Sandy is still causing headaches. Bureaucratic ones.

After Hurricane Sandy, rent-stabilized tenants living in damaged buildings with diminished services were told—and believed—that they would be able to get rent reductions for the entire time they were without services.

The Rent Stabilization Code stipulates that reductions are given from the time the service is lost. But, as rent-stabilized residents at Peter Cooper Village and Stuyvesant Town have discovered, they might only be eligible for reductions starting in March—a four-month discrepancy that could be worth thousands of dollars per tenant.

According to a recent fact sheet from the state's Division of Housing and Community Renewal, rent reductions will only be awarded from the month that the department notifies landlords of diminished services, rather than from the time when the services were lost. For the 1,200 tenants of Stuy Town and Peter Cooper Village who filed with their claims with the Department on Feb. 26, the difference is significant. Rather than receiving rent reductions starting in late October, when flooding damaged the building's security systems, laundry rooms, elevators, building intercoms, bike and carriage room storage and trunk storage, reductions would only start applying in March, or even April.

Now, politicians are trying to untangle the mess.

"Unlike the Rent Stabilization Code this seems to be an administrative policy that doesn't have a basis in law," State Assemblymember Brian Kavanagh told The Observer. "We're talking about a fact sheer versus a formally adopted code."

Earlier this week Mr. Kavanagh, State Senator Brad Hoylman, Councilmember Dan Garodnick, U.S. Representative Carolyn Maloney and borough president Scott Stringer sent a letter to the Division of Housing asking for clarification on the discrepancy and an explanation on its basis. They have yet to receive a response and the Division has not yet returned a request for comment from The Observer.

Mr. Kavanagh said that tenants could be denied a significant amount of compensation to which they are entitled if the Division's standard is applied rather than the Rent Stabilization Code's. Moreover, the Divison is not even applying reductions from the date they were filed, but from the beginning of the month that notifications are served on the landlords. Meaning that in some cases, rent reductions could be delayed a number of additional weeks, or even months.

Tenants may also have reason to be concerned as it's not the first time that the Division of Housing has shifted its policies and interpretations to be more landlord friendly. Incidentally, the last case also involved rent-stabilized tenants in Stuy-Town and Peter Cooper Village.

The tenants lived in apartments that had been removed from rent stabilization even though the landlords were receiving J-51 benefits. In 2000, the Division of Housing—which had earlier issued an opinion letter stating that J-51 units were exempt from deregulation—adopted a regulation that the exemption didn't apply to buildings like Stuy Town, which would have been rent stabilized even if the landlords did not receive J-51 benefits. The regulation was eventually struck down in court as illegal.

As for the market-rate tenants living in the complex? Neither the Rent Stabilization Code nor the Division's rules and regulations apply to them. But there's a class action lawsuit that they could join.

kvelsey@observer.com

Tenants will receive $68 M. in damages.

The tenants of Stuyvesant Town and Peter Cooper Village have finally settled their class action suit, winning $68.7 million in damages that will be awarded to tenants who were overcharged on their rent between January 2003 and December 2011 as a result of illegal rent deregulation.

The settlement means an end to the lengthy Roberts v. Tishman Speyer legal battle. Tishman Speyer defaulted on its loans in 2010 and the property is now owned by CW Capital Asset Management LLC. The damages, to be paid by CWCapital (on behalf of the
bondholders' trust) and former owner MetLife Inc, will be divided among 21,250 tenants in 4,300 units.

The settlement, pending final court approval that could come as early as April 2013, will mean that damages of some $10,000 will be awarded to each of the 4,300 units deemed to have been affected by overcharging. It also means that tenants' plans to buy the complex themselves in a bid to protect the buildings as a increasingly rare refuge for Manhattan's middle class might finally move forward.

Tenants sought $215 million in compensation for the rent overcharges, which is far more than the current award, but the plaintiff's attorneys say that the final agreement will bring the total recovery in the lawsuit to at least $146.8 million. In addition to compensating tenants for past rent overcharges, the agreement also includes savings in the form of future rents, which will be based on a formula that factors in market conditions and tenant turnover rates.

"We believe this settlement provides an extraordinary recovery for our clients and we couldn't be happier for them," said Ronald Aranoff of Bernstein Liebhard, one of the plaintiff's lead attorneys, in a statement.

The agreement also guarantees rent stabilization through 2020, when the complex's J-51 tax benefits expire, reinstating the benefit to a number of residents whose units had been erroneously deregulated. Tenants who signed market rate leases will be offered modified rents or their original rent grown by the yearly rent guidelines board increases.

