The sale an 80-acre residential property in lower Manhattan has attracted interest from an array of potential bidders willing to pay up to $5bn (£2.6bn).
US insurance giant Metropolitan Life has hired a broker to register bids for Stuyvesant Town and Peter Cooper Village, a pair of adjacent estates on the East River, New York.
The sale of the 110 apartment buildings, containing 11,000 homes, has attracted interest from institutional investors – private equity groups, pension funds and investment banks – as well as from New York City’s most prominent real estate families.
Originally built for Second World War veterans, about two thirds of the tenants in the red-brick blocks just north of the East Village are in ‘rent stabilised’ accommodation at around half the market rate.
Over the past few years Metlife has completed $300m (£157m) worth of upgrades on the buildings and replaced tenants not listed on lease with tenants who are charged market rates of more than $2,500 (£1310m) month.
A buyer, who at $5bn (£2.6m) would be paying the equivalent of $450,000 (£235,000) per apartment, with designs on redeveloping the properties to create a lucrative address in the central location has a long and tedious process according to Kenneth Patton, associate dean of the Real Estate Institute at New York University.
“The denominator – time – is unpredictable, the bidder is going to have to ‘guesstimate’ the actuarial rate at which the tenants will die or turnover and how much it will cost to buy them out.
“You can’t just snap your fingers and throw these people out on the street. The exit strategy is 10 or 20 years.”
Jonathan Miller, the president and chief executive at of Miller Samuel, a New York real estate consulting and appraisal firm, is more confident, predicting that multiple bidders will team up to put in offers.
“This is a very large and complicated deal,” he said. “The sheer scope of this project means there aren’t a lot of players who have both the financial power and expertise [to pull it off].”
References: EGi News 31/08/06
