This page has been archived and commenting is disabled.
The "Peak Bubble" Deal Is Back: Stuy Town To Be Sold Again
Stuyvesant Town, Manhattan's largest 'rental community', is back on the block as Bloomberg reports Fortress is preparing a $4.7bn bid for the apartmenet complex whose last 'failed' deal came to epitomize the lax lending based on unrealistic projections of future income that fueled the real estate bubble. Tishman Speyer and BlackRock purchased the 11,000-unit complex for $5.4 billion in 2006 - a record at the time - helped by a $3bn senior loan which was sliced-and-diced to investors (and then defaulted upon). But, as one analyst notes, "Stuytown has certainly come a long way since the depths of the crisis,” and Fortress' $4.7bn reflects a "resurgence in pricing." No bubble here at all as they hope rent-stabilized tenants will flip enabling all that fresh cash-flow for yet another yield-chasing investment idea based on the belief that real-estate prices (and rents) never go down (ever)... or potential buyers might remember "too many people have had too many unpleasant surprises at this location."
The "market" is sending signals...
“The Manhattan apartment market has never been stronger,” said Dave Bragg, an analyst at Green Street Advisors Inc., a Newport Beach, California-based real estate research firm. The company estimates that Manhattan apartment asset values are about 9 percent above the 2007 peak.
And so Fortress is jumping in...
Fortress Investment Group LLC is preparing a bid to buy Stuyvesant Town-Peter Cooper Village, the Manhattan apartment complex whose future has been in limbo since its owners defaulted on a $3 billion mortgage four years ago, according to a person familiar with the plans.
The New York-based private-equity firm is seeking financing for an offer valued at about $4.7 billion, said the person, who asked not to be identified because the discussions are private.
...
“Stuytown has certainly come a long way since the depths of the crisis,” said Ben Thypin, director for market analysis at real estate research firm Real Capital Analytics Inc. The $4.7 billion value considered by Fortress “reflects that resurgence in pricing.”
A long way indeed...
Tishman Speyer and BlackRock purchased the 11,000-unit complex for $5.4 billion in 2006, a record for a New York commercial property at the time. The $3 billion senior loan that financed the transaction was carved up and bundled into commercial-mortgage bonds that also contained debt tied to offices, hotels and shopping centers.
...
Tishman Speyer, which based its acquisition on plans to raise the cost of rent-regulated units to market rates and evict illegal occupants, defaulted after tenant litigation blocked that effort and the apartment market crumbled following the global financial crisis. The deal came to epitomize the lax lending based on unrealistic projections of future income that fueled the real estate bubble.
But prices are accelerating...
Stuyvesant Town was appraised at $3.4 billion in September, according to Barclays Plc, up from about $2.8 billion when CWCapital took it over. Barclays estimated in a May 2 report that the property could fetch $4 billion to $4.3 billion in a sale, which would result in zero losses to bondholders.
And now Fortress is set to bid $4.7bn...
“There used to be a saying, if you’re a restaurant you don’t want to open up in a place where other restaurants went out of business,” Stein said in a telephone interview. “All these bidders who otherwise might be very interested may say, ‘you know what? Too many people have had too many unpleasant surprises at this location.’”
It would appear that we have once again reached peak credit, peak real estate bubble, and peak extraploated exuberance all over again.
- 9821 reads
- Printer-friendly version
- Send to friend
- advertisements -


No Surprises here, the CAPE adjusted P/E is almost 24, that's a really high price to averaged smoothed earnings.
Stuytown.. As good as it Gets..
Why hasn't ZH link that article yet: http://www.theguardian.com/commentisfree/2014/may/13/ukraine-us-war-russ...?
"A popular truism is that "the world changed" following 9/11. But what has changed? According to the great whistleblower Daniel Ellsberg, a silent coup has taken place in Washington and rampant militarism now rules. The Pentagon currently runs "special operations" – secret wars – in 124 countries. At home, rising poverty and a loss of liberty are the historic corollary of a perpetual war state. Add the risk of nuclear war, and the question is: why do we tolerate this?"
Stuytown is a shit hole inside of a shit hole wrapped in a shit hole
it's all one big feed lot
10Y at 2.57%. Stuytown at 4.7B. Why are you acting so surprised.
