Stuy Town/Peter Cooper...again.

Anyone have thoughts on this?

For the newbies...the prior deal to buy these properties was led by Tishman Speyer and BlackRock...it blew up badly...and is considered the worst real estate deal in history. The LPs obviously got fucking hosed badly. The plan hinged on lots of leverage and getting rid of rent-controlled units one by one.

Is Fortress going to get it right this time? I think Brookfield is considering a bid, as well.

 

I think everyone gets excited about it because of the notably large deal size but chances are, returns are going to be pretty thin. Its going to get a lot of attention and based on Tishman's experience, there is clearly quite a bit of red tape that comes with the property. I would expect bidders to be more cautious this time around, but I doubt anyone wins this deal at a price where they can knock it out of the park.

 
talkaboutit:

I think everyone gets excited about it because of the notably large deal size but chances are, returns are going to be pretty thin. Its going to get a lot of attention and based on Tishman's experience, there is clearly quite a bit of red tape that comes with the property. I would expect bidders to be more cautious this time around, but I doubt anyone wins this deal at a price where they can knock it out of the park.

Agreed. The question is not whether anyone will get a decent return, because they won't, but rather how dumb it gets this time around.
 

Real value proposition here is breaking off pieces and selling the land for redevelopment... 80 acres of land in downtown Manhattan sitting right beside the East River. It's truly an irreplaceable opportunity.

 
chrisjr:

Real value proposition here is breaking off pieces and selling the land for redevelopment... 80 acres of land in downtown Manhattan sitting right beside the East River. It's truly an irreplaceable opportunity.

Do you know when that happens, roughly speaking? Is that a couple decades away or could they start selling off chunks in like 24 months?
 
Best Response
prospie:
chrisjr:

Real value proposition here is breaking off pieces and selling the land for redevelopment... 80 acres of land in downtown Manhattan sitting right beside the East River. It's truly an irreplaceable opportunity.

Do you know when that happens, roughly speaking? Is that a couple decades away or could they start selling off chunks in like 24 months?

Tishman/BR's original plan was to initiate this plan in Peter Cooper village as its the smaller of the two, more gramercy-esque so probably yield higher psf pricing. Detenenting a non-rent regulated building could easily be done over 24 months as that is the typical max length of a lease, would need to take a look into the zoning/FAR (most likely has some special clause bc it is a superblock). All you have to do is include a 60-day termination clause in every new lease you sign and you have total flexibility.

Biggest issue would be the rent controlled and stabilized tenants, most likely a buy out would need to occur and that can cost you...a ton http://gothamist.com/2014/03/02/rent-stabilized_buyout_record.php

 

this has to be an exciting deal for the brokers at CBRE, eastdil or what ever shop wins the assignment. The firms buying these assets are suppose to be the smartest guys in the room but they end up f**king things up due to crazy underwriting and assumptions that 20% of tenants will move out yearsly so they can jack up rents! 10% rent growth and 2% expense growth assumption, fire all the property managers and engineers with lower paid staff members, buy at 3% cap rate and borrow at 4% and lever that baby up to 90% LTV, assume they will get money from the new major from his $40billion plan to renew old property. these are the genius brokers, developers and owners of real estate who come up with very creative deal structures that only work on paper.

Array
 

I live in StuyTown. Anyone who buys it, is an idiot. All the tenants are unruly because the place has turned into an utter ghetto over the last few years (nothing getting repaired, all the washers/dryers fixed, etc) while externally they pretty it up for buyers. A ton of tenants here are rent stabilized, and they sue on an almost daily basis. Any sort of development, rent increases, or plots to force out rent stabilized people would be met with 5-10 years of lawsuits. The reputation of the place is in the absolute trash (below two stars on yelp), so there is no way they can turn this into a luxury" place any time soon, for the apartments that are market rate. Plus most of the old people are disgusting cat ladies, which will scare away people with money.

Anyone who buys it will lose billions of dollars, should be fun to watch. Especially with De Blasio as mayor, who is going to be EXTREMELY pro tenant.

 
OpsDude:

I live in StuyTown. Anyone who buys it, is an idiot. All the tenants are unruly because the place has turned into an utter ghetto over the last few years (nothing getting repaired, all the washers/dryers fixed, etc) while externally they pretty it up for buyers. A ton of tenants here are rent stabilized, and they sue on an almost daily basis. Any sort of development, rent increases, or plots to force out rent stabilized people would be met with 5-10 years of lawsuits. The reputation of the place is in the absolute trash (below two stars on yelp), so there is no way they can turn this into a luxury" place any time soon, for the apartments that are market rate. Plus most of the old people are disgusting cat ladies, which will scare away people with money.

Anyone who buys it will lose billions of dollars, should be fun to watch. Especially with De Blasio as mayor, who is going to be EXTREMELY pro tenant.

Can confirm - just moved out of StuyTown after 2 years. Especially after Sandy things went to shit.

