NEW YORK (Reuters) - A boutique investment bank and a building developer plan to offer tenants of Manhattan’s largest privately owned apartment complex the chance to become owners.
Condo Recovery LLC, which was created to buy distressed properties and includes investment bank Westwood Capital, intends to offer tenants in the 11,227 units that make up the 56 buildings sprawled over 80 acres on Manhattan’s East Side a chance to buy their rentals.
“We believe 8,500 to 9,500 of units will buy if we have priced it correctly and provide the proper financing,” said Gerald Guterman, a partner in Condo Recovery.
Guterman, who has owned or managed more than 60,000 apartments during his more than 43 years in the business, has partners with appraiser Jonathan Miller to offer the apartments at an average that would be equal to their monthly rent.
The investors would profit from the rental units that become available and would be sold at market prices.
“That’s where the profit is,” Guterman said. “Otherwise, all we’re doing is trading dollars, and I have six kids, three wives and a judge. I can’t afford to trade dollars.”
The Condo Recovery plan would price the apartments at an average of what rent-stabilized tenants pay as their monthly rent, or about $290 per square foot Guterman said. They would also guarantee a mortgage of 85 percent of the cost.
The market rate in the area is about $775 per square foot.
The plan would repay bondholders of the $3 billion mortgage over 18 to 24 months, Guterman said.
Stuyvesant Town/Peter Cooper Village became a symbol of the U.S. commercial real estate bust earlier this year when Tishman Speyer, which led the group that bought the projects for $5.4 billion in 2006, defaulted on its loan payments.
Guterman’s plan is one of several, but any offer would have to wait until New York State Supreme Court Justice Richard Lowe III rules on whether to lift a stay that prevents CWCapital, which represents the bondholders, to proceed with an auction. A spokeswoman for CWCapital declined comment.
Condo Recovery’s plan probably will not satisfy the $700 million in fees and accumulated interest owed to the bondholders, but they would get the principal, Daniel Alpert, Westwood Capital managing partner said.
“The property as a rental would be worth about $1.9 billion, $2 billion on a good day,” Alpert said.
As a co-op it would bring in at least $3 billion plus a profit for company, he said.
Reporting by Ilaina Jonas, editing by Leslie Gevirtz