Friday, July 28, 2006
How Parkchester fared after the Met sold it
LOOKING AHEAD by Wally Dobelis
The prospects of Metropolitan Life selling the Stuyvesant Town/Peter Cooper
Village complex raises the question of what will happen to the properties, the
largest apartment complex in Manhattan. More importantly, how will such a
sale affect our neighbors, the over 25,000 people living in the 110 buildings, in 11,250 apartments on
the more than 80 graceful parkland acres?
To answer the question, we turn to Josh Barbanel of the NYTImes, to find
that condos are the trend. Despite thousands of apartments on the market,
7,000 new ones have been applied for in the first half of 2006. Sales had
slowed but have recently picked up, and his sources state that the market
is extraordinarily strong for the higher priced apartments. Condo
conversion by the buyer/sponsor is probably the direction for ST/PCV,
should the sale materialize.
Let’s also spend some time looking to what happened to the Met’s first
foray into mass housing, the Parkchester development, now a condominium
colony.
The Parkchester housing development consists of 171 residential brick
buildings on 129 acres of Northeast Bronx between Tremont Avenue and the
Cross Bronx expressway. It has its own subway to Manhattan, 45 minutes
away, the #6 Lexington Avenue train. There's also a post office, a public
library branch, an Art Deco theatre (now a multiplex), a 100,000 sq. ft.
Macy’s (a tenant since 1941), some national retailers and a number of
smaller stores, coffee shops and restaurants; a complete city within a
city.
In its time the largest housing complex in the US, it was begun in 1938 and
completed in 1942. With 12,271 apartments for 42,000 working people, middle
income tenants, with a central oval park, landscaped grassy plots,
featuring a Fantasia fountain, it was a successful prototype for the ST/PCV
design, planned in 1942-3 and completed in 1947. All three
projects were approved by the City Planning Commission, despite
discriminatory tenant selection practices, later overridden by court
decisions. To serve the ethnic communities, the Met had also built a
separate but equal facilities development in Harlem, Riverton Houses.
For two decades Parkchester was a fine housing site for its tenants. But
trouble was brewing, the surrounding communities were declining, crime and
poverty were spreading. The trend was unmistakable, and the Met started
neglecting the upkeep, not throwing good money after bad. It sold
Parkchester to developer Harry Helmsley in 1968, and he converted the two
sections into condos, North in 1974 and South in 1986, despite strong
opposition from tenant groups and their elected representatives. But the
real estate market continued to drop, buyers were faced with losses, and
the sponsor cut expenses. In 1998 Helmsley and his partners sold the 6,362
money-losing apartments that he still owned, including 700 vacancies kept off the market for fear of rent control, to the not-for –profit Community Preservation
Corporation, a group founded to use bank financing in rescuing struggling
communities. By that time the tenancy had changed radically, from nearly
all white to predominantly ethnic.
CPC’s for-profit subsidiary, CPC Resources, set up a Parkchester
Preservation Corporation, financed through the value of the ex-Helmsley
apartments, bought for $4.5M. That was the collateral for financing the
badly needed renovations, to be paid for by higher condominium charges (reportedly increased by $30-80 /mo) over 30 years, by abatements of real estate taxes obtained through laws adapted by NYS Legislature, by cheap mortgage insurance from the state, and bysavings through individual metering of gas and electricity formerly paid
from condo fees.
There were long struggles before these solutions were
adopted by the tenants’ organizations, amidst faltering condominium prices,
foreclosed apartments, problem tenants moving in (that’s condo control, or
lack thereof), some drug dealing, prostitution - the crime and poverty
problems of the South Bronx creeping into this not-so-any- longer
middle-class environment.
But the PPC put over $30M immediately into repairs, particularly the
decrepit plumbing system, electric wiring, masonry and window upgrades. As
the real estate market moved upwards, so did Parkchester values.The tenancy
also changed, with many hard working Asian immigrant families joining in
and becoming active in improving the area. Investors were induced to screen
potential buyers and renters, and a moratorium was imposed on the sponsor
not to dump apartments. The one bedroom apartment worth $22,000 in 1996 now
may be $95,000 today, and a three-bedroom unit will sell at $215,000.
Today, after an expenditure of nearly $200M, the PPC’s owners, banks and
insurance companies, have seen a boost in the value of their investment. The owners of the apartments have, once again, livable quarters in
decent surroundings, the rental vacancies are being filled, and new buyers
are pleasantly surprised at the comparatively low prices, pleasant
surroundings and conveniences.
This recital of riches-to-rags-to-riches describing a sister property of
ST/PCV may or may not be of value to the people facing a radical ownership
change in Midtown Manhattan; essentially it illustrates the validity of the
real estate maxim of “location, location, location.” SP/PCV is not facing
the population shifts that Parkchester experienced; on the contrary, the tenancy may
be looking at a rising market, with the attendant benefit of capital
gains, and the added ability for heirs to inherit valuable property. And,
of course, one does not have to buy if one does not want to.
On the negative side, it does cost more to buy and pay both a mortgage and
a maintenance fee than to rent, particularly particularly when current
tenants, or at leat some 75% of them, are under rent stabilization. To counter that, a sponsor always offers a below market price to current tenants, and there’s the
tricky “sell it to a speculator and let him pay your costs” option, like a
reverse mortgage.
But that is a different subject.
Wally Dobelis thanks the sources of this research article, Josh Barbanel,
Julia Vitullo-Martin and Liz Lent, and their publications, The NY Times, NY
Sun and The Cooperator, not forgetting the sundry Internet resources.
