(Corrects paragraph 7 to read "sets rent for more than a third
of the 11,200 units in the property through June 2020" instead
of "sets rents for the 11,200-unit property")
By Ilaina Jonas
NEW YORK Nov 29 The owners of Stuyvesant Town
and Peter Cooper Village have reached a $147 million settlement
to resolve claims by thousands of tenants who said they were
overcharged on rent, removing the biggest hurdle to a sale of
the huge Manhattan apartment complex, attorneys for both sides
said on Thursday.
About 25,000 people live in Stuyvesant Town and Peter Cooper
Village, a sprawling complex of 56 high-rise brick buildings
with a private park on 80 acres on Manhattan's East Side. The
co m plex - known for its spacious apartments - was built in two
stages beginning after World War II with the intention of
providing homes for returning veterans and later for
middle-class residents. Last month, the property sustained tens
of millions of dollars of flooding damage from Superstorm Sandy.
CWCapital Asset Management LLC, which has controlled
Stuyvesant Town/Peter Cooper Village since 2010, and past owner
MetLife Inc will pay $68.75 million to reimburse 21,250
tenants for past overcharges under the agreement. CWCapital also
agreed to end any effort to recover $78.1 million in rent
reductions it has provided since the lawsuit - known as "the
Roberts case" for lead plaintiff Amy Roberts - was f iled in
The tenants had sought roughly $215 million in their
"The Roberts settlement has been hanging over our heads for
a long time as a barrier to tenant ownership of the property and
that barrier is now removed," said New York City Council Member
Daniel Garodnick, who represents the area and lives in Peter
Yet Garodnick said he would "reserve judgment" on the
decision because it could raise rents on some current tenants.
The settlement, which also sets rent for more than a third
of the 11,200 units in the property through June 2020, has been
approved by the New York State Division of Housing and Community
The settlement is the most recent chapter in the saga of
MetLife's sale of the vast apartment complex to T ishman Speyer
Properties L.P. and an affiliate of BlackRock Inc for a record
$5.4 billion at the top of the commercial real estate market in
2007. The tenants' lawsuit, filed two years later, and the
downward spiral of the real estate market culminated in the
owners defaulting on their loans in 2010.
A FIGHT FOR AFFORDABLE HOUSING
The lawsuit was filed to fight MetLife's - and subsequently
Tishman Speyer's - policy of converting rent-stabilized
apartments to much higher market rents when a tenant vacated.
Under this policy, the rents on 4,311 apartments had been raised
sharply from rent-stabilized rates in vacancies since 2003.
The courts ruled that the procedure violated a city program
designed to encourage landlords to improve property in exchange
for tax abatements. Since landlords of tens of thousands of
other apartments in New York have done the same, the formula
used for the Stuyvesant Town/Peter Cooper Village settlement is
likely to serve as a template for those apartments.
Tishman Speyer upgraded apartments as they became available
and then raised rents to market rates from the much lower
stabilized rents. MetLife, the previous owner, had done the same
to a lesser degree.
New York State's highest court, the Court of Appeals, said
that the property's current owner as well as MetLife, which also
had been upgrading apartments, were responsible for damages.
The Tishman Speyer-led investors who bought the property had
used $4.4 billion in debt. That included a $3 billion mortgage
that was sliced up into commercial mortgage-backed securities
(CMBS) held in five different trusts. CWCapital represents the
holders of that debt.
When the owners defaulted on the mortgage, CWCapital, a
special servicer who represents the securities holders, took
control of the property.
"There's a long way to go, but this is a very significant
milestone in stabilizing the property," said Andrew MacArthur,
CWCapital managing director.
ANATOMY OF THE SETTLEMENT
Under the settlement agreement, the bondholders represented
by CWCapital will pay $58.25 million, including about $11
million to $13 million already in escrow. Past owner MetLife
will contribute $10.5 million.
A final settlement would pave the way for CWCapital to
entertain offers for the properties. Those who have expressed
interest in the past, including Westwood Capital LLC and the
LeFrak Organization, said any bid would have to have the
"To have saved the tenants or set them up for refunds over
the course of the last nine years for an amount close to $150
million is something the tenants ought to be very proud of,"
said Alexander Schmidt, an attorney with Wolf Haldenstein Adler
Freeman & Herz, which represented the tenants.
A final settlement, including class approval and the end of
the appeal process, could take another 18 months, pushing back a
sale to 2014, said attorney Greg Cross, a partner with the law
firm of Venable LLP, who represented CWCapital.
A hearing has been set for April 9 to finalize the
settlement, but an appeal could drag that out.
Last year, the Tenants Association chose Brookfield Asset
Management Inc as a partner to formulate a bid for the
Manhattan apartment complex that would let tenants buy their
An offer would include a plan to enable tenants to buy their
apartments or keep leasing them at rent-stabilized rates.
The case is Roberts v. Tishman Speyer Properties LP et al,
New Y ork State Supreme Court, New York County, No. 100956/2007.
(Reporting by Ilaina Jonas; Editing by Jan Paschal)