Memo to the owners of a massive affordable housing complex in Brooklyn overlooking beautiful Jamaica Bay: Word is, there's one conversation you don't want to pass up. Don't get involved too much, too fast with prospective buyers. Talk first to Deborah Van Amerongen, commissioner of the state Division of Housing and Community Renewal.
That's what Van Amerongen herself recommends, in regard to the nearly 6,000-unit Starrett City complex which would have been sold this year, except that state and federal regulators nixed the $1.3 billion deal because they said the apartments' affordability and the complex's services wouldn't be maintained.
The would-have-been buyer, Clipper Equity, had its offer turned down twice by the federal Department of Housing and Urban Development – but its contract with owner Starrett City Associates doesn't actually expire until early August. HUD's approval was needed because the complex uses federal subsidies to maintain its affordability, which also comes from its status as a development in the state's Mitchell-Lama program, giving Starrett owners real estate tax breaks and favorable loan terms in exchange for keeping rents low.
The door to selling Starrett and increasing rents has been open since last year, and most observers think the complex will change hands or opt out of Mitchell-Lama eventually. But neither Starrett City Associates, headed by longtime Starrett owner Disque Deane, nor the attempted buyer, Clipper Equity, headed by New York real estate buyer David Bistricer, is showing its hand.
“Bistricer has a contract until August 9. We haven’t decided what we’re going to do,” said Martin McLaughlin, spokesman for Starrett City Associates, a limited partnership of 250 individuals, families and other investors.
When pressed for details about what will happen when the contract expires, McLaughlin said, “We haven’t made up our mind what we’re gonna do. And when we do, we’ll tell everybody.”
As for the spurned buyer, David Bistricer “isn’t giving any interviews and hasn’t issued a statement” on the latest HUD rejection, said Lisa Linden, a Clipper Equity spokeswoman.
Some groups involved in the Starrett wrangling – such as affordable housing group ACORN – don’t expect Clipper to remain in the game.
Starrett’s owners have a couple of options once the Clipper contract expires: They can entertain bids from other prospective buyers to sell the complex. They can refrain from selling and take the complex out of the Mitchell-Lama program themselves, which would allow them to capture a bigger profit, since the Mitchell-Lama program limits an owner to taking 6 percent of the profit made by its housing complex each year. There's no word yet on which way they'll go.
Van Amerongen said she has “reached out to” the owners, Starrett City Associates. “My basic request to them was, 'Please don’t make further decisions without having a conversation with us,' ” she said.
Van Amerongen said she made her overture to Starrett owners on behalf of the city’s Department of Housing Preservation and Development, the state’s Housing Finance Agency, and HUD, plus her own agency, DHCR. Those are the four regulatory bodies involved in Starrett, she said.
According to Van Amerongen, any Starrett sale should meet the goals of “protecting the residents and preserving long-term affordability,” as well as keeping up services and maintenance.
The rancor over Bistricer’s $1.3 billion offer – which attracted unremitting criticism from U.S. Sen. Charles Schumer and other federal, state and local politicians – has created turmoil for Starrett’s residents. There are 12,000 tenants at the 140-acre, 46-building complex, according to Starrett City Associates – and around 14,000 residents, according to other estimates. Van Amerongen said this rollercoaster ride for tenants has been “the biggest issue.”
“It's a terrible wait to live, waiting for what's going to fall next,” said Marie Purnell, the president of the Starrett Tenants Association and a 31-year resident of the complex. Purnell said tenants are in the dark about the next step in the Starrett dealmaking, now that HUD had slapped down Clipper again. “Right now, nothing. We don't know” what's next, Purnell said last week.
In the next chapter, DHCR wants to take what Van Amerongen calls “a proactive approach.” The turmoil of the past six months can be avoided in the second round if Starrett City Associates first talks with her office, Van Amerongen said.
In fact, the DHCR commissioner said all Mitchell-Lama owners should talk with her office before issuing a contract of sale or before giving tenants notice of their intention to buy out of, or leave, the Mitchell-Lama program.
“They do have the option to buy out,” Van Amerongen said of Mitchell-Lama owners. She added, “We won’t be able to stop every buyout. That’s the nature of the market.”
And the open market will have the final say, should Deane's group or a future owner remove Starrett from Mitchell-Lama. Because Starrett was first occupied in 1974, it doesn't fall under rent stabilization after exiting the Mitchell-Lama program, and it won't be protected by Gov. Eliot Spitzer's recent change to state housing policy (tightening the “unique and peculiar” provision), which only affects pre-1974 Mitchell-Lama complexes.
Instead, the owners would be able to set market-rate rents for the apartments. Probably, most tenants would keep their current rents. Nearly 90 percent of households at Starrett City get federal assistance of one kind or another; those households probably would be eligible for so-called enhanced vouchers, according to Amy Chan, a Mitchell-Lama organizer with Tenants & Neighbors. But, Chan pointed out, when those tenants leave Starrett City, they take with them their enhanced vouchers – and their affordable rents.