The prospects of Metropolitan Life selling the Stuyvesant Town/Peter Cooper
Village complex raises the question of what will happen to the properties, the
largest apartment complex in Manhattan. More importantly, how will such a
sale affect our neighbors, the over 25,000 people living in the 110 buildings, in 11,250 apartments on
the more than 80 graceful parkland acres?
To answer the question, we turn to Josh Barbanel of the NYTImes, to find
that condos are the trend. Despite thousands of apartments on the market,
7,000 new ones have been applied for in the first half of 2006. Sales had
slowed but have recently picked up, and his sources state that the market
is extraordinarily strong for the higher priced apartments. Condo
conversion by the buyer/sponsor is probably the direction for ST/PCV,
should the sale materialize.
Let’s also spend some time looking to what happened to the Met’s first
foray into mass housing, the Parkchester development, now a condominium
colony.
The Parkchester housing development consists of 171 residential brick
buildings on 129 acres of Northeast Bronx between Tremont Avenue and the
Cross Bronx expressway. It has its own subway to Manhattan, 45 minutes
away, the #6 Lexington Avenue train. There's also a post office, a public
library branch, an Art Deco theatre (now a multiplex), a 100,000 sq. ft.
Macy’s (a tenant since 1941), some national retailers and a number of
smaller stores, coffee shops and restaurants; a complete city within a
city.
In its time the largest housing complex in the US, it was begun in 1938 and
completed in 1942. With 12,271 apartments for 42,000 working people, middle
income tenants, with a central oval park, landscaped grassy plots,
featuring a Fantasia fountain, it was a successful prototype for the ST/PCV
design, planned in 1942-3 and completed in 1947. All three
projects were approved by the City Planning Commission, despite
discriminatory tenant selection practices, later overridden by court
decisions. To serve the ethnic communities, the Met had also built a
separate but equal facilities development in Harlem, Riverton Houses.
For two decades Parkchester was a fine housing site for its tenants. But
trouble was brewing, the surrounding communities were declining, crime and
poverty were spreading. The trend was unmistakable, and the Met started
neglecting the upkeep, not throwing good money after bad. It sold
Parkchester to developer Harry Helmsley in 1968, and he converted the two
sections into condos, North in 1974 and South in 1986, despite strong
opposition from tenant groups and their elected representatives. But the
real estate market continued to drop, buyers were faced with losses, and
the sponsor cut expenses. In 1998 Helmsley and his partners sold the 6,362
money-losing apartments that he still owned, including 700 vacancies kept off the market for fear of rent control, to the not-for –profit Community Preservation
Corporation, a group founded to use bank financing in rescuing struggling
communities. By that time the tenancy had changed radically, from nearly
all white to predominantly ethnic.
CPC’s for-profit subsidiary, CPC Resources, set up a Parkchester
Preservation Corporation, financed through the value of the ex-Helmsley
apartments, bought for $4.5M. That was the collateral for financing the
badly needed renovations, to be paid for by higher condominium charges (reportedly increased by $30-80 /mo) over 30 years, by abatements of real estate taxes obtained through laws adapted by NYS Legislature, by cheap mortgage insurance from the state, and bysavings through individual metering of gas and electricity formerly paid
from condo fees.
There were long struggles before these solutions were
adopted by the tenants’ organizations, amidst faltering condominium prices,
foreclosed apartments, problem tenants moving in (that’s condo control, or
lack thereof), some drug dealing, prostitution - the crime and poverty
problems of the South Bronx creeping into this not-so-any- longer
middle-class environment.
But the PPC put over $30M immediately into repairs, particularly the
decrepit plumbing system, electric wiring, masonry and window upgrades. As
the real estate market moved upwards, so did Parkchester values.The tenancy
also changed, with many hard working Asian immigrant families joining in
and becoming active in improving the area. Investors were induced to screen
potential buyers and renters, and a moratorium was imposed on the sponsor
not to dump apartments. The one bedroom apartment worth $22,000 in 1996 now
may be $95,000 today, and a three-bedroom unit will sell at $215,000.
Today, after an expenditure of nearly $200M, the PPC’s owners, banks and
insurance companies, have seen a boost in the value of their investment. The owners of the apartments have, once again, livable quarters in
decent surroundings, the rental vacancies are being filled, and new buyers
are pleasantly surprised at the comparatively low prices, pleasant
surroundings and conveniences.
This recital of riches-to-rags-to-riches describing a sister property of
ST/PCV may or may not be of value to the people facing a radical ownership
change in Midtown Manhattan; essentially it illustrates the validity of the
real estate maxim of “location, location, location.” SP/PCV is not facing
the population shifts that Parkchester experienced; on the contrary, the tenancy may
be looking at a rising market, with the attendant benefit of capital
gains, and the added ability for heirs to inherit valuable property. And,
of course, one does not have to buy if one does not want to.
On the negative side, it does cost more to buy and pay both a mortgage and
a maintenance fee than to rent, particularly particularly when current
tenants, or at leat some 75% of them, are under rent stabilization. To counter that, a sponsor always offers a below market price to current tenants, and there’s the
tricky “sell it to a speculator and let him pay your costs” option, like a
reverse mortgage.
But that is a different subject.
Wally Dobelis thanks the sources of this research article, Josh Barbanel,
Julia Vitullo-Martin and Liz Lent, and their publications, The NY Times, NY
Sun and The Cooperator, not forgetting the sundry Internet resources.
# posted by Wally Dobelis @ 11:25 AM 
