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Monday, June 2, 2014

Memorandum from Guterman Copied to Firm Representing the Tenants Association



Guterman Partners LLC
M E M O R A N D U M


To:  Daniel Alpert, Jon Messersmith
        Guterman-Westwood Partners LLC

Copy:  Meredith Kane, Paul Weiss et al, 
             William Derrough, Moelis & Co

From:  Gerald Guterman
             Guterman Partners LLC

Date:  September 28, 2011 to October 31, 2011

Re:  Stuyvesant Town – Peter Cooper Village


As we discussed earlier in the week, the article in the New York Post on the trashing of Stuyvesant Town - Peter Cooper Village (“STPCV”) confirms our company’s conclusions (as a prospective purchaser of STPCV) concerning the physical maintenance of the project, as well as management’s current and ongoing rental policies. Our conclusions are the result of direct and personal on-site inspections and visits to the rental office, including interactions with rental agents at STPCV.

In short, we believe that Fortress Investment Group ("Fortress") through its subsidiary CWCapital Asset Management ("CW") and thereafter Rose Associates ("Rose") its property management agent, is managing the project to maximize the vacancy available to a subsequent acquirer and to spin up rent levels on vacant renovated apartments to market levels as quickly as possible following the “re-stabilization” of the previously deregulated units as a result of the Roberts v. Tishman Speyer Properties L.P. decision  It appears that they are aggressively screening for short term tenancies – with a focus on the multi-occupant student population that tend to take one year leases for apartments that Rose is evidently subdividing with additional partitions, to increase the number of occupants (as it is easier to maximize gross with multiple occupants sharing in higher rents). Management appears to be actively discouraging other leasing.

While it is in Fortress/CW’s and, as a potential purchaser, our own interest to have the project come closest to the 10% maximum vacancy at the point of a conversion to condominium or cooperaive, there are legitimate concerns that the leasing practices at the project are  discriminatory and, as the Post article points out, are disturbing the community and upsetting tenants who we hope will ultimately become buyers of the apartments after we undertake our acquisition and condo/co-op conversion plans.  Furthermore, there is the question of whether or not Fortress/CW is instructing Rose to "park” apartments with student tenants, in a way that might be deemed by the Attorney General’s office to go beyond the spirit of the regulations governing maximum vacancy, or that the aggressive spinning of turnovers – and the multi-occupant issue as a way of pumping the rent roll – might be successfully challenged, as was Tishman-Speyer’s illegal destabilization activity, and further taint the project.

Our Investigation

I was curious as to whether the information I was hearing from my people and others was in fact the case, so I went down to the property leasing office myself.  Appearing as a prospective tenant who is quite obviously not a student, I attempted to rent an apartment in a normal and usual manner. This is an action I undertake for all properties in which we have a sincere acquisition interest.

It should be noted here, that this summary is not about age specific discrimination. My experience in the rental office is included as background only, to illustrate a personal view of one portion of this demographic change as it is currently taking place.  

I was dressed in slacks and a golf shirt and went directly to the rental office as an applicant. I had not made any advanced appointments and did not personally know any of the rental agents in the office. The rental agents told me that an advanced appointment must be made. I was told to call in approximately two weeks and make an appointment with any rental agent who answers the phone.

There were approximately six to eight rental agents in the office at the time of my visit. There were about two dozen people who appeared to prospective tenants. The average age of the prospective tenants appeared to be about eighteen to twenty-four years old. There appeared to be about three or four individuals together for each apartment and I over-heard the mention of a referral from the NYU student housing center, as a topic of conversation.

From our ongoing physical inspections of the property (by onsite tours), as well as my experiences with the rental agents at the onsite rental office, we are convinced that the concerns we laid out herein are legitimate and we should pay attention to what is going on.  

Condition of Apartments and Project

I am also particularly concerned that the assumptions we have made with regard to the condition of the renovated apartments (in terms of the ultimate sales value thereof), may prove challenged by the high-turnover, student tenancies that Rose (as management and rental agent) is pursuing.

On a broader level, it is also troubling that CW has adopted a plan (in conjunction with Rose) to convert STPCV from the middle income, stabilized, residential community we find attractive from an acquisition and conversion standpoint, to student/dormitory style housing offering one (and, I imagine a smattering of two) year leases to groups of individuals joining together to rent a single apartment. 

The lease terms would, of course, correspond to a single school year or maybe two school years with an individual student free to either rent or sublease their portion (a bedroom, or maybe even a couch or two) of the total apartment, in order to cover ever changing personal and individual plans.