The settlement comes after some 18 months of negotiations. The complex has been mired in drama ever since Tishman Speyer bought the complex for $5.4 billion in 2007 with plans to draw an upscale clientele in the market for luxury apartments.

CW Capital Partners took care to point out that they took over the complex almost four years after the suit was first filed.

“Since then we have worked hard to try to balance the interests of residents and bondholders, recognizing that our fiduciary responsibility to investors must respect the concerns of tenants who call Peter Cooper Village Stuyvesant Town home," wrote CW managing director Andrew MacArthur in a release.

The settlement deals with less than half of the complex's 11,229 units spread out across 56 buildings.

Rather than heralding the announcement, lifelong resident and council member Dan Garodnick issued a cautious statement.

A popular amenity. (Marianne O'Leary/Flickr)

Hurricane Sandy turned Stuyvesant Town and Peter Cooper Village into hell in Manhattan for almost a week after the power went out. Sure, much of downtown was a disaster zone, to say nothing of the devastation in the outer boroughs, but Stuy Town had some particular, peculiar problems. Most notably, all the hallways are interior, with no windows, so it was impossible to get around. What's worse, the locks on all the doors are electronic, so anyone could have been lurking in the darkness.

Fortunately, Stuyvesant Town and Peter Cooper Village have returned to a sense of normalcy now that the power is back, as the management has been detailing in a serious of lengthy email updates to residents. Unfortunately, one of the things tenants might have hoped Superstorm Sandy would have washed away is still coming: the ice rink.

Rinks have become all the rage in recent years, not only in Central Park and Rockefeller Center, but everywhere from the Standard Hotel and W Downtown to McCarren Pool in Williamsburg. Stuy Town was no exception, and last year the management installed a rink, too. They saw it as an amenity for tenants, but naturally those persnickety residents, many of whom have been in full-on revolt ever since the complex was sold to Tishman Speyer, hated it.

There were the crowds, the noise and fumes from the generators and the loudspeakers blaring music at all hours. It was anything but a winter wonderland.

Well, now, just as the lights and locks are back, so, too, is the ice rink, as a note near the bottom of the latest resident update explains.

PCVST Ice Rink: PCVST's seasonal ice rink, operated by Ice Rink Events, will open this Saturday, November 17th at 11am. Residents are invited to enjoy free admission all day this Saturday. For operating hours, lessons, and other details, please visit pcvst.com. For additional information, please contact icerink@pcvst.com.  The completion of the ice rink was accomplished using separate outside contractors and did not impact any of our on-going restoration efforts.

So please, don't complain that those outside contractors could have been put to better use putting the complex back together. The rink is an important part of the complex, and it is here to stay, so it needs just as much resources as the boilers and the grounds.

Update:As a number of commenters have pointed out, the utilities are indeed spotty for some residence, meaning those outside contractors might well have been put to better use than building an ice skating rink. That is one frigid move, Stuy Town.

Hence why one shouldn't turn their stairway into a bathroom. (Photo: Flickr, frankfarm)

There’s never a shortage of stories about negligent apartment managers and landlords, and the overlords at Stuyvesant Town and Peter Cooper Village have proved that they are not the exception. As charming as this 25,000-resident complex in the East Village seems with its brick exteriors and tree-lined paths, everything is not peachy-keen.

A recent FDNY inspection has found that a number of fire code violations exist in the complex’s 110 buildings, according to the Post. Several fire doors don’t close properly, a few hundred apartment doors don’t close or latch on their own, and the stairwells, which serve as emergency exits, have become toxic wastelands.

“[This] presents a very real danger to the lives and safety of the residents of the community,” Al Doyle, the former president of the Tenants Association, wrote in a letter to the FDNY. You think?

A tenant survey conducted in the spring also found that the stairwells have become the preferred bathroom for some tenants, as well as hot spots for alcohol, tobacco and drug use.

The FDNY has set a date for when the Peter Cooper Village/Stuyvesant Town complex must fix the violations, one that Sean Sullivan, the general manager of the complex, told DNAinfo he is not worried about meeting. “We take fire safety very seriously,” he said, adding that “all issues [will be] resolved well before the FDNY’s required timeframe.”

As for the illicit activities taking place in the stairwells, Mr. Sullivan hopes that residents (that is, civilized, reasonably normal residents) will rat the wrongdoers out. Here’s hoping they do.

Pillaging the Village.

