The Work

February 9, 2010 1:57 PM

Stuy Town Tenants Hire Paul Weiss

Posted by Brian Baxter

UPDATE: Feb. 12, 10:23 a.m. Bloomberg reports that the Stuyvesant Town apartment development hasn't yet been handed over to creditors because of a dispute over payment of a $90 million tax bill.

Perhaps not content with Greenberg Traurig stealing all the rent dispute headlines in New York, Paul, Weiss, Rifkind, Wharton & Garrison is wading into the fray between tenants of Manhattan's largest apartment complex and bidders for the 110-building development that was returned to creditors last month.

The $5.4 billion sale of Stuyvesant Town and Peter Cooper Village to an investor group led by Tishman Speyer and BlackRock three years ago blew up in January after the joint venture defaulted on $4.4 billion in debt used to help finance the deal.

With distressed investors like billionaire Wilbur Ross and other vulture funds circling the 80-acre property, the Stuyvesant Town-Peter Cooper Village Tenants Association has turned to Paul Weiss to advise them on the bidding process for both developments.

The firm will represent tenants without seeking compensation from them, providing counsel on offers from competing groups seeking to take over management of the complex from Tishman. A Paul Weiss spokeswoman told The Am Law Daily that the matter was not pro bono, but declined to comment on how the firm would be paid.

Bloomberg reports the tenants association could also mount its own bid to take control of the 11,200-unit facility, and Paul Weiss will represent the group on this effort as well.

"We believe that the tenants are the key to a successful solution to the ownership of this iconic housing complex--and we are looking forward to helping them achieve their goals," said Paul Weiss real estate partner Meredith Kane in a statement released by the tenants association. (Kane was in an all-day meeting on Tuesday and not immediately available for comment.)

How did the firm land the assignment? According to The New York Observer, the firm is connected to the tenants association through city councilman Daniel Garodnick, who lives in Peter Cooper Village and played a leading role when tenants submitted a $4 billion bid in 2006 seeking control of the complex.

Garodnick, who grew up in a rent-stabilized apartment in Stuy Town, is a former Paul Weiss litigator, the Observer reports. The firm takes over the role last served by Troutman Sanders real estate partner Leonard Grunstein, implicated in a $50 million kickback scheme by federal prosecutors in November.

According to a profile in the Observer last October, Grunstein was retained by the tenants association when it decided to file a civil suit against Stuy Town's former owner, MetLife, over the issue of deregulating rent-stabilized apartments while accepting city and state tax breaks.

A potential conflict with MetLife prevented Grunstein from filing the suit himself, so New York firm Wolf Haldenstein Adler Freeman & Herz took on the matter for the tenants and filed a class action suit in New York State Supreme Court in 2007.

A New York state appellate court found in favor of the plaintiffs last October, ruling that Tishman must cease the deregulation program if it continued to accept public tax benefits, severely restricted the ability of the landlord to raise rents to meet mounting debt payments.

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