I was going to ask if the people came with it.
Stuytown is a shit hole inside of a shit hole wrapped in a shit hole
It "ain't" that nice. It is worse.
I say cut a deal with the CIA and turn it into the World's largest crack house (I know I'm recycling an old 80s idea, but it seemed to work for some). Cash flow, baby.
This was such a total fuck up before to expect NY residents to pay higher for housing.
sad
The rent is too damn high
Yea but it keeps "us" busy and is a whole lotta fun.
(sarc off)
All that freshly printed money needs to go somewhere.
Money doesn't mean much to Stuy Town. It's actually got a function. Reasonably priced housing for people that live and work in NYC for the Megabucks uptown.
However Stuy Town is an interesting case study. It's tenants are incredibly organised plus they've got that neighbourhood spirit people look for in a big place like NYC.
Example; When the hurricane swamped NYC, it was one of the local communities that actually had their shit together to help manage day to day operating fundementals. Brave folks walked up hundreds of flights of stairs to check in on people that needed a hand. Men and women organised themselves to help clean up. Drinking water and supply management happened nearly instantly. BBQ's to get cooking done. From the news articles I read during the time, it seemed like everyone in the area decided to take a break and go camping in the city. It stuck out like a gem in a bed of gravel with the rest of the mess happening in NYC in the aftermath of Sandy.
What created the strength in that community? Middle men. Lots of them.
https://indypendent.org/2013/08/17/fighting-landlords-stuy-town-detroit
http://www.crainsnewyork.com/article/20121016/real_estate/121019928/stuy...
http://gothamist.com/2006/09/26/i_have_seen_tha.php
The apartment blocks had been under enormous pressure for years by the developer power brokers in NYC to kick all the 'poor people' out so they could put yet another string of (now failed) loft concept condo's. Every dirty trick in the book was pulled on them over the past 20 years to get them to move.
Yet after the storm they were the last people standing with a firm grasp of the situation. Versus the power broker developers that hung all their condo owners out to dry, along with the insurance companies by proxy.
I would love a list of the major bond holders from that deal but I can probably guess.
...round up the usual suspects. [/Captain Renault]
It's publicly available. I actually own a lot of them, but admittedly nowhere close to groups like Teachers (TIAA), ING for a few of its funds, Doubleline, Principal for a number of its funds, etc. Virtually all the exposure is owned by retirees through their pension plans and investments in various mutual funds. Are the usual suspects your parents and grandparents, or did you think it was a bunch of "evil" profiteers?
If they couldn't ditch rent stabilization with Bloomberg in power, how do they figure to do with Comrade de Blasio at the helm? Playing with OPM is all good and well, but seriously?
from fin.yahoo! The Federal Reserve warned it may need to take additional action to rein in banks' funding of corporate takeovers after observing continued deterioration of lending standards this year... [/laughing hysterically]
CalPers will get back on this 3-legged horse and retrieve all of its half billion loss ! < snickers >
WHO DOESN'T WANT TO OWN A PIECE A REAL ESTATE WITH RENT CONTROL ON IT!??!
If civil society in America takes a few steps back I can't think of a place I'd rather NOT be than New York City. Over 10 million people crammed into tight infrastructure. The combination of the fascist oligarchs using the militarized police to try and maintain control to the criminal class declaring open warfare on everyone would be hell on earth.
Perfect place for "The Joker"
No doubt. He's my Avatar because I know I have it in me to be "that guy". But I never WANT to be "that guy". The darkness exits within us all, some more so than others...
Plus all that Financial power so close, wielding so much power against the serfs.
not rent controlled but rent stabilized
Hauling up the nets for a fresh catch of "suckers"...
I got $20 that says China buys it...
I don't know about you, but I love paying as much as possible for something.
Must be banking on going condo....... LOL :)"
I bet the new Mayor buys it..he is looking for some low income housing....Blasio blocks they could call it....
it dont get any uglier than Stuyvesant Town
looks a lot like Co-op City in the Bronx
Make it a casino. Cuomo is putting a casino in every town in NY.
