Mostly built at the conclusion of World War II to house returning servicemen and their families, megacommunities seek to alleviate the ever-present shortage of affordable housing in the country’s biggest metropolitan areas. While their age makes ongoing physical improvements a complex necessity, most assets have enjoyed historically high occupancy and cash flow from residents eager to identify themselves with the communities.
That cash flow likewise continues to attract investors and developers who see cost-savings in the economies of scale at such large properties. But from operations to capital structure, the behemoth size that makes mega projects so appealing from an economies-of-scale standpoint also means that minor problems take very little catalyzing to become full-blown catastrophes in communities that are often larger than many small cities.
Take the Bronx’s Co-Op City, the nation’s largest apartment cooperative community, accommodating nearly 60,000 residents with 15,372 units across 35 high-rise buildings. In June, the community faced a sanitation nightmare when contract negotiations stalled between the property’s management firm, New York-based RiverBay Corp., and unionized garbage collectors, janitors, repairmen, and groundskeepers. In the space of 72 hours, some 100 tons of garbage accumulated on Co-Op City streets. Fearing an explosion in the rodent population as the summer heat bore down on refuse piles more than 5 feet high, the Health Department finally declared the site a health hazard and mandated garbage collection, even as new contracts had yet to be finalized.
Hop on the subway and head south, and you’ll see that problems continue to plague Stuyvesant Town/Peter Cooper Village, the post-war mega complex of 11,227 rental units across 52 buildings constructed by New York-based Metropolitan Life Insurance Co. in 1947 and sold in October 2006 to a New York-based Tishman Speyer/BlackRock joint venture for $5.4 billion. The deal continues to hold the distinction of being the largest U.S. apartment transaction to date—and one that many multifamily real estate observers in and outside of New York wonder should ever have been consummated.
