Ever since hedge-funder Bill Ackman announced his plan to force the vast Stuyvesant Town housing complex through a foreclosure process that would bring the Manhattan megadevelopment into his own hands, we've wondered what his plan would look like. (Full disclosure, readers, you should know that Intel Chris lives in Stuy Town, in case his deep knowledge about black squirrels and blue hydrangeas hadn't tipped you off by now.) Now we know. Ackman intends to avoid the plight of previous owners Tishman Speyer — who hoped in vain to push the complex into profitability by converting a large number of rent-stabilized units to market rate — by turning as much of the complex as possible into a giant co-op. This is, in a way, what the Tenants Association also wants: to give people the option to buy if they can and want to do so, but also to to keep a stabilized rent option available (and keep the so-called "middle class" nature of the complex intact, to boot).
The Tenants Association doesn't have a specific plan for a partial, non-eviction conversion that would maintain this "middle class" feel. We spoke to City Councilman (and Stuyvesant Town resident) Dan Garodnick about this earlier in the week. He said the association was waiting to see whether "it's a negotiated solution or whether we are making an independent bid" before making any solid plans. "There are mechanisms frequently used in affordable cooperative or condo conversions that you might see here, although we have not latched on to any in particular."
Here's Ackman's plan in a nutshell: He'll assume the first $3 billion mortgage in its entirety and agree to pay it off over time. According to the Times, that means he's basically paying $300 per square foot in the complex. He hopes to sell the majority of the apartments, and with prices in the $800 to $900 per-square-foot range in the surrounding neighborhood, he has a lot of room to maneuver while still offering a seeming discount to residents. Renters would be offered shares in the corporation at a price "based on the size of the unit and its location within the complex."
In a nod to the Tenants Association, Ackman wants a non-eviction conversion, so rent-stabilized tenants could not be kicked out if they do not buy, and market-rate tenants would be allowed to stick around until their leases expire. (Unfortunately, this is very murky territory, as a judge's recent court decision has a wide swath of formerly market-rate apartments temporarily held at rent-stabilized rates, with the possibility that they will stay that way.)
According to the Times' math, if Ackman offers apartments up for $600 per square foot — a substantial discount to market rate — total monthly costs (including tax and mortgage payments) for residents will probably still go up significantly. But that may not even be the key problem — nowhere in the plan announced today is there yet a nod to the enduring "middle class" element that Garodnick and the Tenants Association hold so dear. Things like a flip tax or median income restrictions only stand to dent Ackman's bottom line.
"At the end of the day, any potential bidder here can't go around us, they can't go behind us, they can't ignore us. The future of the property lies with the tenants. And their goals need to be satisfied," warns Garodnick. "Whether it's a rental scenario or a co-op scenario, the tenants are the ones who are paying the money. Not to put too fine a point on it, but you need buy-in from the tenants and their local leaders."