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Friday, March 02, 2007

HUD rejects $1.3B NYC real estate deal

By DEVLIN BARRETT, Associated Press Writer Fri Mar 2, 11:52 AM ET

WASHINGTON - The federal government said Friday it had rejected a developer's $1.3 billion deal to buy the nation's largest federally subsidized rental housing complex, Brooklyn's Starrett City.

The real estate developer said it would try to find a new way to buy the property. In a letter sent to Clipper Equity LLC, Jackson said the prospective buyer had not provided sufficient information to demonstrate its financial and managerial capabilities for preserving Starrett City as affordable housing on a long-term basis.

Clipper Equity said in a statement prior to the announcement that it looked "forward to the opportunity of correcting certain underlying misinformation and to providing the secretary with the appropriate assurances he seeks."
The proposed sale of Starrett City would be one of the richest real estate deals in New York City history — and has been one of the most criticized.

The would-be deal came amid a historic residential real estate boom in New York City and follows last year's $5.4 billion sale of Stuyvesant Town and Peter Cooper Village in Manhattan. Some residents there now face rent increases of more than 30 percent.

With about 6,000 apartments, Starrett City has about half as many as Stuyvesant Town and Peter Cooper Village. The Brooklyn complex has its own shopping center, schools, churches, synagogues, power plant and armed security force. Some tenants pay as little as $200 a month in rent.

HUD lawyers met Thursday with deputies of New York Attorney General Andrew Cuomo to discuss government worries about the purchase of Starrett City.
HUD notified Clipper Equity on Thursday that the agency would not approve the sale because of a lack of certain information the agency believes is critical and because certain details of the transaction, such as the sale price, lead them to believe the complex may not remain affordable housing.

The notification from the U.S. government also indicated the sale could be approved if Clipper Equity can provide more information about its credit standing and answer some of the challenges posed by critics, according to the two people familiar with the notice.
New York Sen. Charles Schumer (news, bio, voting record), who had vowed to block the deal, said he was happy to hear of Jackson's decision.

"HUD is doing the right thing. Now we can get back to the drawing board to craft a deal that preserves middle-class housing and supports the tenants," Schumer, D-N.Y., said in a statement.
However, Cuomo said he did not believe there was any way Clipper Equity could revive its purchase.

"The information we gave HUD precludes this purchaser," said Cuomo, a former HUD secretary during the Clinton administration. He added that HUD's denial was "exactly the right decision."
The Starrett City sale has come under attack from many different levels of government in recent weeks.

Mayor Michael Bloomberg has called the sale problematic, members of Congress have demanded hearings and Jackson had already publicly threatened to block it.
Cuomo raised concerns about a partner in Clipper Equity, David Bistricer, who already owns 71 other buildings with 8,792 outstanding violations.
Since 1998, Bistricer has been under permanent injunction from offering or selling cooperative buildings and apartments — a statewide ban Cuomo said he intends to enforce.


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