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Updated: Blackstone, Ivanhoé to buy Stuyvesant Town

The private equity real estate giant partnered with Ivanhoé to purchase the 80-acre property with a long history of private equity investment and lawsuits.

The Blackstone Group and Ivanhoé Cambridge partnered to buy Manhattan’s Stuyvesant Town-Peter Cooper Village, the firms announced Tuesday. The island’s largest apartment complex sold for $5.3 billion, just under its record 2006 sale price.

The 80-acre development, home to about 30,000 New Yorkers, was a symbol of the post-crisis real estate meltdown. Five years ago, New York-based private real estate owner Tishman Speyer defaulted on the loan that financed the developer’s $5.4 billion acquisition of the property in 2006. The property’s value plunged during the recession, leaving Tishman and co-owner BlackRock unable to raise rents.

Tishman ran into trouble when it attempted to convert rent-stabilized units into market-rate apartments, losing a lawsuit that alleged Tishman and former owner MetLife illegally deregulated the apartments while receiving a tax break. A 2013 settlement said the units are subject to deregulation, with rents potentially rising to market rates, after June 2020.

The new buyers plan to avoid the problems that plagued Tishman through an affordability agreement with the city. Mayor Bill de Blasio and other politicians announced the plan Tuesday in conjunction with the firms. The agreement keeps 5,000 apartments set to be de-regulated in 2020 as rent-stabilized units for 20 years, and extends rent protection for another 1,400 apartments until 2025.

“We intend to own Stuyvesant Town and Peter Cooper Village on behalf of our investors for many years to come,” said Jon Gray, Blackstone's global head of real estate, in a statement Tuesday.

Toronto-based Brookfield Asset Management made a play for the property starting in 2011. Blackstone and Ivanhoé Cambridge, the real estate investment subsidiary of Canadian pension plan Caisse de dépôt el placement du Québec, have partnered on previous deals.

Loan servicer CWCapital Asset Management, which has been in control of the property for bondholders, hired Eastdil Secured’s Doug Harmon to advise on the sale. The transaction is expected to close at the end of December.

The firms are jumping into the fracas as the New York City apartment market reaches record occupancy rates and prices. Last month, Blackstone led a venture with Fairstead Capital to purchase 24 Manhattan apartment buildings, constructed between 1910 and 1995, for $690 million from the Caiola family.

“Prices for Manhattan apartments are up a cumulative 20 percent since the (2014) transfer of Stuyvesant Town to CWCapital so it’s likely an opportune time to move this,” Jim Costello, the vice president of Real Capital Analytics, told PERE before the official announcement.

Jon Gray, Blackstone's global head of real estate, is offering PERE's readers a unique opportunity to ask him anything related to real estate at next month's PERE Summit, November 10-11. Email jonathan.b@peimedia.com with your questions.