Neighborhoods in New York have always been fungible. Names change or are invented out of thin air, acronyms, and nearby landmarks. Borders shift like tectonic plates—slowly, imperceptibly, then, in a city-shaking tremor, all at once. We all pretend to hate it, but we live with it, quietly profiting off it all. This is a town singularly obsessed with real estate, after all. So who can really blame Rose Associates for pushing the boundaries of the East Village?

An eagle-eyed East Villager spotted this ad in Metro the other day and passed it along to The Observer. "Spacious Apartments in Manhattan's East Village," it reads, next to a rendering of one of those repainted, reupholstered, light-filled apartments that are sure spacious by tenement standards. Historically, the area has been known as just good, old Stuyvesant Town, maybe part of greater Gramercy. Kips Bay South? Why not just pull a Clinton and resort to historic precedent—call it the Gaslight District.

Still, you can't fault Rose Associates for at least trying. Stuy Town has had enough troubles of late that it needs all the help it can get. And it's not like they're stealing a neighborhood with any authenticity to it in the first place, the East Village being a nome de terre created in the 1980s to polish the upper reaches of the Lower East Side (it took a while and Rudolf Giuliani).

The only thing is, does the East Village really have any cachet Stuy Town would want to steal?

mchaban [at] observer.com | @MC_NYC

One story has carried dozens of his bylines over the past few years, that of the sale and subsequent collapse of Stuyvesant Town and Peter Cooper Village. Now, his name will grace the cover of a book about the massive middle-class housing complex on the East River.

According to Publishers Marketplace, the book was picked up yesterday by Dutton, a Penguin imprint, for an undisclosed sum.

"You've got this wonderful tale of the people who lived there, and then you've got 'greatest real estate deal of all time,'" Bagli told The Observer over lunch in the Times' airy cafeteria last week.  That deal would be Tishman Speyer's $6.3 billion purchase of the 11,000-unit, 80-acre spread that MetLife built in the 1940s and then sold at the height of the real estate boom. Orchestrated by Rob Speyer, with the help of BlackRock, the Church of England, the government of Singapore and a handful of public pension funds, the takeover soured along with the real estate bubble. "It's just a phenomental story, it has everything," Bagli said.

Bagli said he would focus primarily on the most recent goings-on at Stuyvesant Town: MetLife's decision to sell, Tishman Speyer's winning bid and its aggressive deregulation of the complex, the court case challenging the new rents, the developer's forfeiture of the property, Bill Ackman's dramatic grab this summer and whatever else might happen before Bagli turns in his manuscript next summer.

The book will also be leavened with the complex's dramatic history, beginning with the seizure of the Gas House District and the relocation of the 3,100 families who lived there. There is also what Bagli called "Stuy Town's original sin," the early refusal by MetLife to allow minorities into the complex. Bagli said were it not for an eventual settlement, the MetLife case, and not Brown v. Board of Education, would likely be the famous de-segregation case discussed to this day.

The mix of tumultuous takeover and complex history has the makings of another Barbarians at the Gate. "If it could be anything like that, even a little bit like that, I'd be proud," Bagli said. "I don't know if it was the first business book I read, but it was the first one I enjoyed."

Bagli will continue to work his regular beat for the paper as he reports and writes the book. It has even turned up a few stories, such as a piece on Lee Lorch, a doctor who fought to integrate the complex and was eventually driven out of the country for it.

"At one time or another, everyone I know lived in or knows someone who lived in Stuy Town, including my agent and the publisher, even my wife's uncle," Bagli said. The book found him as much as he found it, he said.

Correction: A previous version of this article mistated the number of apartments as 23,000. That is roughly the number of people living in the complex.

mchaban [at] observer.com | @mc_nyo

CW Capital just released a statement saying it had reached a settlement with Pershing Square and Winthrop Realty to buy the firms' mezzanine debt from the massive housing complex. While the rogue investors, led by Pershing's Bill Ackman, were unable to foreclose on the property themselves and seize control, CW Capital and the senior lenders it represents decided to buy out Ackman's mezzanine loan, for which his group paid $45 million, because it could save the remaining debt holders tens or even hundreds of millions of dollars in taxes.

A CW spokesman would not say how much the servicer paid Ackman's group or whether it was more or less than what the mezzanine loan, bought for pennies on the dollar, originally cost.

The even more surprising turn is that the senior debt holders will not be foreclosing on the property on Friday as originally planned. About the new plan, the spokesman was also mum. "Suffice it to say, there's a lot of options," he said. Chiefly they are for the property to remain under the control of the lenders, who could continue to flip units to market rate and milk the monthly rents, or to go the Ackman route and offer the units for sale to residents as coops. This would allow for a quicker but also lower return.

