Stuy Town ruling impacts dealmaking
October 23, 2009 04:30PM By Adam Pincus
Aaron Jungreis, president of the Rosewood Realty Group, and Stuyvesant Town
In one instance, an apartment sale could now be canceled; in a second a seller may have to cut a Brooklyn property's valuation; and in a third, an owner sought to rush a sale to unload his Midtown apartment building.
In all of the cases, the dealmakers said, the sellers or buyers were reacting to the court ruling yesterday by the state's highest court, the New York Court of Appeals, that upheld a lower court decision against Tishman Speyer Properties and BlackRock Realty, owners of the 110-building complex on Manhattan's East Side. The court said the landlords improperly raised rents and deregulated thousands of apartment units while benefiting from special tax incentives in the so-called J-51 program.
Housing experts have said between 35,000 and 80,000 New York City apartments, mostly in Manhattan, could be affected by the ruling. There are approximately one million rent-stabilized apartments in the city.
Real estate professionals were unsure what the ruling will mean for properties benefiting from the J-51 tax abatement program, which gives tax breaks in exchange for capital improvements.
"I spoke with a client with a [sales] deal, who said it was contingent" on the court ruling in favor of Tishman Speyer, said attorney Robert Goldstein, a partner at real estate law firm Borah, Goldstein, Altschuler, Nahins & Goidel.
With the tenants' victory, Goldstein said his buyer could back out, because now the property would be worth less.
In Brooklyn, the seller of a 15-unit Brooklyn Heights property with the J-51 benefits has about eight units the owner claims were free-market, but those might be considered rent-stabilized under the new ruling, said Timour Shafran, an associate broker at Capin & Associates.
He called the owner yesterday to say the rent values should be reviewed carefully.
"It could mean a 10 to 20 percent reduction in price," he said, if the owner was overcharging.
And in Midtown, the owner of an 84-unit apartment building with a J-51 tax abatement today called broker Aaron Jungreis, president of Rosewood Realty Group, to ask him to sell the unlisted property right away.
"My response was, fine," he said. But he cautioned the potential seller that everyone is looking at the same information and would now perceive the owner as desperate.
Whether buildings were put on the market or pulled off, brokers agreed that for apartment buildings with J-51 benefits, the prices would be lower.
"This is just going to hurt values a little more," said Adelaide Polsinelli, associate vice president of investments at Marcus & Millichap Real Estate Investment Services.
Jeffrey Turkel, a partner at law firm Rosenberg & Estis, said several property owners called him wanting to sue the state Division of Housing and Community Renewal, which in the 1990s had issued opinions widely interpreted to allow deregulation as carried out at Stuyvesant Town.
But Turkel, who filed a "friend of the court" brief in the Stuyvesant Town case on behalf of the trade group the Rent Stabilization Association, saw little chance for success.
"Suing the government in this situation is probably an uphill battle," he said.
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Comments
Anonymous
The rule were always in place. Disregard them and run the risk of being caught with your pants down.
Comment #1 Posted By: Anonymous 10/23/09
Anonymous
#1 - what rule - show me the verbiage - if it was so clear why did the lower court rule unanimously for TS and why did the higher court rule 4 to 2. A law that is so ambiguous that after 3 trials the courts still can't agree what the law actually says shouldn't have such detrimental effects on the bond holders of Sty Town, on other owners around the city, and it also shouldn't be such good news for rich market rate renters.
Comment #2 Posted By: Anonymous 10/23/09
Anonymous
The ruling concerns every single apartment in any building receiving J-51s. J-51s are given out over years and years and years. Face it, slimey owners: You can't have your cake and eat it too. You've cheated on preferential rents. You've cheated on MCI increases. You've cheated by not listing your units with DHCR when you know they should have been. And now it's coming back to bite you. Any landlord who had hoped to deregulate units by (allegedly) spending tens of thousands of IAIs in order to bring the apt. up to the magical $2K; and any landlord whose tenants do not automatically move out once their legal stabilized rent hits $2K is affected. Not a big deal? Ha ha ha ha ha
Comment #3 Posted By: Anonymous 10/23/09
Anonymous
#2 Get your facts straight. The original judge dismissed the case -- wouldn't hear it. The tenants appealed, and the lower court ruled unanimously for the tenants. TS appealed to the Court of Appeals which AGAIN ruled in favor of the tenants
Comment #4 Posted By: Anonymous 10/23/09
Anonymous
#4 semantics - you get the point - if the law was so clear and TS was so greedy by deregulating then why can't judges all agree on what the statute says. Are these judges greedy too?