We understand that CW entered into this leasing plan with the intent to continue it over and indeterminate term.  It is clearly driving up rental rates (potentially defeating the spirit of the rent stabilization laws) because of (i) the substantial vacancy allowances as well as additional equalization allowances, which additional allowances are authorized based on each vacant apartment's previous occupancy by a rent stabilized tenant who lived in the apartment for at least eight continuous (8) years. 

A major result of the current leasing practices is to directly remove the renovated STPCV apartments from protection (from unreasonable increases) under the rent stabilization laws, thereby eliminating the middle income family profile of the community by negatively impacting the intentions of rent stabilization and protections of New York City residents.

Possibility of Self Dealing

I think we also ought to be concerned here that the activity is part of a sub rosa plan on the part of CW’s parent – Fortress Investment Group – to purchase STPCV at a lower market value for the total property, based on its rental value without credit for the  potential up-side value to a condo/coop conversion.   I admit this last portion may sound “over reaching,” but we believe that their current policies and actions demonstrate that they are setting the stage to buy the property based on nearly fully leased conditions with rents at the top of the comparable market (other than those apartments that are held at lower rents through entrenched stabilization) and fairly controllable vacancies Thereafter, they may just be able to argue that they are paying a fair price.

Of course, in an auction situation (with us bidding) the foregoing would be difficult (but then again, they are showing no signs of actually intending to run an auction any time soon).  The current market value (with the condo/coop conversion potential), is still approximately $3 billion, in our opinion.

We need to monitor this situation carefully and I am having counsel work with HPD and the AG’s office to inquire as to whether any of CW’s acts might gum up the works as and when CW proceeds with the ultimate liquidation of the property on behalf of the existing senior mortgage holders.

Building Plans

I believe additional comments are necessary to further clarify my original notes dated prior to September 28, 2011 and concerning the physical dangers and other consequences of the conversion of STPCV from a middle income, stabilized, residential community with a defined average population, to student/dormitory style housing with a significant increase in the physical number of people occupying the same amount of original limited space.

Our team reviewed the current work (building) plans as submitted to the building department of New York City by CW/Rose.

 We estimate that the increase in new STPCV resident population within the same original space, (thereby decreasing fire safety, maintenance, management and sanitation services) will be at least fifty  (50%) percent over the current STPCV resident population, to as much as a two hundred fifty (250%) percent over the current STPCV resident population.

The population increase depends on the individual apartment layout and the number and position of the new room partitions installed or currently being installed by CW/Rose. An example is a recent advertisement on Craig's List....
"We are 2 early 20's females and we found a great apt in East Village (Stuy Town- near 14th and 1st). The apt is a 3 bedroom flex with a living room also. ...
newyork.craigslist.org/mnh/roo/2641099547.html "

Another way at looking at this increase in resident population, is that for every one hundred (100) apartments partitioned and leased as student/dormitory housing, the physical occupancy (in the same original space) at STPCV will increase by at least two hundred (200) additional tenant residents, to as many as five hundred (500) additional tenant residents.

To expand the reality of what is happening, for every five hundred (500) apartments partitioned and leased (Fortress/CW and Rose have already renovated and leased approximately five hundred apartments) as student dormitory housing, the physical occupancy of the additional tenant residents in the same original space, will increase by at least one thousand (1,000) additional tenant residents to as many as fifteen hundred (2,500) additional tenant residents.

Fortress/CW and Rose have made a clear statement in their (building) work permit, or in the alternative, have allowed the following statement to appear in their (building) work permit; NO CHANGE IN USE, EGRESS OR OCCUPANCY.

At best this statement is not true. At worst, the statement is deliberately false with the specific intent to mislead the Building Department and the City of New York.  

We are convinced that by allowing such statement to be prominently inserted into the (building) work permit, Fortress/CW and Rose understand that the building department does not fully recognize the drastic increase in residential tenant population or the serious potential dangers that accompany such population increases in an original, small physical space.

If Fortress/CW and Rose are allowed to continue this active partition of the original apartment as many as seven thousand five hundred (7,500) additional residential tenants will be added over the current residential tenant occupancy, without any without any increases to the physical space of the housing or the upgrades and modifications to fire protections as well as egress from the buildings, or additional and required maintenance, management and sanitation services.  

While the increased residential tenant population will occupy the same original space as currently exists this increase in population without adequate increases (in STPCV as well as in the general area of the community) in fire, police, maintenance, management and sanitation services  will place an unusually heavy burden on community services due to the increased physical danger as well as a substantially lower quality of life to the average family in the STPCV community.

In addition to our very substantial concern about the physical welfare of the STPCV residents and surrounding community, those elements that relate to "quality of life" will face serious downgrading for all of the families in the community.  The results of such deliberate and drastic "over population" has already started with the first few hundred apartments in which the partitions have been installed or are planned to be installed. 

