Wondering how long it might take a new owner of Stuyvesant Town and Peter Cooper Village to remove most of the apartments from rent regulation? The seller has a prediction: By 2018, the percentage of stabilized apartments in the complexes could plummet to less than 30 percent from more than 70 percent today.
In 2008 alone, 800 apartments in Stuyvesant Town could be deregulated, according to marketing material that the broker for Metropolitan Life, the current owner, is giving to potential bidders. If the projections prove correct, the material says, the rents collected could more than double by 2018 to nearly $519 million at Stuyvesant Town and to $170 million at Peter Cooper, which together contain 11,200 units.
MetLife’s brokerage company, which prepared the document, has some tips, too, for potential buyers hoping to appeal to what it calls “the discerning tastes of Manhattan’s market-rate apartment community.” It suggests turning the complexes into gated communities, adding “health club amenities,” selling units, importing doormen and installing “an elite private school.”
The 117-page offering memorandum may paint an overly rosy picture of a new owner’s possible profits in hopes of enticing bidders for what could be a $5 billion sale, but it also suggests strongly that the community’s days as an unpretentious middle-class bastion in increasingly upscale Manhattan may well be numbered.
With “aggressive investigation of potential stabilization violations,” the memo suggests, a new owner could deregulate 1,000 units in both complexes in 2008 alone, “approximately double the current rate.” By investing in major capital improvements, a new owner could speed up rent deregulation and win additional rent increases, even in the rent-stabilized apartments.
As more apartments are deregulated and higher-income tenants move in, the brokerage firm speculates, demand for garage space will increase and garage income will go up. The loop roadways in the 80-acre property could be reserved for resident monthly parkers “with revenue potential approaching $1 million.”
“New ownership has infinite opportunities to personalize, improve and transform the complex into the city’s most prominent market-rate master community,” say the documents from the broker, CB Richard Ellis.
The memo says the transformation of the two complexes along the East River is already “well underway,” led by MetLife’s “aggressive capital improvement program.” It recently committed or spent $168 million on improvements including electrical upgrades and new roofs and windows.
Under rent regulations, owners can pass on to tenants a portion of the cost of such capital improvements, pushing their rents toward the $2,000-a-month level at which they can be decontrolled (for an occupied unit, the tenant’s annual household income would also have to reach $175,000 for two consecutive years). The memo points out that any new owner of Stuyvesant Town and Peter Cooper “will be the beneficiary of these ‘paybacks.’ ”
Critics of MetLife’s sale plans were not enthusiastic.
“It’s clear, and this makes it clearer, that MetLife’s strategy for making several billion dollars on this site is to speculate on the aggressive displacement of middle-income New Yorkers and their replacement with wealthy New Yorkers,” said Brad Lander, the director of the Pratt Center for Community Development, a housing and planning advocacy group. “I had assumed that was implicit. The fact that MetLife is offering a road map for that displacement in their offering materials makes plain their intentions.”
Daniel R. Garodnick, a city councilman who is trying to organize a tenant-backed bid to buy Stuyvesant Town and Peter Cooper Village, where he lives, said of MetLife, “I think that they have a vision of this community which is inconsistent with the purpose for which it was founded and which will have a big-picture effect on the affordability of housing in New York City.”
Darcy Stacom, the broker handling the sale, dismissed the suggestion that the marketing documents serve as a “road map” for displacement. She said she had simply come up with some “value-added ideas for transactions.” Under the rent laws, she said, anyone whose income qualifies him to remain in a stabilized apartment even after his rent reaches $2,000 a month “is going to live there for the rest of their lives.”
Ms. Stacom also said that, in light of recent sale prices of comparable buildings, “if you look at this deal on a by-the-pound basis, it’s dirt cheap.”
MetLife, which opened Stuyvesant Town and Peter Cooper Village as housing for veterans returning from World War II, put the 110-building community on the block last month. Some of the city’s biggest landlords, real estate companies and banks have signed up to bid. The deadline for initial offers is Oct. 5.
Mr. Garodnick wants the complexes to remain largely affordable to middle-income New Yorkers, in part because they were built with help from the city. The city acquired some of the land through eminent domain, gave MetLife the streets in the 18-block area and froze property taxes for 25 years at the value of the land before redevelopment.
“Look, it’s nice to live in luxury,” said Leonard Grunstein, a lawyer representing the tenants association, which is working with Mr. Garodnick. “But this was built to be affordable. It was built to give good housing so people could live and work in the community. If you’re going to pay a near-luxury price, you need a luxury building.”
According to the projections in the memorandum, a new owner could expect the number of rent-stabilized units in Stuyvesant Town to drop to 2,539 in 2018, down from 6,251 this year. The number of stabilized units in Peter Cooper Village could shrink to 712, down from 1,734 this year.
There is one downbeat note amid the brokerage’s rosy representations. The memo notes that, under an agreement with the state, Consolidated Edison has been investigating the existence of subsurface soil and groundwater contamination in some parts of Peter Cooper Village. The memo says the contamination, from the operation of gas plants before the complex was built, poses no threat to tenants or workers “if properly handled when excavated or exposed.”