Q&A with Charles V. Bagil: The deal that turned Stuy Town upside down
Charles V. Bagli, 59, a real estate writer for The New York Times, is author of "Other People's Money: Inside the Housing Crisis and the Demise of the Greatest Real Estate Deal Ever Made," a real-life real estate thriller about the ill-fated purchase of Stuyvesant Town and Peter Cooper Village.
"Other People's Money," describes how Tishman Speyer and BlackRock overpaid for the complex of 11,232 units and then skipped away, while the investors lost millions, and many tenants suffered uncertainty. Bagli will be discussing his new book at the Stuyvesant Community Center 7 p.m. Thursday, April 4.
Q What's happened to Stuy Town and PCV since your book was finished?
A In 2006, 28% of the apartments there were rented at market rate. Today it's 50%, and there are two different cultures. It's now a tale of two cities: The middle and working class people who have been there - some for three generations, and new people - students and mobile young professionals who have no intention of staying or becoming rooted and who make noise and stay up late and often annoy the older tenants.
Q Tishman Speyer and BlackRock bought Stuy Town knowing rents would cover only 40% of the debt service and there would be a $14 million gap each month between collected rents and debt service: How were they blind to the fact this would end badly?
A They couldn't cover the mortgage from day one. There are lots of examples of new owners coming in and doubling the debt: The strategy is to turn over (increase) rents. The whole travail is indicative of the casino-like atmosphere of Wall Street.
Q How much blame does Mayor Michael Bloomberg shoulder for permitting this sale?
A Bloomberg's record is mixed. He has a huge housing program and is probably building more housing in NYC than the federal government, but it's not keeping pace with all the affordable housing lost as buildings drop out of the 80/20 program after 20 or 30 years. (Also, rental units become deregulated via luxury decontrol and by other methods). When Met Life wanted to sell Stuy Town, Bloomberg could have used his bully pulpit, much like he stands on it to lobby against sugary drinks, to urge Met Life to set aside a percentage of units that would remain affordable. That would have dampened all the crazy bidding. .
Q Yet, we incentivize developers to build luxury housing. What kind of reforms would you recommend?
A It really makes you scratch your head when Trump World Tower gets 421A tax abatements. Virtually all rental housing built in NYC gets some kind of tax abatement. As a society, we have to say there is a benefit to having a variety of incomes living in the city. If the working class people can't live here and get pushed out of the city, you have to wonder if the businesses that need them (as workers) won't follow.
Q And those absentee owners of new $50 million condos and coops - the Russian oligarchs and Chinese billionaires - parking their money in NYC real estate pay much less proportionally than ordinary residents in property taxes. How could the tax code be restructured to be fairer?
A New York's tax system is pretty wacky and disjointed. There has to be much more equity. Time and again, polls show that people will pay taxes, but they want them to be equitable.
Q When you were reporting on the bidding and the sale, did you predict what would happen?
A I don't know if I was a seer, but I raised a question about a deal based on an outcome based that everything would go their (Tishman Speyer's and Black Rock's) way. That never happens. It was extremely predictable.
Q Any heroes in this debacle?
A I feel awkward making a partisan judgment: I just wanted to tell a story. But the tenant association and (New York City Council Member) Dan Garodnick really tried to fight the good fight. They struggled to support the tenants in Stuyvesant Town and rallied support there broadly.
Q And villains?
A The bankers in the casino-like atmosphere of Wall Street were just grabbing for more and more lucrative fees. But the buyers took a sip of the Kool Aid, too. If you or I default on a mortgage, (lenders) want to take our first born child. But there are no penalties for players in this league. I don't know where the fairness is in that.
Q Bankers may have been offering the money, but the buyers didn't have to take it. I really have to ask: How do these profiteers who already have so much more than the people they hurt justify such unbounded greed?
A (Long pause.)
Q Really! It's so shocking. How do these people live with themselves?
A Some people count their success by their number of dollars.
Q Have the needed lessons finally been learned?
A Right now you're seeing residential prices at 2007 levels, and sometimes higher. The banks are requiring more equity now, but I can see the same thing happening all over again.