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 complexes, attorneys for both sides
said o n 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 was filed in 2009.
The tenants had sought roughly $215 million in their
The settlement, which also sets rents for the 11,200-unit
property through June 2020, has been approved by the New York
State Division of Housing and Community Renewal.
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.
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
But 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.
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.