What do the Church of England and a giant New York housing development known as Stuyvesant Town/Peter Cooper Village have in common? It turns out, quite a lot; they’re both worth a lot less than they used to be.
The Church was one of the investors in Stuyvesant Town when Tishman Speyer, a real estate firm, bought the complex from Metropolitan Life in 2005, the biggest real estate deal in U.S. history. Tishman paid $5.4 billion for those 11,000 apartments covering 80 acres on the Lower East Side of Manhattan, with views of the East River. It’s now worth $1.9 billion and Tishman has defaulted.
Apparently the Church’s investment philosophy is Buy High, Sell Low. “Hey, Bishop, I know how to repair your palace. Let’s speculate in foreign real estate, we’ll make a killing!”
The New York Times reports:
Housing Complex Goes to Creditors
By CHARLES V. BAGLI
Published: January 25, 2010
The owners of Stuyvesant Town and Peter Cooper Village, the huge middle-class housing complexes overlooking the East River in Manhattan, have decided to turn over the properties to creditors, officials said Monday morning.
The decision by Tishman Speyer Properties and BlackRock Realty comes four years after the $5.4 billion purchase of the complexes’ 110 buildings and 11,227 apartments in what was the most expensive real estate deal of its kind in American history.
Don’t just blame it on the housing bubble, because this deal was a stinker from the get-go. Tishman’s plan was to spend a billion dollars on renovations, then deregulate the rents and triple them. Most apartments there are rent-controlled.
But New Yorkers don’t move out of rent-controlled apartments except by order of the coroner. The rent laws are strict, many lawyers specialize in housing issues, and the residents are savvy about their rights.
Met Life built Stuyvesant Town after World War II specifically as affordable, middle-class housing. The city and the whole country had a severe housing shortage—little had been built since the Depression—and the first tenants were thrilled with their apartments.
But in 2005 Tishman and the Church of England thought they could displace the residents and fill the apartments with rich people. The first targets were the tenants already paying market rates, who saw huge increases when it was time to renew the lease. Once that was accomplished, they’d move on the rent-controlled tenants.
Maybe Rowan Williams can preach to us again about justice for the poor.
The surrender of the properties ends a tortured real estate drama in which the partnership made expensive improvements to the complex and then tried to rent the apartments at higher market rates in a real estate boom. But a real estate downturn and the city’s strong rent protections hindered those efforts, leaving the buyers scrambling to make payments on loans due for the properties, which have been a comfortable harbor for the city’s middle class since they opened in the late 1940s.
The Times doesn’t say how much the Church stands to lose on this deal, but it’s a major partner with Tishman. The property has lost 65% of its value and $3.5 billion in cash.
Were they nuts? Or just greedy?
Why not both?
The property is currently worth an estimated $1.9 billion — far less than the purchase price, which means many investors will lose some or all of their money. Those investors include Gramercy Capital, an affiliate of SL Green Realty; Wachovia bank; CW Capital; Winthrop Realty Trust; the Church of England; and a Florida state pension fund.
For tenant advocates and urban planners, the sale underscored the loss of affordable housing in the city and the highly speculative financial structures that they warned would end in disaster.
If I were a state employee or retiree in Florida, I wouldn’t be too happy either. In fact, I’d make it a big issue in the Florida U.S. Senate race. Gov. Charlie Crist has decided he wants to be a senator now; oh really?
Wachovia Bank, based in Charlotte, North Carolina, went under because of deals like these and is now a subsidiary of Wells Fargo. The money just disappeared one day; “I thought it was in my wallet but I can’t find it.”
Did they think housing would only go up?
Were they nuts? Or just greedy?
Why not both?
Last October The Times reported on a devastating court decision revealing what the new owners of Stuyvesant Town were really up to:
The state’s highest court, the Court of Appeals, ruled Thursday that the owners of Stuyvesant Town and Peter Cooper Village had wrongfully raised rents and deregulated thousands of apartments while receiving city tax breaks.
Meanwhile English bishops in the House of Lords continue to argue for their right to discriminate against LGBT employees.
Someone, anyone, tell me again why the Episcopal Church should be dragged down by these people.++
UPDATE: Episcopal Cafe details the Church of England’s mammoth losses here.