Stuy Town and the Multifamily Craze

The news that Toronto-based firm Brookfield Asset Management, Inc. (NYSE: BAM) plans to partner with tenants in buying the troubled Stuyvesant Town and Peter Cooper Village apartment complex from CWCapital adds a new dimension–or, perhaps kink is more accurate–to the ongoing hoopla over multifamily investments. The apartment complex, the biggest in Manhattan, has become notorious for its debt, mismanagement, and legal squabbles, and represents quite a gamble for Brookfield. With over 11,000 units and a $3 billion senior mortgage (managed by CWCapital), the purchase of this complex along the East River is anything but simple.

Recognizing the complexity of this transaction, Brookfield plans to partner with Stuy Town's tenants in acquiring the property, offering the opportunity to buy their current units as condos (in one of two ways) or continue renting. This alliance, not the first attempted for this property, seems a good opportunity for residents (allowing them more control of the property) and for Brookfield (which clearly didn't want to foot the whole bill).

What I find surprising about this deal is the fact that condos are being proposed, while the rest of the commercial real estate industry seems to be focusing its enthusiasm on rent-based multifamily projects. As the Urban Land Institute finds in its most recent survey, CRE professionals view multifamily investments as the safest bet in today's economic climate. The logic of this wisdom is clear: given the recent home mortgage crisis and ongoing financial insecurity, rentals are the only option for many Americans.

The ULI points out, interestingly, that this is also the case in major economic centers such as Manhattan and San Francisco, where the influence of the rich is unhindered by the economic malaise of the rest of the nation.

Brookfield's Stuy Town deal, if it goes through (forgive my jadedness), will be a rather unique solution for this highly distressed property. Allowing residents to either rent or own will preserve the diversity and economic accessibility of these units, while (hopefully) bringing the complex into some semblance of financial security.

This deal is good news for the middle class. As for Manhattan's ultra-rich, there's always that high rise with the car-elevator.

#CRE #finance