Tishman Speyer and BlackRock Realty Advisors have lowered rents on some apartments at New York’s Stuyvesant Town and Peter Cooper Village complex after a court ruled the firms had improperly raised rates.
An interim deal agreed yesterday will affect the January and February rents of those apartments involved in the New York Court of Appeals decision in October.
Tishman and BlackRock bought the 11,227 apartment complex for $5.4 billion in 2006, with Tishman investing $112 million of equity into the deal. The firms’ strategy was to convert 8 percent of the units from rent-stabilised rates to higher, market rates each year generating cash flows of more than $330 million a year by 2008.
On 22 October though the Appeals court sided with tenants and ruled the strategy violated New York law as Stuyvesant Town and Peter Cooper Village was, at the same time, part of a city tax abatement programme for major renovations. The high court sent the case to back to the trial court to decide issues such as damages and rent levels.
In a joint statement yesterday, Tishman and BlackRock said it had reached an interim agreement with the tenants’ lawyers to adjust affected rents “to an estimated rent-stabilised level for January and February 2010”.
The two sides also agreed to hire an independent consultant to determine a longer-term rent-stabilised rent level and to treat affected and future tenants as rent stabilised, court documents showed.
Tishman added in its statement a “more inclusive, six-month agreement” had also been reached “covering a wider range of unresolved issues beyond those addressed in the interim agreement”. The firm said the agreement was intended to “expedite” resolution of the court case, but needed approval by Stuyvesant Town special servicer, CW Capital.
Earlier this month, a $3 billion senior mortgage backed by Stuyvesant Town and Peter Cooper Village was transferred to special servicing following a “request for relief” by Tishman and BlackRock. Tishman said at the time the transfer was to allow the firms to “facilitate negotiations on a restructuring of the debt load”.
The latest court ruling added that rent reductions could also be extended to June if Stuyvesant Town and Peter Cooper Village lenders and bondholders approved. The ruling though does not stipulate possible damages Tishman, BlackRock and previous owner MetLife may have to pay following the court decision.