The proceeds from the largest real estate deal ever could become smaller based on the outcome of a recent lawsuit filed by a group of Stuyvesant Town and Peter Cooper Village tenants in New York State Supreme Court against MetLife and Tishman Speyer.
MetLife agreed to sell the sprawling enclave of 110-residential buildings for $5.4 billion to Tishman Speyer and Black Rock Realty on October 2006. But now a group of tenants have filed a class action lawsuit Jan. 22 that alleges MetLife
had illegally charged market-rate rents for more than 3,000 apartments in the Manhattan complexes, according to a New York Times report.
The tenants also say that MetLife received tax breaks since 1992 under the city’s J-51 property tax program, which, they say, prohibits a property owner from removing apartments from rent regulation.
The lawsuit intends to correct the alleged inflated rents at Stuyvesant Town and Peter Cooper Village. It also seeks a formal declaration that the 3,000 or so market rate apartments remain subject to rent regulation at least until the tax breaks expire, in 2017 or 2018. The suit also asks for $320 million in damages, or three times the rent overcharges for the past two years, as calculated by the plaintiffs.
It is true that MetLife had made a concerted effort since the late 1990s to drastically improve its units and push the costs onto existing tenants via
higher rents. Rents, which reach the $2000 threshold, are considered
deregulated and can be leased for a market rent to the next tenant.
Market rate one-bedroom apartments can be fetched for at least $2800
and two bedrooms at $4000 per month. Since going public in 2000, MetLife's
strategy to maximize its earnings from Stuyvesant Town/Peter Cooper had
also included leasing apartments to NYU students and closing its list for rent-stabilized apartments.
The repercussions of the tenants winning the suit would probably cost MetLife 6% of the sale price. In addition, Tishman Speyer and its partner, BlackRock Realty, would not be able to raise rents as quickly as they would have believed before the suit.
For now, Tishman Speyer says the suit has no merit but the courts will be the true judge of that ... — Gerald Magpily
See New York Times article (registration required - available for limited time)
See Stuyvesant Town-Peter Cooper Village Deal Watch
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