Tenants of Stuyvesant Town-Peter Cooper Village in New York who sued alleging they were overcharged for rent reached a $68.8 million settlement with MetLife Inc. and CWCapital Asset Management, lawyers said.
The settlement received preliminary approval yesterday from Richard Lowe, chief justice of the New York State Appellate Term, First Department, according to a statement yesterday by Wolf Haldenstein Adler Freeman & Herz LLP and Bernstein Liebhard LLP, the law firms for the tenants. A hearing on final approval of the settlement is set for April 9.
Tenants sued MetLife 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. CWCapital gained control of the property after Tishman defaulted on its senior mortgage in 2010.
The settlement clears the way for the eventual sale of Manhattan’s largest apartment complex, which has been held up by uncertainty over how high legal rents can be set at the rent-stabilized property, according to commentary by the property’s loan servicer compiled by Bloomberg. The value of commercial property is determined by the rental income an owner can receive from it.
In January 2010, Tishman Speyer and BlackRock missed a $16.1 million debt payment on the mortgage and said they would cede control of the complex to lenders after its value fell and they were prevented from raising rents.
“When the settlement is approved, it will give us much more certainty with respect to rents and the cash flow on the property,” said Greg Cross, a lawyer for CWCapital.
“CWCapital’s position has been that it needed to resolve this issue before it considered what the ultimate disposition of the property may be,” Cross said.
CWCapital, the so-called special servicer for the $3 billion senior loan on the property, represents investors of that mortgage debt. The firm has controlled the 11,000-unit complex since the mortgage went into default in 2010. As special servicer, it is advancing interest payments on the loan to investors as it manages the property, according to data compiled by Bloomberg
“We took over property operations in October 2010, nearly four years after the suit was originally filed,” Andrew MacArthur, managing director of CWCapital, said in a statement. “Since then we have worked hard to try to balance the interests of residents and bondholders.”
Combined with other refunds, the total recovery in the suit is at least $146.9 million, the law firms claimed. They said that total could “significantly increase,” depending on future rental market conditions and tenant turnover rates.
The appeal is Roberts v. Tishman Speyer, New York State Supreme Court, Appellate Division (Manhattan). The lower court case is Roberts v. Tishman Speyer, 100956/2007, New York State Supreme Court, New York County (Manhattan).