NEWS FRONT
Courts Go Against Multifamily Owners in Tax-Break Rulings
NEW YORK CITY—Current and former multi-family owners suffered defeat at the hands
of judges this summer in a pair of rulings
that centered on the deregulation of rent-stabilized apartments receiving tax breaks.
State Supreme Court Justice Richard B.
Lowe III ruled that tenants at the massive
Stuyvesant Town and Peter Cooper Village
complex can go after former owner MetLife
in a $215-million class-action suit as well as
the partnership that bought the property
from MetLife in late 2006.
And in a follow-up to his December 2009
ruling that the owners of 37 Wall St. illegally
deregulated an apartment unit there, New
York City Housing Judge Bruce Scheckowitz
refused to hear new arguments brought by
the owners’ counsel. Attorney Serge Joseph,
representing the tenant in that unit, says
the ruling could mean as many as 5,500
deregulated apartments in Lower
Manhattan could be returned to rent stabilization, according to published reports.
In the Stuy-Town case, Lowe wrote that
the October 2009 ruling by the state’s high-
est court, which found that a joint venture
led by Tishman Speyer Properties and
Blackrock Realty had unlawfully deregulated
4,400 apartments there while receiving J- 51
tax abatements, applied retroactively. The
class-action suit, brought by Stuy-Town ten-
ants in 2007 after the complex changed
hands, named Met Life as well as the current
ownership as defendants.
Executive Moves
NEW YORK CITY—After 11 years with CB
Richard Ellis, James Searl has joined
Cushman & Wakefield
to become a senior director in its Downtown
Manhattan office.
A transaction advisory
specialist at Jones Lang
LaSalle, Ruby Hwang has
been promoted from
VP to
senior
vice president.
Meridian Capital Group
has hired Robert Beni Jr.
as a vice president in its
commercial originations
group. He will support
underwriting and origi-
nation efforts.
For more executive moves, please visit
www.globest.com/executivewatch.
Searl
Hwang
Tax Reforms May Level Out Wall Street Rollercoaster
The new financial regulatory reforms that were passed in July
pose significant trade-offs to New York City’s economy. Wall
Street’s contribution to the city’s tax base has grown substantially over the past two decades as profits have soared, but Wall
Street is also largely responsible for the heavy volatility in New
The media often like to cite that Wall
Street contributes 25% of the city’s tax base.
In fact, New
York City
Department
of Finance tax revenue data show that this
dependence has fluctuated dramatically over
the past 12 years.
Using these data (that only go through
2006), we projected that the ratio of tax revenues generated by
the finance industries to taxes generated by all industries climbed
to 33% in 2007 but then fell to 24% in 2009. In dollar terms, this
decline in taxes from finance firms totaled $2.2 billion in 2008
and 2009 together, which accounted for 85% of the total tax-rev-enue decline from all industries in those years.
In other words, Wall Street is benevolent in the good years
but draining in the bad years. The finance industry faces
upcoming challenges as it figures out how to comply with the
new rules. But the details of the reforms will be left to the regulatory agencies to implement, which means that lobbyists will
still have the opportunity to exert their influence in the final
By Barbara Byrne Denham
language and preserve loopholes around the harshest reforms.
It is commonly believed that Wall Street profits will suffer in
the short term but volatility will be curbed in the long run. This
means that the industry should see slower, but more stable,
growth and tax revenues will stabilize as well. In most recoveries,
Wall Street not only hires aggressively, but also does so earlier
than most industries. The 2010 data already show that this is not
the case this time around. New York City has added 61,600 jobs
this year, but the finance industries have added a mere 400.
What does this mean for the real estate industry? The first
logical conclusion to be drawn is that capital requirements will be
stricter than in the past, which will constrain lending. However,
New York City’s commercial property market is still deemed a
safer asset than most and, no doubt, Wall Street will be more risk-averse than in the past. Consequently, lenders will be more
inclined to lend for New York real estate than other riskier assets,
especially if they believe that the local economy is more stable.
Indeed, lenders are already providing capital more aggressively
than they did over the past two years.
That said, while the regulatory reforms are intended to curb
the industry’s volatility, the stock market has interpreted the
new reforms to go easy on the industry. This could mean that
the ups and downs endemic to Wall Street will continue.
Barbara Byrne Denham is chief economist with Eastern Consolidated in New
York City. She may be contacted at bdenham@easternconsolidated.com.
The views expressed here are the author’s own.
