The Real Estate Bloggers

Peter Cooper Village and Stuyvesant Town Going Co-op?

Posted: 10 Aug 2010 07:56 AM PDT

Petercooper2 The clean up the ownership situation of Peter Cooper Village and Stuyvesant Town in Manhattan is a prime example of the inertia that is created once deals start happening. And for many of the buildings residents, the injection of the marketplace is going to be very interesting to say the least.

There are strong indications that the new debt holders of Peter Cooper and Stuytown are looking to take the complex co-op. Pershing Square Capital and Winthrop Realty have bought up a great deal of the debt. Pershing’s William Ackman is recommending the conversion from rent controlled apartments to co-op units.

Mr. Ackman, who hadn’t disclosed his interest in the complex previously, said Monday that his group would convert units in the complex into cooperative apartments in what would be one of the largest conversion efforts in the city’s history. “The value of the property as a co-op is much higher than the value of the property as a rental,” he said in an interview.

Mr. Ackman said his group would work with the complex’s tenants association to ensure the co-ops would be affordable so people who live there now would be able to buy their units. He noted that his venture can afford to offer low prices because it bought the debt at such a steep discount to its original value of $300 million—spending about 15 cents on the dollar, or a total of about $45 million. via the WSJ

Having lived in Peter Cooper years ago as well as doing a number of posts on the subject I know the residents are very eager to maintain the status quo. Very eager.

But after the initial purchase and then the bankruptcy, the vultures are moving in. What we will now be seeing is pure capitalism. BlackRock and Tishman Speyers made the deal as an ego play and agreed to terms with the tenants to get the deal done. That was unsustainable at the purchase price they found out.

Now the hedge funds and vulture firms are moving in, buying the cheap debt, and are looking to monetize Peter Cooper Village and Stuyvesant Town as effectively as possible. There is no love in the deal anymore, just cold hard cash.

The combination of a prime location, renters that do not have an ownership stake, and cheap debt now will allow the new caretakers of Peter Cooper and Stuyvesant Town to try to monetize the community through making it a co-op as quickly as it can.

Watch out below is all I can say.

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Peter Cooper Village and Stuyvesant Town Going Co-op?