Anonymous said...

Don't forget that if Brookfield pays $4.4 billion, they are going to try to sell the units at a higher price than that. They have to finance that purchase and they expect to make a profit on top of that. I would guess you can tack on AT LEAST 20% on top of that figure which brings you to a Tishman Speyer-like price of $5.3 billion to tenants (thanks, Al).

That works out to just under $500,000 per apartment with some more and some less.

Bargain?!?

Anonymous said...

Did anyone notice the TA held an election recently? (Actually, they had to hold it twice.) Don't worry if you didn't you aren't alone. There were a total of just under 3,000 votes cast. Not bad 3,000 out of 11,000 apartments, about 1/3 of tenants. But wait. Each person who voted voted for 4 candidates. Dividing 3,000 by 4 you get 750 voters. OK, 750 out of 11,000 apartments is about only 7% of tenants cared enough about the TA to vote. But wait many of the voters were married couples thus from the same apartment so to compare the 750 voters to apartments would be wrong. We must take the 750 voters and divide by the number of tenants, which is somewhere around 25,000/30,000 now that hey are stuffing people in here. So, 750/25,000 equals .03 or 3% of the tenants cared enough about the TA to vote in the election of board members. That means a whopping 97% of tenants think the TA is irrelevant. Very telling numbers!!!!

Stuy Town Reporter said...

There's no reason for transient tenants, ie students, to be interested in the TA. I'd love to know how many of these tenants we have.

Anonymous said...

Why are people working themselves up into a fever pitch based on no concrete information? Just because one estimate put the place at $4.4 doesn't mean that's what the TA is going to pay for it.

Anonymous said...

Exactly what We're saying all along. There is no reason (in this tight real estate environment) to think the property won't sell for 5 billion or more. None at all. EVEN with the litigation .......

Anonymous said...

Any deal CW would ever agree to would by definition have to be a good deal for bondholders. I don't understand why this is a bad thing. A deal can be good for bondholders and for tenants at the same time. As far as I'm concerned this means the TA is is in the game for buying the place, and I'd sure rather have people who live here in the running than some developer from the outside.

Anonymous said...

JP Morgan is hedging 4.4b in value in a specific scenario with variables. It is not the assessed value nor the value the Partnership would pay. The complex has been appraised for 3b.

Anonymous said...

"Why are people working themselves up into a fever pitch based on no concrete information? Just because one estimate put the place at $4.4 doesn't mean that's what the TA is going to pay for it."

Besides their $2B loss recently I consider JPM to be credible. Question for you, why would the complex sell for less than its worth?

With the bond market returning negative, real estate is competitive, investors are willing to take less of a return, hiking up the price.

"JP Morgan is hedging 4.4b in value in a specific scenario with variables. It is not the assessed value nor the value the Partnership would pay. The complex has been appraised for 3b."

JP Morgan is not in the deal, not sure why they made this report, can you explain?

4.4B was the number its valued at as a condo, 3B was the quoted figure of the value as a rental.

The key is what does the 4.4B number mean? Is it after all units are sold as a condo or to the purchaser who intends to convert to condos?

If its the latter then there is no bargain for these units.

Anonymous said...

Re: TA election, 11:56 a.m. I believe it's only one vote per apartment. And yes, anyone capable of picking up a flyer stuffed under the door was aware that there was an election. Anyone who was in the Oval on a couple of weekends could have met the candidates. And I'm pretty sure the election was mentioned here. Wake up, Rip Van Winkle!

Anonymous said...

"Why are people working themselves up into a fever pitch based on no concrete information? Just because one estimate put the place at $4.4 doesn't mean that's what the TA is going to pay for it."

Who is buying it? Is it the TA? I didn't know that.

Anonymous said...

"Any deal CW would ever agree to would by definition have to be a good deal for bondholders. I don't understand why this is a bad thing. A deal can be good for bondholders and for tenants at the same time."

First sentence is basically true. At least in principle. They have to try, after all.

The devil lies in your next two comments. A good deal for the bondoholders can certainly be a bad deal for the tenants. The bondohlders' basis is based on a purchase price that may or may not be reasonable. Making the bondholders whole, or close to whole, may mean a bad deal for tenants.

Look. If you're a renter with a below market rent, this will be a bad deal for you. If you are paying up for your place, you might be able to reduce your monthly nut. Of course, that doesn't mean you can get your investment back in the end.

A good deal for bondholders likely means a less favorable deal for tenants and for prospective buyers. It's 4th grade math.

Anonymous said...

