UPDATE 1-Brookfield, tenants to seek NY's Stuyvesant Town

Wed Nov 30, 2011 5:25pm EST

* Brookfield to partner with tenants for a bid

* Plan calls for two ownership propositions

By Ilaina Jonas

Nov 30 (Reuters) - The Stuyvesant Town-Peter Cooper Village Tenants Association has selected Brookfield Asset Management Inc <BAMa.TO as a partner to formulate a bid for the sprawling Manhattan apartment complex that would allow tenants to buy their units.

The tenants' association on Tuesday approved an agreement with Brookfield to develop a bid over the coming months to submit to CWCapital, the special servicer that represents senior bondholders who now control the complex.

The specifics have not been worked out yet, and even a rough price was not disclosed.

"The tenants' association and its advisers met with countless potential partners and felt that Brookfield both shared the goals that the tenants' association had put forth and also had the strength and substance to get them over the goal line," said City Councilman Daniel Garodnick, who also is a life-long resident there.

An offer would include a plan that would enable tenants to buy their apartments under two different ownership scenarios -- a discounted price or a deeper discounted price, each of which would come with resale restrictions. It also would allow current renters to remain as rent-stabilized tenants and would seek government assistance for that.

Brookfield would own the apartments that are not purchased and would manage the complex.

"In my eyes that is a much stronger outcome for the tenants and city because it protects the affordability and sustainability of the place in a way no other plan can," Garodnick said.

Brookfield Asset Management has $150 billion of assets under management and has been involved in distressed complex real estate deals, such as financing mall owner General Growth Properties' emergence from bankruptcy, that take time to grow.

"This one's a classic" said Andrew Willis, Brookfield Asset Management spokesman.

The company owns or controls 12,000 U.S. apartment units, including its Fairfield portfolio which was bought during a bankruptcy.

The vast apartment complex of 56 buildings located on 80 acres on Manhattan's East Side came became a controversial issue in 2007 when a joint venture between Tishman Speyer and BlackRock Inc bought it for $5.4 billion from MetLife Inc . The project had been built in two stages starting after World War II as housing for the middle class.

The real estate firm planned to upgrade apartments as they became available in order to raise rents to market rates. It also planned to build or convert some units to condominiums. Tenants said the new owners' plans would force them to move out of the 11,200 apartment complex. About 25,000 people live there.

But a year later, the commercial real estate market went into a downslide and a court ruled that bringing the apartments to market rents violated a tax agreement with the city.

Earlier this month, a New York State appeals agreed with a lower court ruling that said that the owners had to pay damages to those tenants who payed the higher rents or were forced to leave because of them. A lawyer for the tenants estimated damages at about $215 million.

The damages could be covered by allowing those who were affected to buy units, Garodnick said.

Regulations that protect its stabilized rent rates expire in 10 years at which time the units will be subject to market-rent levels, Garodnick said.

In 2010, entities set up by the joint venture to own the complex defaulted on a $3 billion mortgage after the value of the complex tumbled due to the financial crisis. The mortgage had been securitized into five different pools of commercial mortgage-backed securities.

The proposal is similar to one investment bank Westwood Capital LLC, has been discussing with tenants.

"We will be continuing to watch the process as it moves forward; we have structure and a bid that will be equally friendly if not more friendly to the tenants," said Dan Alpert, Westwood's managing partner.

A representatives from CWCapital could not be reached for comment.

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