B$b: Part 10, the residents’ imperatives
[
1, starting gun, 2, opening bets, 3, what’s at stake
4, paging the cavalry, 5, must the public pay?,
6, orchestra warms up, 7, unpublished score, 8, hidden free riders.]
Previously, we saw that the seller has opened the action by selecting a proposed buyer, rejecting the residents’ offer as too low. Game over, right?
Not quite. The residents have at least one city councilor strongly on their side:
Daniel R. Garodnick, a city councilman who lives in Peter Cooper and helped organize the tenant offer, expressed disappointment that a symbol of middle class housing would be lost: “Eventually, I think what you will see is a market-rate, gated community, which is what MetLife was pitching to all the potential bidders.”
The residents did make one predictable move: they themselves offered to lead a charge toward a partial conversion:
The tenant bid was intended to preserve about 20% of the apartments for middle-income families who rent and another 20% for residents who want to buy. Most of the remaining apartments, under that plan, would have been sold at market rates.
So under the residents’ own plan, 20% of them would become homeowners, and only 20% would be preserved. That’s acknowledging a lot of inevitability of change.
In an attempt to bolster their offer, the tenants had sought tax breaks and exemptions from the Bloomberg administration.
But the mayor took a hands-off approach, saying, “MetLife owns it, and they have a right to sell it.”
“At $500 million, I’ll wash my hands of it.”
That quote, if it really reflects the mayor’s position, is an exercise in issue prestidigitation. The question for the city is not whether an owner can sell, but should the city offer resources to help?
Deputy Mayor Daniel L. Doctoroff said it was a matter of the best use of scarce resources. He said it would have cost the city nearly $500 million to provide the tax incentives the tenants’ wanted.
And that, we recall, only brought the residents’ offer up to $4.5 billion.
For the same money, nearly $107,000 per unit, the city could build a new middle-income apartment, and possibly, preserve another affordable unit elsewhere.
Mayor Bloomberg, at the moment, is saying no. And like a good elected official, he’s showing activity with the money that might otherwise go to
Indeed, the city was expected to announce a deal tomorrow with the Port Authority of New York and New Jersey to build low- and moderate-income housing at Queens West, a waterfront development in Hunters Point, according to a Port Authority executive.
The Bloomberg Administration’s decline of assistance puts the residents in a very weak position, because as matters stand, they can neither block the sale (themselves or via their public officials) nor offer enough to make it worth the seller’s while.
Now what?
The preservationists have to get MetLife back to the table. They can do this in three ways:
1. Create credible legal arguments.
2. Stir up a political firestorm.
3. Dissuade the buyer from proceeding.
If the preservationists are smart, they will seek to do all three, with actions such as the following:
1. Continuing to press the Bloomberg Administration (whose neutrality is expected but doesn’t help them) to continue to pronounce that it will vigorously enforce rent stabilization rights.
2. Review the original urban renewal site assembly documents (that is, from 1947) in hopes of finding either an implicit city right to approve a sale, or an explicit or implicit obligation that the property remain affordable indefinitely. One lever sometimes deployed is to try to show that conversion to market use busts previously approved zoning. For instance, suppose zoning waivers, such as for less parking than required, were granted based on reasoning that in 1947 lower-income people would be less likely to own cars. Does conversion to market use void that previous zoning waiver?
3. Prepare and hold ready for filing a preliminary injunction to block the sale — remember, the LOI or P&S is not a sale, and therefore revocable — based on whatever legal theories they can construct.
Thus there should be activity on multiple fronts: (1) process, (2) substance, and (3) public perception.
While all that’s going on, the preservationists would like the buyer group to be demonized, but this is a risky proposition if in fact the buyers are (as we speculate, and as I would recommend if anyone were asking my advice) having quiet discussions with the residents about a friendly affordability-oriented sale of some large subset of the buildings. Ideally, therefore, they would have deniable but colorful mouthpieces doing the demonizing for them. Like this:
“Stuyvesant Town was a national model for middle class people in an urban setting,” said John H. Mollenkopf, director of the Center for Urban Research at the
You need a whole bunch of these
One key is this: Are the residents demonizing the buyer in the press? If they are, that’s a signal negotiations are going poorly or not taking place. But if the residents are curiously quiet, that bespeaks unpublicized activity.
4. While the preservationists are trying to rally. The seller will be sprinting.
I’m closing as fast as I can!
Tishman Speyer and BlackRock were among about eight companies invited to make final bids for the complexes on Monday afternoon. Apollo, the No. 2 bidder, came in at $5.33 billion.
Give MetLife credit for a very effective and accelerated auction process.
MetLife and its broker, Darcy Stacom of CB Richard Ellis, negotiated with Rob Speyer into the early-morning hours, then signed a contract at
For the sellers, speed is essential.
They plan to complete the deal in a month — three times faster than most buyers close on a single-family house.
We’ll see.
“MetLife really enjoys seeing its name in the paper.”
While the seller wriggles in the stocks, the buyers have a more complex value formula, including the likely possibility of mitigating their financial and political risk by pre-agreeing a limited-affordability deal.
Watch the deadlines.
If the buyer closes by mid-November, then I’m wrong, and the residents will have next to no leverage. But if the closing starts slipping, as I expect it will, we may find some very curious and complex realignments of interest among seller, buyer, and various residents groups.
Who’ll be dancing with whom?