After all these months, I can believe the questions being asked. Trolling or what? Good for the bondholders = the bondholders get more money (menas tenants have to pay more to buy). Flip Tax - an extra tax that is levied via the board (condo or co-op) when you sell your apt. So you paid $550K, you sold for $750K. Your profit is $200K but you have to pay the flip tax. In the early years maybe this is 50% of your profit. The flip tax money will go into a fund for operation or improvement of the property. Brookfield has said it will employ a flip tax. Guterman said no flip tax.

Anonymous said...

Don't professional writers proofread their work anymore? Sabena's article was filled with grammatical errors.

Anonymous said...

You're right, the TA is irrelevant and we should start listening to anonymous guy at 11.56 am, he's got this all figured out...

Anonymous said...

"Guterman said no flip tax."

Has anyone heard anything from Guterman in months? Shoot, no one has heard anything from Brookfield, either.

Remember, the bid was coming in April...

Anonymous said...

"Don't professional writers proofread their work anymore? Sabena's article was filled with grammatical errors."

How long have you been reading T&V?

Anonymous said...

Forget the spelling & grammar. There are no more professional reporters in the truest sense. They all live for just one thing. To write a book & clean up. That means they need cooperation from sources. So they try to offend nobody. And they get on-board with all the trends to keep themselves 'safe'.

Anonymous said...

Dear 5:09 p.m.: Didn't you proofread your comment? Ms. Mollot spells her first name Sabina. She's not the defunct Belgian airline.

Anonymous said...

I hope this new go-round doesn't mean even more intimidation and harasment of the older rent stabilized tenants who may not have either the desire or the wherewithal to buy into this place if it goes condo/co-op whatever. I am really sick of the way my life has been negatively affected since they started putting students into every unit that is over, under or next door to an older RS tenant (when there is availability, of course). I feel it is a deliberate, calculated move on management's part when this happens. I am driven crazy by party animals downstairs from me and to the side of me. Maybe we older RS tenants should form our own TA to fight this harassment. The traditional TA sure as hell doesn't care. They can all go to hell as far as I'm concerned. I stopped paying my dues as soon as I realized what a bunch of Benedict Arnold Shysters they had become.

Stuy Town Reporter said...

The correct spelling is Sabina Mollot.

BTW, here's an interesting article about T&V from 2007:

http://observer.com/2007/02/stuy-town-paper-to-landlordreadi-thisi/

Anonymous said...

Why are people working themselves up into a fever pitch based on no concrete information?

You must be new to STR.

Anonymous said...

"For longtime residents, the future has seemed frighteningly murky ever since the disappearance of plaques once posted in the common areas, which spoke of the complex’s original aim: to provide a place where “families of moderate means might live in health, comfort and dignity in park-like communities.”

“When the complex went to free-market, the plaques were taken out by MetLife,” Ms. Mollot said. “People are always asking me, ‘Why did they rip out those plaques?’ So I’m always asking, ‘People wanna know: Why did you rip out the plaques?’ No comment, no comment, no comment.”

What more needs to be said. Eh, STR?

Anonymous said...

"I am driven crazy by party animals downstairs from me and to the side of me."

Where have I heard this before? Oh, yeah...

"Clowns to the left of me,
Jokers to the right, here I am,
Stuck in the middle with you"

More true than ever before.

Stuy Town Reporter said...

>>“When the complex went to free-market, the plaques were taken out by MetLife,” Ms. Mollot said. “People are always asking me, ‘Why did they rip out those plaques?’ So I’m always asking, ‘People wanna know: Why did you rip out the plaques?’ No comment, no comment, no comment.”

What more needs to be said. Eh, STR?<<

It says it all, for sure. That was my favorite part of the article. On this blog's main page sidebar, I have a little tribute to that plaque. Love to know where it is. (Probably melted down, at profit, for scrap metal.) Wasn't our congresswoman Carolyn Maloney supposed to find out years ago?

Anonymous said...

I know. That's why I posted it! I grew up in a building next to it. It has been replaced by a barren triangle of dirt. When it rains, it becomes a big mosquito pool. Quite a tribute.

FYI, a judge just sentenced the guy who punched that lady on 14th street over a parking space to 1 year in jail. Apparently, that was the max he could give. Amazing.

Anonymous said...

you have to love the ny court system. one year? sheesh and wtf?

has anyone moved in recently? trying to convince my bf to move into a one or two br. she's being told there are very few available. anyone?

fwiw, she's quiet and decent and respectful. lol