Stuyvesant Town was built in the 1940s by MetLife, and for years, it has been one of the great rent-stabilized destinations for New Yorkers. A few years ago, however, it was bought by a joint venture of balcRock and Tishman Speyer, who planned to renovate the vacant apartments, pushing them above the $2,000 level, and decontrol them.
Which they did. But a court just ruled that they hadn't ought to have done this, because they (or Met Life) used New York City's J-51 tax credit, a renovation tax credit that was intended to rehabilitate New York's increasingly decrepit housing stock, which is what you tend to get when you set the price of housing at arbitrarily low levels. The court said that if you take the J-51 tax credit, you can't deregulate any of the apartments in the building; the previous understanding had been that this only applied to rent stabilized units which had been built under special programs that gave tax credits to landlords who kept their apartments stabilized for a period of years.
Now the task moves to deciding damages--do the current tenants get a bunch of back rent, or what? Except isn't the joint venture is now very likely to end up in bankruptcy? Even with decontrolling many of the apartments, the JV has been losing money, and has only a couple of months to restructure its debt or go bankrupt. Had the judgement gone the other way, I would have bet on a restructuring--but now, it needs to shed a $200 million potential liability.
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