Lastly and worthy of note are the projected costs to reconvert the property from student/dormitory style housing back to a middle income, stabilized, residential community with a well defined, average population. This process of re-stabilizing the STPCV community, will require a long number of years and a highly significant capital investment.

For clarity concerning the building permit and the intentions of Fortress/CW and Rose, I have attached an actual signed copy (as filed and accepted by the Building Department on September 16, 2011).

-----------------

STR here: I myself have questioned for years how adding partitions to an apartment does NOT change "use, egress or occupancy." This is something the TA should have fought ever since it started. I'm not aware if the TA ever challenged these type of work permits.  If not, why not?

Below is the signed copy referenced in Guterman's memorandum (click to make larger):

24 comments:

Anonymous said...

I take it that Mr Guterman sent this memo to you (STR) for publication. Is that correct?
I don't care about any upcoming disparaging remarks calling this memo self serving. All of this is self-serving. We're all hoping to gain if not to be injured by what's to come.
But I do think that it's good to see others outside our community talking about CW's underhanded tactics of turning this place into a student dormitory. This has been the linchpin of CW's strategy in which NYU has been an accomplice, and I neither understand nor condone the laziness and irresponsibility of the press not telling (nay, blasting) the story of what's been going on down here. With any luck the publication of this memo will help get the press of their lazy butts and start informing the city the high-handedness going on here.

Anonymous said...

BTW at TA facebook page they're back to complaining about light bulbs and washing machines.

Stuy Town Reporter said...

>>I take it that Mr Guterman sent this memo to you (STR) for publication. Is that correct?<<

Yes.

Anonymous said...

And John Marsh had the nerve to call it only "floor plans"

"floor plans" !?

The thousands of student apartments with partitions wreak havoc physically and financially on the property and people in this community.

No John Marsh, it is not merely "floor plans"

It is a scheme to fraud the system and rob us of our homes.

Stuy Town Reporter said...

I also thought this prophecy was of interest:

"I think we also ought to be concerned here that the activity is part of a sub rosa plan on the part of CW’s parent – Fortress Investment Group – to purchase STPCV...."

Anonymous said...

The City Council has long known and turned a blind eye to the NYU dorms, the DOB falsified permits, the problems caused to the infrastructure and the quality of life here. The list of names of those on the City Council who have known and been involved in this need to be revealed. Let's hope a good reporter reveals their names in an expose soon!

Anonymous said...

We need the Attorney General - I wonder what came of Guterman's work with the AG office.

And thank you to those comments who again brought light to the massive amount of illegal NYU apartments a few blogs ago.

Anonymous said...

At the risk of having that juvenile person who is always accusing everyone of living in a cave or under a rock - I must ask what the deal is with the light bulbs? Did I miss something when I as out of town? Why are people talking about light bulbs and why is CW charging people for light bulbs? doesn't everyone go to bed bath and beyond and get bargain multi packs of energy efficient bulbs? What am I missing?

Stuy Town Reporter said...

Light bulb replacement in the kitchen was replaced for free by management. That appears to have changed this last month or so. Not sure about the light bulb in the bathroom. I think initially the new energy efficient twirly bulbs were being replaced for free. Otherwise, tenants would replace the regular bulbs in lamps and wall fixtures themselves.

Anonymous said...

Again with the light bulbs!!!

Anonymous said...

So this is strange because it means the DOB was in on the false statements on the partition permits. Just prior by a few months to the partition construction in every building is a permit for plumbing work in each building's cellar. So it seems they did the least they had to knowing the strain the increase population would have on the pipes. Which means some at the DOB allowed CW Rose to falsify the permits for partition construction saying no change in use etc.... Probably the same few at DOB that Garodnick and TA used to suppress opposition to the office construction this past winter. I am not saying all at DOB are corrupt - but certainly seems a few are because there are a lot of permits with wrong and misleading information on them at DOB.

Stuy Town Reporter said...

I think, but am not certain, that the DOB just takes the word of the person/company doing the construction regarding occupancy.

Anonymous said...

Sorry 9:52 that was my fault. I was asking why it was even a topic of discussion.

Seems another way the TA tries to keep quiet what is really going on in PCVST by focusing on bikinis, light bulbs, and bad dog owners instead of the bigger matters that need tackling.

The TA tries to make the big matters look small (office construction) and the small matters look big (bikinis).

Usually I ignore them and will go back to doing that.

Anonymous said...

"Probably the same few at DOB that Garodnick and TA used to suppress opposition to the office construction this past winter"

And your proof for this? The DOB does not need any help from the TA or Garodnick to rubber stamp any RE industry shenanigans

Anonymous said...

We're not talking just "light bulbs" here. We're talking fluorescent tubes that are up on the kitchen ceilings. These are very difficult (in some cases impossible) for tenants to change themselves. Seniors, especially, need to have someone come in and change the bulb when it dies. These are also the people who can least afford to pay $33 for the service that was always free.