If the residents knew what was good for them, there would be a continuous, well-publicized crime spree or riots occurring there from now until deal closing. mayhem -> lower price -> lower rent
American Homes Beats Blackstone With Low Rental-Bond Yields
13 May 2014, by Jody Shenn (Bloomberg)
http://www.bloomberg.com/news/print/2014-05-13/american-homes-beats-blackstone-with-lowest-rental-bond-yields.html
The deal is actually very cheap on a gross rent multiplier and price per units basis, 13x and 420k respectively.
Moreover, the NOI margin at the property is 50% and mor normalized is 65% reflecting $50mm of upside in NOI that a sophisiticated operator like Fortress will be able to extract.
In place NOI is $180mm reflecting a 4% cap rate in in-place.
NYC multi is safer the 10YT as you have diversified borrower base and inflation hedge through annual leae resets.
Fortress will do well even at this value.
11k units? How much is the rent in each one? Let's say $3000 per month. 3k x 11k = 33 million per year in revenue. At a price of 4.7 billion, that would put the revenue to assets somewhere around 0.7%. 1% if I round up. wtf mate.
This is what a good REIT's numbers look like:
https://www.google.ca/finance?q=TSE%3ABEI.UN&fstype=ii&ei=DYtzU7DSCYatiA...
0.46 billion revenue on 5.9 billion assets.
3k/mo x 11k units x 12mo = 396mm annual revenue.
Spungo you are an absolute moron you should leap off stuytown building 6
The average monthly rent is much closer to $1,000 than it will be to $3,000 for some time - getting the people out was the problem last time (ran out of cash for interest) and that was Tishman Spier - who have a lot of experience except for the kid at the time who wanted to be daddy
so how do you get them out - sure some illegal sublets but that is a long term pitched battle in discovery
people would marry just for the apartment rights and then get a divorce - there are a lot of chicks would would marry a guy 80 years old you can believe it
further there are a lot of lawyers in the complex retired at leat 100with nothing to do but drive someone crazy - in a four story building you can create havoc and get them out 10,000 units scale works the other way - they got you - fortress i think is chicago based so they have less appreciation for the game and see mostly numbers
Jerry Speyer was a serious guy so whoever they got it should be interesting
actually, you won't get very many of them out because they aren't stupid greedy pigs like their landlord. they know the rent laws and understand their leases. stuy town was built by an insurance company as middle class housing so no landlords were ever harmed by the rent stabilization laws here. the reason the building is rent stabilized is because the previous landlord took tax abatements and voluntarily entered into the rent stabilization system. look up j-51, if you don't believe me. the reason the last landlord went bankrupt is because they based their projections on being able to scare the existing tenants out with legal hocus pocus. i'm not in stuy town but i'm in another project that left a housing program. my landlord, lawrence gluck, made up a bs case against me claiming i was an illegal sublet and tried to evict me. my lawyer kicked his ass. so did my neighbor's lawyers. the only guy on my floor that they scared out was an unstable troubled man who lived alone and talked to himself. these pricks make their living by preying on the weak and old.
since, the new landlord has a more realistic view of what his rent roll will be, it's much more likely that he will be able to pay his mortgage and this will all work out fine for everyone.
This is so damn funny. Can't believe that piece of shit is back in action.
Rent control is a form of state theft of private capital, so actually I wish them luck in either removing the freebie tenants or in getting controls overturned...or something...
+1 regarding rent control, yet in this case it was originally built on property that was seized under eminent domain in the name of 'urban renewal', and the public private rabbit hole only goes deeper from there.
If Gerry Guterman gets his hands on it he will either find a way to make money with it or dump it back to the banks....rinse, wash, repeat.
J
Stuytown Summary
Price Per
Units
11,298
$416,003
Buildings
56
$83,928,571
Residents
25,000
$188,000
Acres
80
$58,750,000
Gross SF
12,064,341
$390
2013 Rev.
$357,000,000
13.2x
Gross Rent Multiplier
2013 Exp.
$179,000,000
2013 NOI
$178,000,000
Margin
49.9%
Normalized Margin
65.0%
Normalized NOI
$232,050,000
Fortress Offer
$4,700,000,000
Cap Rate on 2013 NOI
3.8%
Cap Rate on Normalized NOI
4.9%
The cap rate is a bit low but it's reasonable. Not a terrible investment. Definitely not in the same ballpark as Twitter.