MetLife Says It Reached Accord With Stuyvesant Tenants
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The accord is incomplete and subject to court approval, New York-based MetLife said in a Feb. 28 filing with the U.S. Securities and Exchange Commission. Terms weren’t disclosed. Alexander H. Schmidt, an attorney for the tenants, and John Calagna, a spokesman for MetLife, declined to disclose them.
“We’re very pleased with it,” Schmidt said of the agreement in a telephone interview. “It’s a very fair and reasonable outcome for the claims against MetLife.”
The tenants sued MetLife and Tishman Speyer Properties LP in 2007, claiming the companies improperly forced at least one- fourth of the residents to pay market rents while the owners received more than $25 million in tax breaks.
The 80-acre Stuyvesant Town-Peter Cooper Village development is Manhattan’s largest apartment complex, with more than 11,000 units. It runs from 14th Street to 23rd Street on Manhattan’s East Side.
MetLife sold the complex in 2006 to Tishman Speyer Properties LP and its partner BlackRock Realty LP for $5.4 billion, a record for a New York commercial real estate deal at the time.
Tishman Speyer and BlackRock missed a $16.1 million debt payment due in January 2010 and said they would cede control of the complex to lenders after the value fell and they were prevented from raising rents.
A state appeals court in November affirmed a decision by Supreme Court Justice Richard Lowe III to deny a motion by MetLife to dismiss the suit.
Lowe dismissed the tenants’ original lawsuit in 2007. The appeals court reinstated it and ruled on behalf of the tenants, who are seeking more than $215 million in damages.
A tenants’ association has been working with Brookfield Asset Management Inc. (BAM/A) to buy the complex since Tishman and BlackRock’s default.
The group intends to convert most of its units to condominiums while retaining its historical affordability to middle-class residents and satisfying debt holders represented by special servicer CWCapital Asset Management LLC.
“We’ll wait to see what the details are as they unfold and hope they will bring fair compensation to the many residents who were overcharged during the time that MetLife was the owner,” said City Councilman Daniel R. Garodnick, a lifelong resident of Stuyvesant Town-Peter Cooper Village who has been working with tenants on a plan to acquire the property.
The MetLife settlement begins to clear the way for an eventual sale of the complex, said Roger Lehman, a managing director at Credit Suisse Holdings USA who oversees research on bonds backed by commercial mortgages.
“We view this as one of the hurdles that needed to be cleared,” Lehman said. “Having clarity on the back rents and forward rents would help to get the maximum value for the property.”
The value of the property in an eventual sale can’t be determined until an agreement is reached about what rents the owner can legally charge. The main hurdle to determining that is the litigation between the tenants and CWCapital Asset Management LLC, Lehman said.
“One of the issues for valuing the property is how much the actual damages are for prior overcharges and who has liability for that,” Lehman wrote today in a note to clients.
CW, which is advancing interest payments to bondholders, valued the property at $3 billion in September, according to data compiled by Bloomberg. Greg Cross, an attorney for the company, declined to comment on the MetLife deal.
CW has said the “‘earliest likely resolution” of the legal rent question will be in mid-2013, according to servicer data compiled by Bloomberg.
Schmidt declined to comment on any pending settlements with the remaining defendants. MetLife’s “estimable losses” in the lawsuit have been accounted for in its financial statements, according to the company’s filing.
“The legal rent setting issue is strictly a part of the case involving CWCapital,” Schmidt said. “The MetLife settlement should have no impact on that issue.”
The appeal is Roberts v. Tishman Speyer Properties LP, New York State Supreme Court, Appellate Division (Manhattan). The lower-court case is Roberts v. Tishman Speyer Properties, 100956/2007, New York State Supreme Court, New York County (Manhattan).
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