Anonymous said...

"I think, but am not certain, that the DOB just takes the word of the person/company doing the construction regarding occupancy."

I suspect that money changed hands - under the table, of course.

Anonymous said...

Of course the DOB knows exactly what's been going on. How could they not?

There was a legal challenge filed by the TA years ago when kids first started putting up temporary walls in ST apartments. The response by the city was not to ban them because of overcrowding and all that comes from that, the DOB and FDNY just came up with a weird new configuration for the temporary walls.

Then there are stories the NY Times put out about these temp walls because they were and still are going up in overcrowded apartments all over the city thanks to to insanely high rents. Google "temporary walls NYC apartments" and you'll see how many pages of companies are out there installing them.

Anonymous said...

Who are all the people who put together the NYU scheme from the financial design to the carefully crafted construction permits?

What was Paul Walsh's role in it? What about Tom Feeney's role - his name is on the DOB permits with the false and deliberately misleading information?

Compass Rock bios:

PCVST New York

Paul Walsh – Vice President, Accounting

Paul Walsh serves as Vice President, Accounting overseeing the Accounting department at Peter Cooper Village / Stuyvesant Town. Mr. Walsh brings 15 years of experience in real estate accounting and finance including over 6 years in multi-family real estate based in New York City.


Prior to joining Peter Cooper Village / Stuyvesant Town, Mr. Walsh previously worked in muli-family as Controller of Vantage Properties where he was responsible for the accounting for over 4,000 units, Reliant Realty Services where he handled 30 properties having almost 6,000 units and Northbrook Partners where he managed the accounting for 12 properties. He also held roles in the office, retail and industrial sectors working at BlackRock as Assistant Portfolio Controller and with RREEF as Senior Accountant.

In addition, Mr. Walsh is a Certified Public Accountant and holds a Masters in Real Estate Finance from New York University’s Schack Institute.

We know Tom Feeney's name is on the DOB permits with the false information. What were Tom's and Paul Cenzoprano's role?

Paul Cenzoprano - Director of Apartment Redecoration and Standardizations

Paul Cenzoprano oversees the process of preparing all vacant apartments for occupancy. He joined the Apartment Redecoration and Standardizations team with Tishman Speyer in April 2010 and has held design and construction management roles overseeing several prominent projects including his work as a Project Development Manager for the design and construction of the new Yankee Stadium. Mr. Cenzoprano is an industry leader who brings over 25 years of engineering and construction project management experience to our team.



Thomas V. Feeney - Director of Maintenance Operations



Thomas Feeney serves as Director of Maintenance Operations overseeing all maintenance and facility operations since coming to Peter Cooper Village / Stuyvesant Town in 2006. Mr. Feeney has over 30 years of real estate industry experience and is considered a leader in the field. Prior to joining the management team at Peter Cooper Village / Stuyvesant Town he served as a senior member of the operations team with Tishman Speyer at Rockefeller Center for more than 10 years.

http://www.compassrock.com/pcvst-new-york

What was the City Council's role? They admitted knowledge of it when they campaign on 16th and First at our PCVST front door, they nod their heads, then look the other way.

How many people are involved in this scam and who?

Why have the serious implications on infrastructure gone unaddressed, covered up by the PCVST Tenant Association?

Why have the quality of life issues gone unaddressed when they are much greater than bikinis in the Oval?

Why is the years long scam unaddressed publicly?

Anonymous said...

10:58 You can't have it both ways. You can't say Dan works closely with the DOB and is on top of PCVST construction to get residents to stop keeping on top of it (eg office construction)
Then the next day say Dan is not working closely with the DOB on the massive in-your-face chunk of PCVST that underwent wall partition construction.
Are you really trying to say Dan knows what the right hand is doing but not the left hand?

Anonymous said...

Impossible not to see why it is so important the Cuomo quashed supboenas on REBNY be investigated! Too many back room deals at the cost to NYC tenants. PCVST is not a commodity nor a back room real estate deal token. Its our home!

Anonymous said...

Agree!!!

Anonymous said...

True, true John Marsh.

Anonymous said...

8:15 AM: Who is bribing whom to keep all this quiet?

Anonymous said...

We're not talking just "light bulbs" here. We're talking fluorescent tubes that are up on the kitchen ceilings. These are very difficult (in some cases impossible) for tenants to change themselves. Seniors, especially, need to have someone come in and change the bulb when it dies. These are also the people who can least afford to pay $33 for the service that was always free.

That is so fucked up. What a hazard and these practices have to be reported. This is unsafe and dangerous for many people to do. Especially on high ceilings such as pcv and st.