In New Sale, Starrett City Would Stay Affordable



– June 2, 2008 –

The owners of Starrett City, a 34-year-old housing complex on Jamaica Bay in Brooklyn, have reached an agreement with federal, state and city officials on the sale of the 140-acre enclave under guidelines that would ensure that it remains a haven of housing affordable to working and middle-class families.

The agreement would not only allow for the sale of the nation’s largest federally subsidized housing complex, but also end a bitter battle that pitted the longtime owners of the complex against residents, tenant advocates and many elected officials. The sale will start this week, and the owners hope to sign a contract by Sept. 1, although it is unclear how high the bidding will go given the slowing economy.

Starrett City, which comprises 46 brick towers with a total of 5,881 apartments, has its own power plant, shopping center, post office, churches and a synagogue. It is widely regarded as one of the most successful economically and racially mixed housing complexes in the country.

Opponents successfully blocked a $1.3 billion sale last year to the real estate investor David Bistricer, fearing that the high price tag would force the new owner to remove tenants in favor of higher-paying residents in order to make a profit. The long-running dispute played out during a real estate boom in New York that has caused rents to soar and has reduced the supply of affordable housing.

Instead of deregulating the complex, the accord states that the guidelines for a sale would “preserve Starrett City as affordable housing.”

“I never really thought we could get such a happy solution,” said Senator Charles E. Schumer, who helped block the sale last year.

“There were so many players, different factions of tenants, the owners, state, city and federal officials, Democrats and Republicans.

But it was worth the long fight and many hours of negotiations. With this agreement we are assured that on into the next generation Starrett stays affordable to working-class and middle-class New Yorkers.”

Tenant advocates also embraced the agreement, which is described in a memorandum of understanding that was signed by the owners, Starrett City Associates; Priscilla Almodovar, the president of the State Housing Finance Agency; Shaun Donovan, the city’s housing commissioner; and John L. Garvin, a senior adviser at the federal Department of Housing and Urban Development.

“It’s what we’ve been fighting for for two years,” said Bertha Lewis, executive director of New York Acorn, a community organization that worked with the Starrett tenants association. “This is a model agreement. Finally the tenants at Starrett are actually going to get a very good night’s sleep. No matter who wins the bidding, they know that people have to abide by the rules.”

Ms. Lewis said the Starrett agreement could become a model for other subsidized housing complexes that are up for sale. In recent years, tenant advocates, like the Association for Neighborhood and Housing Development, say that large developers and private equity
firms have bought 90,000 apartments in the South Bronx, Harlem, Long Island City and East New York, raising rents and depleting an already tight housing market.

Mr. Schumer, Gov. David A. Paterson, Assemblyman Vito J. Lopez, Congressman Ed Towns and others plan to attend a rally at Starrett City on Monday to formally announce the accord and the pending sale.

Starrett City, with its manicured lawns and dozens of apartment towers with balconies, was designed in the 1970s as a subsidized middle class co-op, not a rental complex. But it initially had difficulty attracting residents and over time, the complex acquired an array of rent subsidies for poor and working-class tenants.

As the original owner, Starrett City Associates initially invested $33 million in the complex and promised to keep rents low in return for a variety of tax breaks. During the aborted sale last year, Starrett City Associates had prohibited bidders from speaking with tenants or government officials, creating an atmosphere of distrust. But this time, interested buyers will be encouraged to talk to public officials.

The new agreement did not come without some arm wrestling and concessions on both sides.The owners, a group of 250 investors led by Disque and Carol Deane, agreed to an affordable housing provision. It could lower the sale price, although it would provide bidders with assurances that the government, which provides roughly $70 million a year in rent and other subsidies, would not block a sale, as it did last year. Under the agreement, the city would also assist a new owner in gaining approval for new retail and housing development on the Starrett City property.

The state, in turn, would forgo an estimated $13 million in interest payments owed by the current owners, and the city would continue to offer a property tax abatement.

More important, Mr. Schumer has sponsored legislation that would convert the rent subsidy programs that cover 60 percent of the units at the complex to a 20-year rent subsidy program known as Section 8. The new owner could then set the rents based on an analysis of the rental market. The remaining 40 percent of the apartments are already covered by the Section 8 program but would not be subject to a new base rent.

The legislation, which is expected to be approved by the full Congress this summer, has already been adopted by the Senate Banking Committee and the House.

Mr. Deane and Starrett City Associates plan to start the sale on Tuesday by sending bid packages to prospective buyers. About 30 organizations have already signaled their interest, including the Related Companies, one of the city’s major developers, Enterprise Community Partners, Phipps Houses and the NHP Foundation.

A potentially large bidder that may try to purchase the complex is led by the Cogsville Group and includes the Rev. A. R. Bernard, who leads an evangelical congregation next to Starrett City; the Metropolitan Council on Jewish Poverty; the Central Labor Council; and the Clarett Group. Mr. Bernard’s congregation owns a 4.5-acre parcel next to Starrett City where it has wanted to develop

But it is unclear how deteriorating economic conditions will affect the offers for the property. As the economy has softened in the last year, lenders have become less willing to finance large real estate deals. Banks are now requiring larger amounts of equity. Some real estate executives estimate that the bids could range from $600 million to $800 million.

Still, Carol Deane, in a letter to tenants that will be slid under every door in the complex on Monday, said that the owners will “only consider bids from potential buyers who can demonstrate their ability to successfully own and operate Starrett City as affordable housing.”

Posted in The Cogsville Group News