It’s difficult to read the words Stuyvesant Town or Peter Cooper Village without soon seeing the words “middle class.” It’s equally rare to see the surrounding side streets described with words other than run-down, drab or gritty.
One $5.4 billion sale later, Stuy Town and Peter Cooper are headed upmarket under the aegis of new owner Tishman Speyer, and hopes of a rising tide for the surrounding area are running high.
Expectations of a “Tishman effect” have already inspired one investor to get in early and negotiate his first deal in the area outside the East Side complex, which is bordered by 14th and 23rd streets, and First Avenue and the FDR Drive. Brokers are busy with other deals nearby on 22nd Street and Avenue C. North Fork Bank took a long-term lease nearby, and other retail deals appear likely.
Stuart Saft, real estate chairman of law firm Wolf Haldenstein Adler Freeman & Herz, says one of his clients is betting on Tishman Speyer to begin substantial improvements soon. Inspired by this expectation, Saft’s client is now negotiating to buy two buildings located across from Peter Cooper Village, which extends from 20th to 23rd streets. The investor has a large portfolio of long-term holdings and will be adding a property from this neighborhood to it for the first time.
“I am very bullish on that area,” says Saft, who expects to see more properties in the neighborhood put on the market — and more attention from investors — in the new year. “There’s never been a great deal of interest in that area. That’s going to change.”
John Ciraulo, CEO of Massey Knakal Realty Services, also reports interest in the Stuy Town neighborhood. As of press time, he had clinched a contract for the sale of 316-318 East 22nd Street for about $5 million, or roughly $325 per buildable square foot.
The local buyers, whom Ciraulo declined to identify, just completed a conversion a few blocks away. He says the relative affordability of property in this part of town compared with prime Midtown neighborhoods appealed to the buyers. He said Stuyvesant Town’s planned upgrades would benefit area landlords.
“Improving the buildings and amenities, improving the average income of the area will bring in higher-quality retail tenants and other people who want to be around that type of people,” says Craig Evans, senior managing director at Colliers ABR. “It’s classic gentrification.”
Neighborhood observers also expect upgrades to the retail in Tishman’s complex and surrounding blocks. That’s already underway, notes Robert Perl, president of Tower Brokerage, located in the East Village. Perl just clinched a long-term lease for North Fork Bank at 36-38 Avenue C. Perl says that type of tenant would never have considered locating on the block five years ago.
Perl has seen the retail upgrade on Avenue A south of 11th Street as the East Village has undergone a renaissance. Because of the Tishman deal for Stuy Town and Peter Cooper, Perl expects Avenue A north of 11th Street, the stretch that borders Stuyvesant Town, to experience the same kind of slow improvement.
“Over the course of a decade or so that section is going to look like the rest of Avenue A, and Stuy Town will be a factor in it,” he says.
The deal to acquire over 11,000 apartments on an 80-acre private park from MetLife closed in November, despite challenges from tenants who fear losing affordable housing.
In public statements, Tishman has sought to allay those fears. In an October press release, CEO Jerry Speyer said: “The thousands of tenants in rent-stabilized apartments are completely protected by the existing system. No one should be concerned about a sudden or dramatic shift in this neighborhood’s make-up, character or charm.”
Yet given the unprecedented purchase price and ever rising market for Manhattan residential properties, most real estate insiders expect Tishman to raise rents or convert some units to condos or co-ops to recoup its investment. Such a process will take time, and so will the resulting ripple effect.
Some upscaling already began under MetLife, which shifted the emphasis to luxury rentals during the last few years.
“Eventually it’s going to go co-op or condo, and hopefully go from a class B neighborhood to a class A neighborhood because of the changes,” says Larry Michaels, vice president specializing in investment sales and developments at Prudential Douglas Elliman. “Quite frankly, they paid an exorbitant amount of money, and it doesn’t make economic sense to hold it as a rental project.”