 

I do not understand why people like to hate on stuytown. Honestly, it is the biggest apartment you could get in this area for the price. Yes, it is not a luxury doorman type of building. But 1 bedrm is close to 700 sq feet for $3000. Where do you get 700 sq feet for $3000 in downtown NYC? I have seen apartments the size of my closet right now going for $3200+ in downtown. And as far as the cat lady situation, no one asks you to interact with them, right? I mean it's NYC, I am pretty sure every building here has a cat lady given the gender ratios in the city. I just hope they keep the concierge and housekeeping services. If you use it, they are actually pretty good, so that gives stuytown a bit of luxurious feel.

It ain't what you know, it's who you know
 

Or its the fact that CW took it over during the bottom of the market and now multifamily is at it strongest. Look CWCapital is the special servicer. Their job is to put as little capital into the building while getting a valuation that stops or minimizes losses for the bond holders.

There's no reason to think that anyone who buys it will lose billions of dollars if underwritten using today's relatively modest standards. Why don't you stay in business school for a little longer, in the real world the using the yelp rating of an apartment building isn't the best way to judge a good investment.

 

Whoever buys this better start bribing all the politicians they can to get RS/RC removed in Manhattan. The company left holding this thing when/if deregulation happens will be sitting on a gold mine, at least on paper. It's accessible to the L train and FDR, its only a couple blocks from all the trendy EV spots and there is an amazing amount of light and air potential. Knock it all down if you can because those buildings are junky and need a lot of work. The complexes look and feel like government housing. It all needs to go. They also need to find a way to make that power station a bit less of an eyesore, or move it.

I lived in PCV for a year, and it wasn't too bad. It was cheap and I had what I needed. My windows had direct view of the empire state building and downtown with nothing obstructing. The immediate area can get sketchy depending on the day and time, though. Walking out the door made me feel like I was in harlem or some lower class area. It was a bit of a culture shock moving from the UES.

 
undefined:

I guess someone should bump this since it looks like this is happening again?

Under contract to Blackstone at $5.3 billion.

"Other People's Money" was a fantastic book...but really made me weary on the success of the complex. (Not to mention the other comments in this thread hah)

Still, Blackstone isn't dumb. They must see something

Commercial Real Estate Developer
 

My uninformed viewpoint from a far - 1. Discount to replacement cost - Trading at like $475k/unit. I don't work in NYC but i am willing to bet that you cannot build product at that level. 2. Patient capital - My understanding is that Blackstone is putting this in a separate account with a core mandate. Don't need to push to get returns like Tishman did (granted Tishman had to stretch just to cover the debt service). 3. If the average monthly rent accross the complex is $3,200/month and OPEX runs at like 45% of egr, they are getting this at around a 4.4-4.5 cap. even if i am off some, they are probably getting something around a 4 cap, which for Fortress multifamily seems in line. 4. I think that long-term they find a way to add density to the site. It might be something like taking the current 14 story buildings and one by one taking them down and building them up to 30 stories. Just too much opportunity. Will it all work out, who knows

 

TS defaulted on $4.4 billion in debt ($3 in senior and $1.4 in junior) and $1.9 billion in equity totaling $6.3 billion.

I assume the foreclosure/default details were not made public (although pension probably released this info to their investors therefore its probably well known).

$5.3 billion sales price should cover the principal loan amount to the senior and junior lenders, the CW fees and the Eastdil fees. The remaining portion of the equity should be divided pro-rata to the companies who lost their equity stake, correct?

The following should happen now----

Debtors made whole $4.4 Billion: Fannie & Freddie: $2 Billion (purchased 2 of the 3 billion in senior notes) SIC: $575 Other lenders: $1.825 billion

Remainder money after debtors made whole: $900 Million

CW Capital Fee: $500 Million

Remainder money after CW Fee: $400 Million

Eastdil Fee: $5 million (flat fee estimate)

Remainder money after Eastdil Fee: $395 Million

Equity Investors Splitting the $395 Million but trying to make 1.9 billion in equity whole (These investors should be paid proportionately using the remaining $395 in equity I believe): Calpers: $500 million stake (wrote it off) Calstrs: $100 million (wrote it off) Florida Pension: $250 million SIC: $200 million TS: $112 million BlackRock: $112 million Church of England: Portion of $626 million in equity SL Green: Portion of $626 million in equity Newcastle Investment Corporation: Portion of $626 million in equity

I know Fannie and Freddie bought 2 billion of the senior notes, so they'll get their money back first. Then 1 billion is given back to the remainder of the senior lenders leaving $2.3 billion. Then the junior debt gets paid and you're at 900 million remaining. Then you pay CW the absurd fees that they are charging for being a special servicer, you're at 400 million. Eastdil fee is probably flat and lets call it an aggressive $5 million fee (I believe CBRE Stacom got $2 million flat fee in '06 from Metlife). Then the equity backers of 1.9 billion including TS & BlackRock split $395 Million(ish) remaining in equity.

Additionally, Blackstone will inherit the $215 in rent rebates owed the tenants that were forced out. So this was actually more expensive than the face value of the price.

 

i think the city waived the transfer tax as part of the deal to get Blackstone to keep 50% of the units affordable (that was my understanding). Why would any of the original equity partners that Tishman/BlackRock lined up get any money back? They defaulted on their loan and handed the keys back. If anything, once the all debtors are made whole CWCapital probably gets the rest.

