What’s the deal? Did Stuy Town break a world price record or not?

Blackstone and Ivanhoe paid $5.3B, but the deal could be said to be worth $5.46B

Jan.January 07, 2016 02:51 PM

In October, when news broke of the sale of Stuyvesant Town-Peter Cooper Village to the Blackstone Group and Ivanhoe Cambridge, most news outlets reported a sales price of $5.3 billion. This meant the deal had just fallen short of the most expensive single asset sale in history: the record $5.4 billion Tishman Speyer paid for Stuy Town in 2006.

But recently, and quietly, news outlets like the New York Post and the New York Times have adjusted the price up to $5.46 billion. Suddenly the price paid was, in the words of the Post, a “world record.”

What changed? And is the deal really the most expensive single-asset sale in history? The Real Deal set out to find the answer.

Typically, the cleanest way to determine the exact price is to look at public records online. But in this case, it’s of little use. Acris, the online database for property records, lists the combined transfer price for Stuyvesant Town and Peter Cooper Village as $5.456 billion. But the actual filing documents put the “sales price paid” at $5.309 billion – or what was initially reported.

In years of sifting through property records, TRD has never come across an instance when the taxable transfer price of a property was higher than the sales price the buyers paid, let alone by a margin of more than $140 million.

But the Stuy Town sale was no typical deal. And the answer to the price conundrum lies with the role the city played in the sale, according to sources familiar with the deal.

When Blackstone and Canadian pension fund manager Ivanhoe Cambridge agreed to buy Stuy Town from CWCapital in September, in a deal brokered by Eastdil’s Doug Harmon, they shook hands over a sales price of close to $5.5 billion provided they could also reach a deal with the city, insiders said. Then, Blackstone initiated talks with the de Blasio administration over an agreement to keep part of the complex affordable in return for the city’s blessing and subsidies.

In early October, Blackstone and the city reached a deal to preserve 5,000 units at the complex affordable for 20 years. In exchange, the buyers received a waiver of the mortgage recording tax and a $144 million loan from the department of housing preservation and development. That $144 million loan is crucial to explaining the confusion over Stuy Town’s ultimate sales price.

That $144 million figure is equal to the amount of the real estate transfer tax payable on a $5.456 billion deal. As the seller, CWCapital must pay the transfer tax. Still with us? Good, because here’s where the accounting gets complicated.

The city’s $144 million “loan” is a loan in name only, because it doesn’t have to be repaid, as TRD recently reported. Via Blackstone and a few accounting gymnastics, this money went from the city to CWCapital. In essence, the city gave CWCapital the money to pay the transfer tax – effectively the same as the city waiving the transfer tax altogether.

In return for this generosity, CWCapital agreed to lower the sales price to Blackstone and Ivanhoe Cambridge to $5.3 billion. Instead of getting $5.46 billion and paying $144 million in transfer tax, it took home $5.3 billion but didn’t have to pay the tax. In the end, CWCapital received the same amount of money.

Blackstone and Ivanhoe Cambridge paid CWCapital $5.3 billion, and could credibly argue that they didn’t pay a record price. But because the deal was initially valued at $5.46 billion, and because the $144 million transfer tax and subsidy were based on that amount, the taxable transfer price recorded in public databases was still $5.46 billion.

Whether the sales price was a record or not is a matter of interpretation. The buyers paid $5.3 billion, which means they paid less than Tishman Speyer and BlackRock did in 2006. But there is a good argument to be made that the $5.46 billion price tag is what really counts, because that’s what the parties valued the deal at before the city subsidy was accounted for.

Since there is no official arbiter on such matters, both Eastdil Secured’s Doug Harmon, who brokered this most recent deal, and CBRE’s Darcy Stacom, who did the 2006 one, can reasonably lay claim to the crown.

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