Comment #5 Posted By: Anonymous 10/23/09
Anonymous
Every, and I mean EVERY apartment owner and building owner will be effected by this judgement. To stipulate that the whole law suit is right or wrong is just criminal. To not have the judges rule in 100% of a direction shows how grey this whole situation is. I am not on either side and luckily am not winning or losing, but this partial judgement is just horrible. I have pitty for both TS and the renters. This is a losing judgement!
Comment #6 Posted By: Anonymous 10/23/09
Anonymous
As the ancient chinese proverb states. " This is the way we wash our clothes"
Comment #7 Posted By: Anonymous 10/23/09
Anonymous
#5 Take a civics course. It's called interpretation of the law. That's what judges do - they decide cases that are not clearly black and white. And the majority wins.
Comment #8 Posted By: Anonymous 10/23/09
Anonymous
#8 so what's your point? My point is that the law wasn't clear and thus you can't cry "greedy greed greed" when is seems plenty of reasonable people side with TS's interpretation of the law.
Comment #9 Posted By: Anonymous 10/23/09
Anonymous
next landlord to get busted is Laurence Gluck from Stellar Management.
Comment #10 Posted By: Anonymous 10/24/09
Anonymous
YEAH, Gluck was sure he could get away with taking advantage of middle income people who wouldn't have the means to fight him in court. He's the worst - a combination lawyer and real estate developer. What a combination. The results are extreme greed and scamming the system.
Comment #11 Posted By: Anonymous 10/24/09
Anonymous
Tishman speyer and all of their ilk got what they deserved. Greed is a very bad form of inspiration.......lesson learnt for us all.
Comment #12 Posted By: Anonymous 10/24/09
Anonymous
It was simply a bad deal by TS, who thought they were invincible in bubbly 2006, as did so many other real estate developers who thought the good times would last forever. Duh! Meanwhile, corporations have been ripping off and overcharging the public now for decades left and right, and finally for once, the public, i.e., "the little people", got a fair hearing. OMG the sky is falling!
Comment #13 Posted By: Anonymous 10/24/09
Anonymous
#13 - how is this a ruling for "the little people?" The only people who benefit here are people who are paying $4K for a 2 bedroom. I miss your point.
Comment #14 Posted By: Anonymous 10/24/09
Anonymous
Gluck & Chetrit Group are notorius for taking rent stabilized apartments from Mitchell-Lama buildings & illegally converting them into free market by cheating on costs of renovations. Every dog deserves his day.
Comment #15 Posted By: Anonymous 10/25/09
Anonymous
Gluck is the next greedy SOB who's gonna go down. What kind of a guy comes up with the kind of business model that he's be implementing? someone with no conscience - a sociopath! It's time to clean house and get rid of guys like this.
Comment #16 Posted By: Anonymous 10/25/09
Anonymous
The following is excerpted from Mother Jones Magazine regarding Laurence Gluck and Riverton (Gluck is the guy who bought 16 Mitchell-Lama middle income complexes and has taken or is attempting to take them out of the Mitchell-Lama program, oust the long-term tenants, and charge everyone market rate) ......................................................................... "It all sounds like a classic tale of the bust except that, unlike ordinary people caught up in foreclosure proceedings, Gluck and his partners have made a fortune off Riverton Houses. Just as homeowners often take out some extra cash when they refinance a property, team Gluck pulled out $67 million—the high-roller version of cash at closing. A homeowner would be on the hook for that extra cash, but Gluck's group purchased Riverton through a limited liability shell company, which allows it to shelter its refinancing windfall in case of a default. Minus the down payment, the partners walk away with nearly $42 million. The Riverton deal exemplifies a strategy known as predatory equity."
Comment #17 Posted By: Anonymous 10/25/09
Anonymous
yeah, why isn't anyone going after these guys with their "shell companies?" this may not be illegal, but it sure sounds criminal to me!!!! and where's main stream media? asleep at the wheel? why aren't they writing about this? it's disgraceful. this is as outrageous as wall street guys giving themselves bonuses when their companies are losing money.
Comment #18 Posted By: Anonymous 10/25/09
Anonymous
Its a shame to quote Jungreis in an article like this, he is not an honest broker, the street know this.
Comment #19 Posted By: Anonymous 10/25/09
Anonymous
it's called LLC's - it's not rocket science. This ruling will create an incredible opportunity for a new wave of apartment building investors who will be given years of upside back and purchase prices at 5-10 year lows, depending on the distress of the sale. I'm glad these old greedy owners will finally get their wrists slapped.
Comment #20 Posted By: Anonymous 10/25/09
Anonymous
and the anti-Gluck idiot is back - listen you idiot every real estate deal is bought in an LLC - Prove one illegal thing Gluck has done or shut up. You still can't prove one. You've posted 50 times on this blog without one. Enough.
