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Comments by:Kenneth P. Riggs, Jr.President, CEOReal Estate Research Corp.Chicago

Few deals caused the fuss and feathers created by the $5.4-billion sale of the mammoth Peter Cooper Village/Stuyvesant Town. And to be sure, until the deal closes, sometime later this year, the pending MetLife sale to a Tishman Speyer/BlackRock JV will continue to generate ink. One intriguing question is if value and price are in line. Size aside, the property is six decades old and, after all, rent controlled. While the split was narrow, last week’s polltakers (52% in fact) said that yes, indeed, it was a pricey buy. But, argues observer Riggs, you have to look at the bigger picture. And the bigger picture is this:

“This deal doesn’t surprise me, from either an investment or demographic perspective. It’s such a complex property that it’s very difficult to make an outside assessment of the relative pricing. However, from a qualitative perspective you could see why this particular property was put on the market and why buyers stepped up to pay such a price.

“Look at the markets generally and the amount of capital and liquidity there is out there. The seller wanted to take advantage of that. On the other side, there are buyers with capital that needs to be placed in the right strategies.

“Then there’s the demographics. The US, and this area in particular, is tremendously under-housed. Always was. Always will be. We’ve grown past the 300-million-person threshold and we’ll continue to grow at a rate of two to three million people a year. With that as a background, if it’s done right, this will be a wise investment.

“I say if it’s done right because, as you know, there are political implications of monetizing the opportunity, because of the middle-income presence there. I would assume that is where the greatest challenges, and the greatest risks and rewards, will be. But in general, if you look over history, the most affordable component of any market has never done poorly.”

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