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
Frequently Asked Questions about Blackstone’s $5.3 Billion Bet on Stuyvesant Town
What is Stuyvesant Town–Peter Cooper Village?
Stuyvesant Town–Peter Cooper Village is an 11,232-unit apartment complex located on the edge of the East Village in Manhattan. It was originally developed by MetLife in the late 1940s to house returning WWII soldiers.
Why is this property significant in Manhattan real estate?
The complex is the largest apartment project of its kind in Manhattan and has historically represented one of the last middle-class housing options in the borough due to its rent-controlled units.
What happened with the 2006 Tishman Speyer/Blackrock acquisition?
Tishman Speyer and Blackrock bought the property for $5.4 billion in 2006 with plans to phase out rent controls and convert units. They faced political and market hurdles, and by 2010, returned the property to their lenders.
Who is involved in the 2015 acquisition of Stuy Town?
Blackstone Group, in partnership with Ivanhoe Cambridge and CWCapital Asset Management, acquired the complex for $5.3 billion.
How is Blackstone’s strategy different from Tishman’s?
Blackstone has partnered with the city to preserve about 5,000 subsidized units and is taking a long-term hold approach, unlike the short-term flip strategy pursued by Tishman Speyer.
Why is this deal considered a risky bet?
Given the complex’s political sensitivities, rent control issues, and Blackstone’s reputation for quick exits, there is uncertainty around whether the long-term strategy will pay off.
What lessons were drawn from the 2006 Stuy Town deal?
The Tishman deal is often cited as a cautionary tale in real estate underwriting—used in graduate courses to highlight what not to do when assessing large-scale, rent-controlled assets.
