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Keep Our Buildings Heavily Rent Regulated. In Return, We, The Residents of Stuyvesant Town, Give You 20,000 Votes!
November 3, 2009 by Neil · 6 Comments
Fannie Mae and Freddie Mac hold part of the primary $3 billion mortgage on Stuyvesant Town / Peter Cooper Village, the most expensive apartment complex in American history. The financing was then securitized, divided into traunches, and sold to a myriad of investors. There is also $1.4 billion in less-prioritized mezzanine debt, and another $1.8 billion or so in equity put into the property. The folks who put up this $3.2 billion will never see a dime of it again.
Of all of this, Tishman Speyer and its affiliates put in just $112 million, according to one person familiar with the deal. The number I’ve heard repeatedly was in the range of $40-50 million. Now, U.S. Representative Carolyn Maloney, Councilman Dan Garodnick, State Senator Tom Duane, Borough President Scott Stringer and Assemblyman Brian Kavanagh are calling in their chit in rescuing Fannie and Freddie. In an open letter, they remind the two GSEs of their taxpayer-funded largesse. In return, they want Freddie and Fannie to play a key role in “preserv[ing] Stuyvesant Town and Peter Cooper
Village for middle class residents into the future” and “keep[ing] Stuyvesant Town and Peter Cooper Village unified as a single community.” My euphemism translator and code-breaker says that this means: Don’t look to work the building and raise the rents. Don’t expect to take any units out of rent regulation long after the J-51 status expires. Don’t even think about turning the buildings condo.
More importantly, Freddie and Fannie will have to take a haircut on their principal. In exchange for this generosity imposed on taxpayers, Freddie and Fannie will have to agree to surrender opportunities to maximize profit.
Here is a copy of that letter, free of code:
Actually it is the taxpayer largess that anybody involved has a job
Itay,
Yes, to make a finer point: government-salaried officials are using government money to create an economic situation that does not “make sense.” One might respond that government programs to help the poor and working class should not necessarily have a financial bottom line to them. Even if one accepts that argument, however, the income requirements for rent regulation are extremely difficult to enforce. Rent regulation, alas, is more luck than economics.