The world’s largest alternate investment group is nearing a deal for a collection of over 11,000 apartments on Manhattan’s east side according to The Wall Street Journal.
Blackstone to splash near the record price paid in 2006
The 56-acre property of Stuyvesant Town and Peter Cooper Village was purchased by Tishman Speyer Properties leading the deal in 2006 when the assembled consortium paid $5.4 billion for the 11,200 apartment “complex.” However, the group defaulted on $4.4 billion in debt in 2010 owing to an overly-bullish estimation of rent increases.
Blackstone is currently negotiating the sale with a group of creditors led by CWCapital Asset Management who took over following Tishman’s default. CW Capital Asset Management is owned by Fortress Investment Group LLC.
If the deal is go forward it is believed that it will involve funds from Ivanhoé Cambridge, the real-estate arm of pension-fund giant Caisse de dépôt et placement du Québec, as well as the City of New York which would pony-up $225 million in order to ensure that low- and middle-income residents would be allowed to stay in a portion of the sprawling complex.
Blackstone is a major player in real-estate
Earlier this year, Blackstone put together the largest real-estate fund in history with a massive $15.8 billion in cash to overwhelm other bidders for high-profile targets that include a $23 billion deal with Wells Fargo & Co. for the real-estate holdings of General Electric.
In addition to the recent GE deal, Blackstone has acquired around 50,000 single-family homes in the last five years as well as making leveraged plays for the Equity Office Properties Trust ($23 billion) and Hilton Hotels ($18.5 billion).
Blackstone reverses course on Stuyvesant Town
Believing that rent controls on properties like Stuyvesant Town are a potential political nightmare for an investment group, Blackstone has according to those familiar with their dealings, largely vowed to stay away but seems to have tracked back on this. Additionally, the failings of the Tishman Speyer group to accelerate the conversion of apartments away from rent control presumably gave Blackstone pause.
In a binding agreement with the City, around 5,000 units will rent well below market rates with about 500 of these being “bargain” two-bedroom apartments renting for no more than $1,500.
“For the traditional rent-stabilized tenants, they can take comfort in the fact that there is very little incentive here for anyone to try to push them out,” said Daniel Garodnick, a Stuyvesant Town resident and city councilman who represents the district that is home to the landmark redbrick complex.