In the biggest real estate deal in history, the sellers prioritized profit at the expense of tenants. What will the buyers do?
One hundred ten buildings housing 25,000 people have been sold for $5.4 billion by an enormous insurance company with $37 billion in real estate investments to a real estate company of equally incomprehensible size with $24 billion in properties to its name, including Rockefeller Center and the Chrysler Building. It’s all so oversized, it’s hard to know what it means.
One thing’s for certain: the selling party dressed up its property so aggressively and the deal went through so fast as to leave no doubt that the seller, at least, had motivations entirely mercenary.
That comes as no surprise to tenants who’ve watched as their nominal landlord became increasingly unfriendly and decreasingly visible over the past five years.
“In a way, they’re almost anti-organization. They’re anti their constituents… This Metropolitan Life, they’re nasty,” says David Cohen of the company that built Peter Cooper Village and Stuyvesant Town with government land and tax abatements for veterans returning from World War II. Cohen, 49, a flamboyant research director at Playboy Magazine, is a thirteen-year resident of a rent-stabilized one-bedroom apartment in Stuyvesant Town.
Met Life has distanced itself from its property, which stretches from 14th Street to 23rd Street and from First Avenue to the FDR Drive, by putting managers and holding companies’ names between itself and its 11,250 apartment units, Cohen says.
Overwhelming evidence of the corporation’s disregard for the people who live in its middle-income apartments, some of them since the place was created in 1947, came in the form of a document that Met Life’s brokerage company handed out to potential bidders. Parts of that document were re-printed in the New York Times. It outlined a plan by which the new owner of the property could deregulate rent-stabilized apartments, so that by 2018, only thirty percent of the complexes’ apartments would be protected by rent laws. Today, nearly three-quarters of the apartments are rent controlled or rent stabilized.
The plan could more than double the amount of rent the property brings in by 2018, the Times reported. It could also force thousands of working class people out of their homes and out of Manhattan.
For wary tenants, warning bells have been sounding for years. Cohen points to the removal of a plaque dedicated to Stuyvesant Town’s creator and inscribed with the original vision of the place as “a very dark moment for Stuyvesant Town.” The 1947 plaque was displayed in the outdoor Oval that is the geographical heart of Stuyvesant Town. It was inscribed with words commending Frederick Ecker, the former president of Metropolitan Life, who “with the vision of experience and the energy of youth conceived and brought into being this project, and others like it, that families of moderate means might live in health, comfort and dignity in parklike communities, and that a pattern might be set of private enterprise productively devoted to public service.”
Last year, while the Oval was being re-landscaped, the plaque was removed “by stealth of night,” says Cohen. “That plaque actually stood mocking them now. It was a testament to something that no longer existed.”
Victoria Friedman, a retired widow who raised two daughters in the complex and has lived in her current two-bedroom apartment in Peter Cooper Village for twenty-seven years, did not think much of the plaque’s disappearance except as an “unfortunate” consequence of the re-landscaping of the Oval.
But the fact that they never put it back up doesn’t strike her as accidental, either, when she thinks about it. “I don’t think that Met Life was trying to promote, from a seller’s point of view, middle-income housing. They’d prefer to advertise it as more luxurious. That’s the only reason I can think of” that they wouldn’t have put the plaque back up in the newly landscaped Oval.
Met Life has spent tens of millions – $34 million on Peter Cooper Village alone – making the place desirable enough to justify a $5 billion price tag. Pricy renovations also serve the hidden purpose of increasing rents, because a portion of the cost of the renovations can be tacked onto the rents, even if they are stabilized. Once the rent reaches $2,000 a month, the apartment can be turned into a market-rate unit. The unit also becomes market rate if the occupants earn a combined income of over $175,000 for two consecutive years.
Met Life has spent tens of millions – $34 million on Peter Cooper Village alone – making the place desirable enough to justify a $5 billion price tag. Pricy renovations also serve the hidden purpose of increasing rents, because a portion of the cost of the renovations can be tacked onto the rents, even if they are stabilized. Once the rent reaches $2,000 a month, the apartment can be turned into a market-rate unit. The unit also becomes market rate if the occupants earn a combined income of over $175,000 for two consecutive years.
“There’s scaffolding up on our building right now,” said Thomas Hammer, who lives with his wife on Avenue C between 14th and 15th streets. “They’ve done enveloping projects on every building in Peter Cooper – refurbishing of existing masonry work. Right now the 14th Street loop is all dug up. They’re replacing the steam pipes; the hot water is off day to day, and they just repaved the sidewalk around where we live.”
“Internally, they’ve replaced all the elevators, carpeted all the hallways, re-painted all the hallways, put in new entrance doors.”
Met Life also went balls to the wall with its aggressive investigations of people living illegally in rent-stabilized apartments, a value-adding strategy that the company suggested to bidders before the sale.
Even Friedman, whose trusting nature left her blindsided by the sale, had “heard things about that, that they’ve become more stringent with people subletting apartments.”
Once an apartment turns over it is often no longer bound by rent laws, and can be modernized and rented at market rate.
Once an apartment turns over it is often no longer bound by rent laws, and can be modernized and rented at market rate.
Met Life’s efforts to sniff out residents living illegally in below-market-rate apartments have resulted in the deregulation of about 25% of the 11,216 housing units in both complexes since 2002. That’s 2,600 apartments that are now market rate, with rents ranging from about $2,600 for a one-bedroom apartment to $5,000 for a two-bedroom, and annual rent increases of between 16 and 25 percent.
