The Real Deal New York

Starrett City owners in talks to refinance complex

New debt package would replace existing $531M financing originated in 2009

November 30, 2016 05:00PM
By Mark Maurer and Adam Pincus

Spring Creek Towers at Starrett City (credit: Spring Creek Towers)

Spring Creek Towers, formerly known as Starrett City, in Brooklyn (credit: Spring Creek Towers)

The owners of Starrett City are negotiating with four major banks to refinance the complex, which is the largest federally subsidized residential rental property in the U.S., The Real Deal has learned.

The loan for the 46-building, 5,881-unit complex at Brooklyn’s East New York-Canarsie border would replace the existing $531 million Freddie Mac financing originated by Wells Fargo in 2009. The existing debt, which is expected to carry a principal balance of about $325 million, on the complex expires in late 2019.

The ownership — a group of investors led by the family of the late Disque Deane – hired CBRE’s TRData LogoTINY Todd Trehubenko to market the refinancing opportunity and has begun meeting with prospective lenders, including Wells Fargo.

Starrett City Associates’ Curt Deane, nephew to Disque Deane, confirmed the refinancing plans, but declined to identify the banks. Deane also denied rumors that the owners were considering selling it off-market, saying there is no interest in that.

He added he was unsure of the complex’s current value, though the owners are in the process of determining it.

Sources told TRD the complex’s value today is closer to $700 million or $800 million – a drop from its billion-dollar-plus price tag of the mid-2000s, when the market was at its peak.

David Bistricer’s Clipper Equity sought to buy Starrett City in 2007 in a $1.3 billion bid, but tenant groups and city officials blocked the purchase amid concerns the apartments would become less affordable. The owners spent the next two years trying to sell it, but ultimately took it off the market. That same year, they obtained the 10-year refinancing, as brokered by Trehubenko, who was then the president of Boston-based CAS Financial Advisory Services. As part of the financing, seven undeveloped parcels of land at the complex were released from housing regulations, allowing for them to be sold or developed, documents show.

Also in 2009, they struck a deal to extend the affordability under the state’s Mitchell-Lama affordable housing program until at least 2039.

In 2010, Disque Deane, who had led the development and ownership of Starrett City, died at age 89. His wife Carol and other family members took control of the business.

When the complex opened in 1974, there were more than 200 limited partners. That number has dropped to around 150 limited partners, as several have died or sold their interests over the years.

In a rare occurrence at Starrett City, a few companies – including hedge funds – began buying limited partner interests from longtime equity partners who wanted out, said Curt Deane. Over the past year, five limited partnership interests have been acquired, added Deane, who declined to identify the companies.

“Some of the oldest investors got tired of paying phantom loans through law firms, so they did transactions,” Deane said.

Among Starrett City’s many investors is President-elect Donald Trump, who disclosed in his financial filings for his presidential run that he holds a 4 percent interest in two entities with an ownership stake.

The complex, which was renamed Spring Creek Towers in 2002 but is still commonly known as Starrett City, spans 153 acres. Its boundaries, from north to south, are Flatlands Avenue and Jamaica Bay.

It has been the subject of several lawsuits over the years, including one from last year accusing the owners of illegally barring families intending to lease apartments with rent voucher from Mayor de Blasio’s Living in Communities Rental Assistance (LINC) program.

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