 

Not saying I would have bought it, but this acquisition is fundamentally different than the Tishman disaster, when it was bought at a 2.0% (!) cap rate rate and had 80% leverage.

For Blackstone and Ivanhoe, NY City waived $77 million in mortgage recording taxes and is providing a $144 million low-interest loan through an affordable housing agency. For this, Blackstone and Ivanhoe agreed to keep 45% of units "affordable" until at least 2035. 12% of units will remain rent-stabilized until 2020, and then are capped at 5% increases per year for five years. The remaining balance of 4,830 units (43% of the property) are at market rate.

Cap rate on the deal is around 4.2% (or so thinks Green Street), and Wells Fargo is expected to be the main contributor to the 50% LTV financing, of which $2.5B will come from agency debt.

Fill the unforgiving minute with 60 seconds of run. - Kipling
 

"Cap rate on the deal is around 4.2% (or so thinks Green Street), and Wells Fargo is expected to be the main contributor to the 50% LTV financing, of which $2.5B will come from agency debt."

Its a 5.3 billion dollar deal...$2.5 of the $2.65 will be GSE debt with a measly 150 million being a standard term loan? That 94% GSE percentage is unusual--why not 100%? Wonder what the term is for the $150 mil. Look for the gse pieces on the MBS market I suppose!

 

I don't, and it's not reported in the Green Street article I'm referencing - "the city waived $77 million in mortgage recording taxes and is providing a $144 million low-interest loan through an affordable housing agency."

Fill the unforgiving minute with 60 seconds of run. - Kipling
 

I dont know the exact terms, but if they have an affordable housing component to this deal, it is extremely common for cities and agencies to offer debt at terms that basically come out as grants, you just cant call them that. Wouldn't surprise me if this deal was full of subsidies so long as they figure out ways to provide affordable housing either in this project or elsewhere in the city.

Also, I heard from someone who knows someone who knows someone, part of the deal involves the ability to take advantage of FAR that is not used in the current Stuy complex, and use it in other parts of the city, which is a game changer.

 

I read this as well, but it's less than 5% of the project cost. The city is purportedly allowing the buyers to transfer the asset's air rights, which would have faced opposition from tenants if pursued at Stuy Town, to elsewhere in the city. The transfer of Stuy Town's air rights (700,000 SF) is estimated at $250 million.

Fill the unforgiving minute with 60 seconds of run. - Kipling
 

That whole complex looks like a public housing project. And the location is terrible as well. I know several people who got mugged in that area recently. One girl almost got raped.

 

actually that place is pretty decently sized and convenient depending on your social scene. if you like the bars and night life of lower east side and brooklyn, that place is pretty awesome.

also the rooms are huge.

granted there are other options in nyc, but if you like that scene, its a 7/10 location

also probably a handful of your classmates will be living there....

tons of young professionals there. but yes that place was a public housing project.

 

Hic quibusdam amet cupiditate earum. Perferendis velit incidunt ut est distinctio magnam. Et dignissimos aspernatur voluptas tempora dolorem rerum. Beatae quae maiores alias eaque et deleniti aut quidem.

Amet suscipit ratione est eos praesentium. Consequatur sit nulla impedit dignissimos harum eos distinctio. Et qui eos dolorum. Asperiores tempora cum odio laboriosam eaque eius facere aliquid.

Ut asperiores non odit voluptas aut ipsa molestiae aliquid. Non dolores in et sunt eum. Aut omnis repudiandae voluptatem quam natus sint.

Career Advancement Opportunities

March 2024 Investment Banking

  • Jefferies & Company 02 99.4%
  • Goldman Sachs 19 98.8%
  • Harris Williams & Co. (++) 98.3%
  • Lazard Freres 02 97.7%
  • JPMorgan Chase 03 97.1%

Overall Employee Satisfaction

March 2024 Investment Banking

  • Harris Williams & Co. 18 99.4%
  • JPMorgan Chase 10 98.8%
  • Lazard Freres 05 98.3%
  • Morgan Stanley 07 97.7%
  • William Blair 03 97.1%

Professional Growth Opportunities

March 2024 Investment Banking

  • Lazard Freres 01 99.4%
  • Jefferies & Company 02 98.8%
  • Goldman Sachs 17 98.3%
  • Moelis & Company 07 97.7%
  • JPMorgan Chase 05 97.1%

Total Avg Compensation

March 2024 Investment Banking

  • Director/MD (5) $648
  • Vice President (19) $385
  • Associates (86) $261
  • 3rd+ Year Analyst (13) $181
  • Intern/Summer Associate (33) $170
  • 2nd Year Analyst (66) $168
  • 1st Year Analyst (202) $159
  • Intern/Summer Analyst (144) $101
notes
16 IB Interviews Notes

“... there’s no excuse to not take advantage of the resources out there available to you. Best value for your $ are the...”

Leaderboard

success
From 10 rejections to 1 dream investment banking internship

“... I believe it was the single biggest reason why I ended up with an offer...”