The landlords of Stuyvesant Town-Peter Cooper Village, Manhattan’s largest apartment complex, are seeking rent increases of as much as 30 percent, asking tenants to start paying the higher rate in the middle of their leases or vacate their units.
CWCapital Asset Management LLC yesterday told 1,300 tenants that under the terms of a legal agreement, monthly rents would rise by as much as $2,200, according to residents and New York City Councilman Daniel Garodnick, who gathered to protest outside the leasing office this morning. Letters placed under apartment doors said tenants would have to begin paying the new rates on June 1 or agree to vacate by mid-July. Most of the proposed increases were $700 to $900, Garodnick said.
“Have you ever heard of such a thing from any decent landlord -- or any landlord?” said Garodnick, a lifelong resident of the 11,000-unit complex. A large mid-lease increase “with only two weeks to prepare is nothing less than an eviction notice.”
After the protest, CWCapital revised the terms, saying tenants would have until July 1 to start paying the higher rates and until Aug. 1 to vacate, according to a statement. The rent increases are in accordance with a legal settlement that set a formula for what the landlord can charge for about 4,300 of the complex’s apartments through 2020.
“Those tenants who are affected by these increases participated in a $173 million settlement agreement that was approved by the court and every one of these residents received notice several months ago with respect to the terms of the settlement, including the ability of the landlord to increase the rent mid-lease term,” CWCapital said in its statement.
The $173 million figure includes reimbursements paid to tenants who were overcharged since 2003, as well as back rent that CWCapital agreed to forgo.
CWCapital, as the special servicer for the $3 billion senior loan on the property, represents investors in that mortgage debt. The firm has controlled the complex, which is home to about 25,000 residents, since the loan went into default in 2010. It is advancing interest payments on the loan to investors as it manages the property, according to data compiled by Bloomberg.
The rent settlement, approved by a judge on April 10, clears the way for an eventual sale of the 80-acre (32-hectare) complex by giving investors a framework to calculate future cash flow from rents and determine the value of the property.
CWCapital estimates it will take 18 months to implement the legal agreement, and it doesn’t intend to consider a sale until then, the company said in an April 15 servicing note. CWCapital said it will spend that time focusing on “operational issues” related to the settlement as well as repairing damage done to the complex by Hurricane Sandy.
Stuyvesant Town-Peter Cooper Village may be valued at more than $3 billion not including the rent increases, according to Roger Lehman, an analyst at Credit Suisse Group AG. That translates to “a zero to very minimal loss” for bondholders, he said in an interview.
“I don’t think this tells us anything about the timing” of a sale, Lehman said of the rent increases. “But if they continue to raise rents, that gets the revenue up for the property and that, in turn, makes it worth more, which should help the bondholders recover the full amount.”
Kevin Burke, 36, a tenant whose two-year lease expires in April 2014, was notified yesterday that the monthly rent on his two-bedroom apartment would rise 16 percent to $4,190. The father of two, including a 3-year-old for whom he just placed a deposit to attend a nearby school, said rent increases are expected -- just not in the middle of a lease contract.
“This is not about ‘boo-hoo for me, my rent is going up,’” he said. “But you just don’t find $600 a month under the cushion of your couch.”
Garodnick said tenants are exploring their legal options, adding that a rent strike is a possibility.
“You sign a lease, you have a rent, you revisit when the lease is due,” he said.
Tenants sued former owners MetLife Inc. (MET:US) and Tishman Speyer Properties LP in 2007, claiming the companies improperly forced at least one-fourth of the complex’s residents to pay market rents while the owners received more than $25 million in tax breaks.
In January 2010, Tishman Speyer missed a $16.1 million payment on the mortgage and said it would cede control of the complex to lenders after its value declined and the owners were prevented from raising rents.
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