Stuyvesant town was built in the 1940’s and had actually been over sixty years old from its initial development. In most parts of the area the residents in this place were living in houses that were more or less in a rent stable condition. In New York rents were on the rise and this may have led Tishman Speyer and Black Rock to purchase Stuy Town. Other factors that were of consideration were the financial implications and luxury apartments were in the long run seen to be a motivational factor for price increases hence the expectations of rewards in raised rents.
In the event of purchase, acquisition of Stuyvesant Town was seen as controversial though Tishman expected to raise rents for the hundreds of housing units so that they could meet the current market rates that were in favor of business. This strategy didn’t work by all means. A court ruling hindered Tishman from converting rent controlled units to market rentals.
The commercial project cost $5.4 billion and this was way above what Tishman could offer as it was even above its market value. But a projection that they could raise rents made them make the purchase with price increase expectations. The motivation behind the purchase was enabled by the fact that despite the $5.4 billion price tag amount, a $112 million of Tishman own money was actually invested hence the purchase was a blind tag to other financiers. Tishman was also to have income; generated from property management as fees. After the collapse of the project Tishman earned $10 million in management fees. A slow move that had begun from 2006; 28% of Stuy Town apartments had been up to market price and the now 50% and the growing middle class owners who could afford some luxury living projected posed a great future to the corporations purchase.
References
Bagli, C. (2013). Other people's money: Inside the housing crisis and the demise of the greatest real estate deal ever made.
Hackel, K. S. (2011). Security valuation and risk analysis: Assessing value in investment decision-making. New York: McGraw-Hill Professional.
