Walls Closing In On Beleaguered Owners Of 11,000 Unit NYC Apartment Complex As State High Court Hammers Landlord For Illegal Rent Increases

In New York City, The New York Times reports:

• The state’s highest court dealt a financial blow on Thursday morning to the already beleaguered owners of the sprawling Stuyvesant Town and Peter Cooper Village complexes in Manhattan when it ruled that they improperly began charging market rents on thousands of apartments.

• The ruling by the Court of Appeals may mean that the current owner, a partnership of Tishman Speyer Properties and BlackRock Realty, and the former owner, Metropolitan Life, may have to pay an estimated $200 million in rent overcharges and damages to tenants of about 4,000 apartments. In a majority ruling (two of the six judges dissented), the court said the owners improperly raised rents beyond certain set levels at the complexes while receiving tax breaks from the city for major renovations.

• The decision could also affect landlords of as many as 80,000 apartments across the city who may also have improperly raised rents and deregulated apartments while receiving special tax breaks.

• But the immediate and most devastating impact was on the Tishman Speyer partnership, which was already facing extreme financial difficulties after paying a record $5.4 billion in 2006 for the properties near the East River. The owners are running out of cash to pay building loans, and analysts have said it is highly likely the partnership will default by December. If the owners are forced to reimburse tenants, analysts say it would only hasten the path to default.

For more, see Court Deals Blow to Owners of Huge Apartment Complex (The Court of Appeals has ruled that the owners of Stuyvesant Town may have to pay an estimated $200 million in rent overcharges and damages to tenants of some 4,000 apartments).

For the ruling, see Roberts v. Tishman Speyer Properties, L.P.

In a related story on this massive 56-building, 11,000-unit New York City apartment complex, described by some as an alleged "predatory equity" deal designed to force tenants from their homes, see The Wall Street Journal: An Apartment Complex Teeters (High-Profile Tishman/BlackRock Property in New York in Danger of Default).