Comment #21 Posted By: Anonymous 10/25/09
Anonymous
Larry Gluck is a real estate Genius. The anit-Gluck idiot is probably an ex employee and obviously doesn't know a thing about real estate.
Comment #22 Posted By: Anonymous 10/26/09
Anonymous
Stuytown will become sty-town. Deferred maintance will go through the roof. Hmmmm who really won this one?????
Comment #23 Posted By: Anonymous 10/26/09
Anonymous
No one is entitled to affordable housing. Private landlords shouldn't have to bear the brunt of subsidizing the rents of low-wage earners. It should be a burden shouldered by all city residents in the form of taxes and affordable housing projects. These people at Stuy-Town/PCV are just fighting to keep their rents low so that they have more money, not out of necessity to keep living there. Americans and New Yorkers need to stop having this attitude of entitlement. Otherwise, our country will be bought out by other countries who are working harder than us (see: Russia, China, Brazil, India, etc.)
Comment #24 Posted By: Anonymous 10/26/09
Anonymous
I love reading what stupid people have to say about ny real estate here. Most of the dumb comments come from residential brokers... the same people that hustle their clients by bringing them to leasing offices instead of showing apartments. GET REAL JOBS
Comment #25 Posted By: Anonymous 10/26/09
Anonymous
never got the appeal of Stuy town /PCV anyway......it looks exactly like a project with better dressed tenants. I would like to see the buildings decontrolled, then torn down and replaced with the original city grid - some bigger buildings and some smaller.
Comment #26 Posted By: Anonymous 10/26/09
Anonymous
i agree with the poster who is writing about Gluck. i live in Riverton and he is considered the devil here. he is immoral and unethical and will end up a broken real estate developer.
Comment #27 Posted By: Anonymous 10/26/09
Anonymous
The fairest thing the courts could have done was to give property owners the option of repaying the backlog in taxes that J-51 benefits provided instead of having to re-regulate all units that were deregulated while receiving the benefits. If this was the case, the properties would be treated like any other standard rent stabilized building that receives no tax incentives, and deregulation laws would still apply.
Comment #28 Posted By: Anonymous 10/26/09
Anonymous
#28 - who says they cant just pay back the J-51? it may very well like that
Comment #29 Posted By: Anonymous 10/26/09
Anonymous
Gluck Sucks and Chetrit is a Pig
Comment #30 Posted By: Anonymous 10/26/09
Anonymous
#27 "he is immoral and unethical" the Rent Stabilization rules and regs are more detailed than the rules surrounding nuclear reactors. These RS laws include 11 different set of harassment laws. If Gluck is so bad then show us one - just one of these more than 400 laws that he's broken? You tenants are such tools. If you don't like the place move.
Comment #31 Posted By: Anonymous 10/26/09
Anonymous
I did, I moved to Stuy Town
Comment #32 Posted By: Anonymous 10/26/09
Anonymous
TS overpaid for the property, wasted millions in a horribly planned re-landscaping, and has managed to lose money even while overcharging rents. Met Life wasn't perfect, but for decades they made a huge profit on a 100% stabilized complex. In contrast, TS (laughably) cries poverty -- they are not poor, they simply hope to remove rent stabilization. And BTW, NY rent stabilization regs are not so very complex, despite the claims of some posters here.
Comment #33 Posted By: Anonymous 10/26/09
Anonymous
#33 - Met Life started the "overcharging" not TS - Met Life was destabilizing units too - it's simply not true to say the place was 100% stabilized. "And BTW, NY rent stabilization regs are not so very complex, despite the claims of some posters here." Perhaps the most absurd comment made on the Real Deal in the month of Oct. Read the ruling on the StyTown case. Even the judges comment on what a mess all of the rent stabilization regulations are. It's more regulated than nuclear reactors. Finally, when did TS ever cry poverty? Answer, never.
Comment #34 Posted By: Anonymous 10/27/09
Anonymous
#34 you are a so annoying. give it a rest. man, you must have been so unpopular in grade school.
Comment #35 Posted By: Anonymous 10/28/09
Anonymous
TS is in it to make money. What's wrong with that? I don't see why people should expect rent to be stabalized for them. Many of these people keep apartments for years and sublet them to friends and family members which doesn't allow the landlord to keep up with rising costs. That is not fair market- the more apartments taken off of the fair market- the higher those fair markets go because of reduced supply. The market will correct itself now naturally...this ruling will only devalue property even further and add to the destabalization of this economy....
Comment #36 Posted By: Anonymous 11/23/09
Anonymous
not only is junreis dishonest but hes a manipuating lying sob. i wouldnt trust a word that comes out of his mouth. when hes finished getting what he needs from u hell throw u in the gutter & watch u die a slow death. i wudnt listen to a word he has to say, let alone do business with him.
Comment #37 Posted By: Anonymous 03/17/10