New York's top court is hearing arguments on whether rent was wrongfully raised on thousands of middle-class Manhattan apartments, a case that could affect rent regulations throughout New York City.
The court case comes a day after it was revealed that the new owners of Stuyvesant Town and Peter Cooper Village are in danger of running out of money and defaulting on $4.4 billion in loans.
Residents are in court arguing their apartments had been improperly deregulated, allowing rents on some 3,000 apartments to rise 25 percent to market rates.
A state appeals court ruled in favor of the tenants, saying Tishman Speyer Properties could not deregulate those apartments while receiving a so-called J-51 city tax credit. Tishman is appealing the ruling Thursday before the state Court of Appeals.
The case is being closely watch by New York City landlords, who are concerned the court's ruling could affect other apartments.
Yesterday, there was more bad news for Tishman, who along with partners, bought Stuy-Town in what amounted to the biggest real estate deal in U.S. history.
Purchased three years ago for a record $5.4 billion, the 110-building Stuy Town/Peter Cooper Village rental complex is now valued at just $2.13 billion by a credit rating agency.
Jerry I. and Rob Speyer and their partner, BlackRock Realty have nearly exhausted an additional $890 million set aside for apartment renovations, landscaping and interest payments. Rents are down 25 percent from their peak, officials said.
Real estate analysts have found that Tishman's money will run out as soon as December and that the owners are at “high risk” of defaulting on $4.4 billion in loans. A spokesperson for the group did not dispute the Times report that said Tishman is likely to default on its loans and can hold out "but only until February."
“We are absolutely keeping an eye on it,” said Rafael E. Cestero, the city’s housing commissioner told the newspaper.
“We’re not doing this to bail out anybody who was part of the original transaction,” he added. “Those folks are going to take their lumps. We are looking at how we can ensure that the rent-stabilized units and the families that live there and families that could live there in the future could be insulated from the unwinding of this deal.”