Hammer, 32, and his wife Jennifer Patt, 32, had been friendly with their neighbor of two years, who lived across the hall and also happened to work at Hammer’s office building in SoHo. The neighbor had been subletting his rent-stabilized one-bedroom apartment from a friend.
As his lease was turning over last summer, the neighbor got a letter – he’d been busted, he came by to tell Hammer and Patt, and had to be out in thirty days. Then he was gone.
Management, a nameless entity beginning to resemble Big Brother, modernized the apartment, installing new kitchen appliances, bathroom and light fixtures, and rented it at market rate to two new tenants.
Management, a nameless entity beginning to resemble Big Brother, modernized the apartment, installing new kitchen appliances, bathroom and light fixtures, and rented it at market rate to two new tenants.
How management found out that their neighbor was subletting, Hammer isn’t sure. “If it’s found out, some of the tenants will let [management] know. I don’t think they mind if people snitch on others. Maybe there’s a benefit there, I don’t know.”
With the destabilization of each apartment, the tight-knit fabric of the community loosens a little. “Whereas it was a rarity for there to be somebody moving out or a community member lost, now it’s a matter of course,” says Cohen.
The average age of the population has plummeted as young singles and families have moved into deregulated or vacated apartments. But Met Life has showed about as much warmth to their more desirable incoming tenants as they had to the ones they kicked out.
Hammer, an account director at a web company, fits the young-married-professional-who-can-afford-market-rate demographic. Still, he got the distinct impression that management couldn’t have cared less about him, so long as his wallet was padded.
Hammer, an account director at a web company, fits the young-married-professional-who-can-afford-market-rate demographic. Still, he got the distinct impression that management couldn’t have cared less about him, so long as his wallet was padded.
“I would say that the management company that was handling those rentals is not the most favorable in terms of their rapport with potential renters. They’re just very rude.”
Or as Cohen puts it: “What do they need you there for? There’s always someone else who can pay the rent.”
Now that Met Life and its tenants are parting ways, the known devil is being replaced by the unknown, and the looming question is: what will Tishman Speyer, the new owner of Peter Cooper Village and Stuyvesant Town, have to do to turn a profit on its $5.4 billion?
The company informed the public that “no one should be concerned about a sudden or dramatic shift in this neighborhood’s make-up, character or charm… As a business with deep roots in New York City, we have a sincere appreciation for these cherished neighborhoods,” through a statement in the Times.
“That’s all we have to go on at this point,” says John Goering, a consultant on research and litigation for the Department of Housing and Urban Development. But “the conversation isn’t over by a long shot.”
In the meantime, “everyone in New York’s teeth are chattering,” says Goering. In a city where the market has priced ninety-nine percent of the middle class to the outer boroughs, “residents worry a great deal about rent destabilization.”
The mayor, who has championed rent laws and tenants’ rights in the past, has steered clear of any involvement in the deal, saying only that Met Life owns the property and has a right to sell it. The mayor, by the way, knows Rob Speyer, the New York head of Tishman Speyer. Bloomberg appointed Speyer chair of the not-for-profit Mayor’s Fund to Advance New York City.
Council Member Dan Garodnick, who grew up in the community, is skeptical and angry. Garodnick spearheaded the tenants’ $4.5 billion bid for the property out of fear that whatever company bought the property would do what companies are meant to do and prioritize profit.
“We will want to know precisely how Tishman Speyer intends to preserve the long-term affordability of this community, and we expect to see concrete plans,” Garodnick said in a statement on October 17, the day the sale was announced. “We will want to know that Tishman Speyer does not intend to add additional development onto this historic property. We will want to know that Tishman Speyer will be an owner whose benevolence will extend beyond the mere obligations of the law. The tenants of this community are organized – 25,000 people strong – and no new owner should doubt our resolve now or in the future.”
The residents are hoping, of course, that the deal will mean nothing more than a change in name. “I’d just like it to stay the way it is,” says Friedman. She has lived in her rent-stabilized two-bedroom apartment for twenty-seven years and pays just under $1,900 a month.
Cohen, whose lease is up in February of 2007, just got his rent renewal papers from Met Life in the mail. He’s not sure whether they’re still valid or if he’ll be getting another set of paperwork from Tishman Speyer. He’s paying $1,400 a month, “and that’s rent stabilized, for which I have to get down on my knees and thank Buddha, Allah and everybody else. So I’m not an old cat lady living in a rent-controlled thing with a two hundred dollar rent with five million dollars in the bank.”
Cohen, whose lease is up in February of 2007, just got his rent renewal papers from Met Life in the mail. He’s not sure whether they’re still valid or if he’ll be getting another set of paperwork from Tishman Speyer. He’s paying $1,400 a month, “and that’s rent stabilized, for which I have to get down on my knees and thank Buddha, Allah and everybody else. So I’m not an old cat lady living in a rent-controlled thing with a two hundred dollar rent with five million dollars in the bank.”
Hammer isn’t sure what’s going to happen with his lease, either, which is up in June of 2007. At $2,110 for a 730-square-foot apartment, with a view, that he shares with his wife, he thinks his rent is “almost below market rate again in the neighborhood.” It’s a much better deal than he was getting at his last apartment, a 500-square-foot studio in the East Village he had to move out of when they raised his rent to $1,900. Now he’s worried that their rent will catch back up with the market, which may be more than what he and his wife, a third-year law student, can afford.
If residents end up being forced out in the coming decades, “half of them would go to Florida to retire and die, and the other half would either go to Brooklyn or Jersey,” Cohen predicts. “[Manhattan] is going to be just a fantasy land of rich kids smoking seven-dollar packs of cigarettes and enclaves of desperately poor with nothing in between.”
