| ||||||||||||||||||||||||||||
| ||||||||||||||||||||||||||||
— Dealwatch —
The auction for Brooklyn, N.Y.'s Starrett City, the nation's largest affordable housing complex is reportedly on hold, according to a Crain's New York story Nov. 11.
The hold up for the property that has been on the block for nearly two years comes as Starrett City's owners and federal housing officials haven't been able to agree "on the fair market value of future rents," Crain's said, noting there was specuation the owners might pull the complex off the block if they couldn't "get the rent numbers that will give them what they think the 46-tower-complex near Jamaica Bay is worth." Bidding is down to two finalists and it will probably go for $700 million if at all, the report said.
The news comes nearly two months after four groups had submitted bids for Starrett City,
Crain's said in late September, even after two of the groups were
rejected earlier in the week by the Department of Housing and Urban
Development as unable to operate the facility. Those who regrouped and
rebid were: the NHP Foundation, which teamed with the Related Cos.; and
the Greater Allen Development Corp., which partnered with J.P. Morgan
Chase & Co., Crain's said. The rejection at the time didn't mean the
game was over, as the seller ultimately decides upon a chosen bidder, a
HUD rep told Crain's.
Meanwhile, the other teams to submit bids were a group that included: Citigroup Inc., Westbrook Partners, the Central Labor Council, the Metropolitan Council on Jewish Poverty and Provident Resources Group, while a second bid team included: the Cogsville Group along with the Christian Cultural Center, the Housing Partnership Development Corp. and the Clarett Group, Crain's said. (The latter two, Crain's said Nov. 11, were the last two standing.) Given the macroeconomic environment, offers were expected to come in below the $1 billion mark, as opposed to going the way of Stuyvesant Town and Peter Cooper Village, which Tishman Speyer Properties and BlackRock Inc. bought for $5.4 billion in Oct. 2006. Starrett City Associates, which is selling the 46-building complex, reached an agreement with state officials in June to keep the complex affordable, which dissuaded some heavy hitters from getting involved. As a July 7 bid deadline drew near, former New York Mets and Boston Red Sox slugger Mo Vaughan was one of seven bidders, Crain's said, representing Omni New York, which has put a lot of money behind New York City affordable housing, intent on maintaining affordability. Clipper Equities LLC offered $1.3 billion for the complex in 2007, which prompted the state's intervention. See more on that below. STAYING PUT Back in April 2007, Clipper wasn't taking no for an answer. Already rejected
twice by federal agencies for its bid, the company looked to a new partner to help with a revised offer. Crain's reported April 22 that Clipper had teamed up with
the Abyssinian Baptist Church of Harlem to help operate the complex. Through its Abyssinian Development Corp., the church has been an
active investor and real estate management company in New York City.
It has invested in projects that have brought affordable as well as
market-rate housing and retail and commercial projects to Harlem, a
community that has until recently been neglected by corporate America.
Abyssinian has developed a reputation among
the community and New York affordable-housing advocates for being a
responsible real estate manager, playing a big role in the current
turnaround of Harlem. Clipper was banking on Abyssinian's strong
reputation, but ultimately, would not prevail. SECOND REJECTION April 7: New York State Housing Commissioner Deborah Van Amerongen rejected Clipper's bid for state approval to acquire the sprawling complex. According to an Associated Press report, Amerongen's office rejected the offer, claiming it didn't protect residents. March 12: In order to buy the complex, Clipper would have needed approval from
both federal and state officials. The state rejected its revised plan, released March 12, to keep the complex affordable. The
new plan followed the federal government's March 2 rejection of the
investment company's initial plan to purchase the property. That rejection contended the buyer had no intention of
keeping the development affordable. Also March 12, Crain's reported that Clipper
laid out a road map for affordability by saying it would cut operating
costs by installing new heating and cooling systems and by lowering
management fees in the 6,000-unit development. The firm also said it intended to build new housing for seniors, a retirement facility and
retail space using the 6 million square feet of development rights,
according to Crain's. FEDERAL KNOCKOUT March 2: Secretary of Housing and Urban Development Alphonso R. Jackson rejected the proposed $1.3 billion sale of Starrett City to Clipper, as it was unable to explain how it would be able to keep the development, which receives federal and state subsidies through the Mitchell-Lama program, affordable for its residents. Jackson sent a rejection letter to Clipper, but did indicate the deal could be revived if the
group could come up with remedies to the government's concerns. "We
look forward to the opportunity of correcting certain underlying
misinformation and to providing the secretary with the appropriate
assurances he seeks," Lloyd Kaplan, a spokesman for Clipper, said in a New York Times article. THE AUCTION Clipper initially won the auction of Starrett City with its $1.3 billion offer in the wee hours of the morning of Feb. 8, 2007, outbidding eight others. The team comprised partners David Bistricer and Sam Levinson. Bistricer has raised some eyebrows because as a landlord, mainly in Brooklyn, he has 8,792 outstanding housing maintenance code violations across 4,768 apartments in 71 buildings. The bidder reportedly outbid the Related Cos. and Apollo Real
Estate Advisors by $500 million. Tishman Speyer Properties, Westbrook,
Vornado Realty Trust, ING Groep NV and Aimco also made offers for
Starrett City. CB Richard Ellis, the broker for Metropolitan Life Insurance Co. on the Stuyvesant Town and Peter Cooper Village deal, is the listing agent for Starrett City Associates. DETAILS OF THE DEAL Clipper's $1.3 billion bid came out to approximately $221,000 for
each apartment at Starrett City. The price tag seemed hefty compared with another deal for a Brooklyn development in 2006. Apollo
Real Estate Advisors and Taconic Partners paid $90 million, or $91,556
per apartment, for the apartment complex that sits across Flatlands
Avenue from Starrett City. CAVEAT TO DEAL Then-governor of New York, Eliot Spitzer, Brooklyn Borough President Marty Markowitz and an assortment of other New York City politicians said they would use their influence to prevent a new owner from raising rents to help pay the billion-dollar price tag. Because it controls a $234.4 million interest-free mortgage on Starrett City, the state can use its influence and reject would-be buyers. Spitzer was monitoring the deal because of concern about the shortage of affordable housing in New York City. The record $5.4 billion sale in October 2006 of StuyTown in Manhattan further eroded the city's affordable rental-housing stock. Tishman Speyer showed all signs that it would remove as many apartments as it could from rent control through renovations and hike its already expensive market-rate rentals. BILLION-DOLLAR CLUB The initial deal for Starrett City fell far short of the $5.4 billion MetLife was able to fetch for StuyTown. But the price tag was still alarming to some. The main reason for the difference in price between the two developments is location. The 80 acres that house Stuyvesant Town and Peter Cooper Village are located in a highly gentrified and more expensive neighborhood in Manhattan. Starrett City is located in the working-class section of East New York in Brooklyn. But the two developments have one thing in common: They were both conceived to provide affordable housing.
Visit the complete Dealwatch Archive | ||||||||||||||||||||||||||||
|
|
|
|
|
