Another Shot at Stuy Town – Blackstone’s $5.3 Billion Bet
Styuvesant Town-Peter Cooper Village, Borough of Manhattan, New York City, New York
Styuvesant Town-Peter Cooper Village, otherwise known as Stuy Town, is back in real estate news. Blackstone, together with Ivanhoe Cambridge and CWCapital Asset Management, have agreed to buy the 11,232-unit apartment complex for $5.3 billion – nearly matching the $5.4 billion paid for the property by a Tishman Speyer/Blackrock partnership in 2006.
The property is the largest apartment project of its kind in Manhattan. Located on the edge of East Village in New York City, the complex was developed by MetLife in the late 1940s to meet the demand of returning soldiers from World War II. The neighborhood has long been considered the last middle-class area in Manhattan, largely due to the rent controlled element that complicates ownership of the property.
MetLife sold the property to Tishman Speyer and Blackrock at the height of the market in 2006. The partnership had plans to phase out the rent controlled component and eventually convert large portions of the property to condos. However, the new owners immediately met political and market hurdles that it was unable to overcome and in 2010, gave the property back to its lenders. CWCapital Asset Management has been managing the property since.
Blackstone’s Billion Dollar Question
While studying for my masters in real estate at Cornell, the 2006 acquisition was used as a case study in one of my real estate investment courses for what not to do when underwriting real estate. And so the question that remains is, has Blackstone learned from Tishman’s multi-billion dollar mistake? On the surface, it appears they have. They’ve partnered with the city to preserve about 5,000 subsidized units, and they’re taking the long view, planning to hold the property long-term. Nonetheless, Blackstone is known for quick flips, not long-term holds and so it will be interesting to follow this investment in the coming years to see whether the $5.3 billion bet pays off.
For a few different views on this transaction, check out:
http://www.nytimes.com/2015/10/22/nyregion/residents-exhale-after-stuyvesant-town-is-sold.html?_r=0