Here's the statement:

CWCapital Asset Management LLC ("CWCAM"), on behalf of the Trusts that it represents, today settled outstanding litigation with PSW LLC ("PSW"). As part of the settlement, an entity managed by CWCAM on behalf of the Trusts acquired the Mezzanine 1-3 loans previously owned by PSW. CWCAM also cancelled the foreclosure sale that was scheduled for Friday October 29th while it focuses on ensuring a stable transition of the property and maximizing recovery of the $3.7 billion owed to the Trust which it represents.

UPDATE: The Times' Charles Bagli is reporting that CW is planning on going the co-op route, which could spark fighting amongst tenants as to the nature of the sale. The debate will surround whether the units should remain affordable in perpetuity or should be purchased at market rates, which would cost more but also holds out the promise of higher resale values. This of course ignores the fact that the ultimate decision lies not with the tenants but with CW Capital, which will likely be looking to maximize its profits, not the amount of affordable housing.

Then again, affordable housing being big business these days, anything is possible.

mchaban [at] observer.com | @mc_nyo

But the sale has been called off, and it looks like Mr. Ackman might carry the day after all.

The auction is now scheduled for Oct. 13 because CW Capital is said to be in negotiations with Mr. Ackman and Winthrop for their $300 million in debt. The speculation is that by buying out Mr. Ackman, CW can force the complex into bankruptcy, saving it what the Journal says is $90 million in taxes and fees or as much as $200 million, according to Crain's.

With those kind of numbers, Mr. Ackman might go from getting wiped out to making a profit on his gambit. Not nearly what he would have made had he won the complex as a whole, which he set out to do this summer, but not a bad beat, either.

mchaban [at] observer.com / @mc_nyo

Yesterday, the appellate division of the State Supreme Court ruled that Ackman's Stuy Town gamble--buy up $45 million worth of mezzanine dept and then try and foreclose on the property ahead of the senior bondholders--had no standing to forestall Monday's auction of the massive East Side apartment complex. But will Bill Ackman still be able to realize a windfall on his and Winthrop Realty's investment? The Post thinks he might:

Although Ackman won't be able to stop the foreclosure by senior lenders, he can still fight in court to recoup the full value of his $300 million in debt plus his potential profits from the lost deal.

The business press remains more skeptical. From Bloomberg:

"I don't view this as being an extremely strong hand right now for Ackman," said Mark Edelstein, chair of the real estate finance and distressed property practice at New York law firm Morrison & Foerster LLP. "But I never count Mr. Ackman out."

[...]

"As a mezzanine lender, your main event consists of making sure there's enough value in the asset to exceed the first mortgage," [Joshua Stein, principal of Joshua Stein PLLC, a New York-based independent commercial real estate law practice that isn't involved in the case] said. "If that doesn't happen, you're ultimately supposed to get stuck. That's the risk you own."

And a riotous line from Reuters:

"We're going to go ahead on Monday," said Greg Cross, attorney for CWCapital, the bondholders' representative. "They had no more ability to enjoin our foreclosure than the Red Sox have to stop the Yankees from signing free agents."

Ackman may have lost, but he's made a potential winner of Stuy Town residents. His arrival forced CW's hand and ginned up interest from others in the project, which could lead to another bidding war for the property or simply more favorable terms for Stuy Towners, should a co-op or condo conversion become a reality.

mchaban [at] observer.com / @mc_nyo

Bill Ackman and partner "have proposed a partnership with the 25,000 tenants there that would create an affordable housing co-op and allow the investors to reap a profit," reports The New York Times. 

The tenants' association wouldn't have to pay for its stake, but it would have full veto rights over all major decisions and would be involved in the plan to turn the units into affordable co-ops, says the letter Mr. Ackman sent to the association, according to Crain's.

The partnership, which consists of Mr. Ackman's Pershing Square Capital Management and Winthrop Realty Trust, is embroiled in a complex legal batle with a rival lending group to foreclose on the property. The partners have purchased $300 million of Stuy Town's secondary loans, while another group of lenders, which holds the property's $3 billion mortgage, has moved to block them from foreclosing.

The case is set to be decided by the end of this month, but the Ackman partnership may hope it can gain the upper hand by appealing directly to tenants who are anxious to hold onto their homes in one of the country's most prominent middle-class housing complexes. “Working together," the letter reads, "we believe that we will be able to effectuate an affordable non-eviction conversion while protecting the long-term affordability of the property for current and future tenants and ensuring that those who wish to remain rent-stabilized renters can do so.”

If successful, this would be the largest co-op conversion in the country's history, according to the Times.

lkusisto@observer.com