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Then It Was BlackRock, Now It's Blackstone But The Result Will Be The Same

Whether one calls it the latest glitch in the matrix, or yet another "market peak" indicator, the outcome will be the same.

First, a flashback to the following October 17, 2006 Bloomberg story when BlackRock together with Tishman, announced it would buy Stuyvesant Town for $5.4 billion:

Tishman Speyer Properties LP, the owner of New York's Rockefeller Center, and BlackRock Realty won the auction to buy MetLife Inc.'s Stuyvesant Town-Peter Cooper Village, Manhattan's largest apartment complex, for $5.4 billion.

 

MetLife, the biggest U.S. life insurer, has been divesting Manhattan property holdings since last year, when it paid $11.8 billion for Citigroup Inc.'s Travelers Life & Annuity insurance business. MetLife sold its namesake building at 200 Park Avenue to closely-held Tishman Speyer in April, 2005, for $1.72 billion.

 

"This is just a rare, rare opportunity'' to buy 80 acres of Manhattan, said Robert White, president of Real Capital Analytics Inc., a New York-based real estate research firm. "Also, we're in a period where a lot of real estate investors are flush with cash, so billion-dollar deals are not so uncommon anymore.''

 

The sale may be the biggest real estate transaction in U.S. history, said Steve Murray, editor of Real Trends, a residential real estate communications company. The United States government paid $15 million for the Louisiana Purchase in 1803, the equivalent of $277 million in today's dollars, according to the historical price calculator measuringworth.com. The median price of new homes in the U.S. was $237,000 in August, up .34 percent from $236,200 a month earlier, according to the U.S. Census bureau. The median price of Manhattan condos rose 1.5 percent to $990,000 in the second quarter from $975,000 in the first, according to Miller Samuel Inc., the biggest Manhattan appraiser.

Fast forward 4 years to 2010 when Blackrock and Tishman admitted a complete loss on their "rare, rare opportunity" investment:

The partnership that bought the 80-acre property on the East River announced on Monday that it was turning the keys over to its lenders after it defaulted on its loans and the value of the property fell below $2 billion. Yet in walking away, the partners, Tishman Speyer Properties and BlackRock Realty, have left tenants in limbo and other investors with far bigger losses.

 

“At the time, it looked like a sound investment,” said Clark McKinley, a spokesman for Calpers, the giant California public employees’ pension fund, which bought a $500 million stake in the property. “When the market tanked, we got caught.”

And then, today, only it is no longer BlackRock, now it is Blackstone which is again buying Stuy Town for the same amount: $5.3 billion.

Blackstone, working with Canada’s Ivanhoe Cambridge Inc., will acquire the 80-acre (32-hectare) enclave for about $5.3 billion, the company and city officials said Tuesday. That’s just under the record $5.4 billion that prior owners Tishman Speyer and BlackRock Inc. paid almost nine years ago before walking away from the mortgage in 2010, marking one of the biggest collapses in the last decade’s real estate boom.

 

Blackstone -- which has built itself into the largest U.S. single-family home landlord and is bulking up an apartment business -- made its first multifamily purchase in Manhattan in September, leading a venture that acquired 24 buildings for $690 million. Gray said this month that he was bullish on the borough’s rentals because it’s too costly for many residents to buy.

 

The transaction was formally announced at a press conference Tuesday featuring New York City Mayor Bill de Blasio, Blackstone real estate chief Jon Gray and City Councilman Daniel Garodnick, a lifelong resident of Stuyvesant Town-Peter Cooper Village.

 

“We can now say to thousands of hard working people, thousands of families in Stuytown: Your future is now secure,” de Blasio said from a courtyard in the complex, flanked by long-time tenants who just learned of the deal. “You can afford your housing for the long haul.”

Actually no: "The deal includes an agreement that would keep almost half of the more than 11,000 apartments affordable for 20 years." Which means more than half will suddenly become unaffordable, once Blackstone yanks rents through before the ink on the title deed is even dry.

As for the obligatory forecast:

Stuyvesant Town is “so big, it’s so well located, there’s still so much upside in it that someone is still going to make a lot of money if you hang in there,” said Peter Hauspurg, chief executive officer of brokerage Eastern Consolidated, who isn’t involved in the deal.

Or just call it a "rare, rare opportunity", again.

And because this time is not different, we eagerly look forward to 2019 when Blackstone is BlackRocked, and it too, suffers a complete loss on its "rare, rare opportunity" investment.