Institutional money tipped to chase $5B Met complex.

Market-watchers are re-thinking initial estimates of the potential price-tag insurance giant, MetLife, could hang on its Stuyvesant Town and Peter Cooper Village residential developments.

After MetLife announced last week that it is exploring the sale of mammoth neighboring residential developments, published reports offered speculation that the 11,200-unit complex could sell for as much $2 billion.

But little more than a few days after news of the sale first emerged, some brokers and real estate investors are already revising their estimates of the complex's value, with some hinting that MetLife may be able to net as much as $5 billion, a figure that would likely make the residential complex the most expensive ever sold.

What investment sales brokers say has had a major dampening effect on the potential value of Stuyvesant Town and Peter Cooper Village, however, is the complex's high number of rent stabilized apartments.

Rent stabilization often significantly diminishes a rental building's cash flow and consequently can seriously dampen its value. But a real estate investor knowledgeable in buying such properties where rent control restrictions are in place said that the complex likely contained opportunities that a savvy real estate operator could exploit to significantly improve rents.

The investor, who spoke on condition of anonymity because he may bid on the complex, indicated that a careful examination of the development's rent roll and a thorough review of residents' tax returns likely would reveal a large number of residents living under some type of rent control, who in fact do not qualify for such rental protections. Because the sale price for Stuyvesant Town and Peter Cooper Village is so high, the purchaser would likely be a joint venture between one or more institutional investors, an investor class known for its deep pockets.

MetLife hasn't yet selected a broker to handle the sale and a fierce competition is said to be underway between sales brokers over who will get the coveted and undoubtedly highly lucrative assignment to market the complex located on the East River between 23rd and 14th Streets, which is reportedly 75% rent stabilized.

MetLife sold its landmark Manhattan office buildings 200 Park Avenue and One Madison Avenue last year. The former, whose sale was handled by Cushman & Wakefield's capital markets team in the city, yielded the highest sales price ever for a building, $1.725 billion.

CB Richard Ellis sold One Madison, an asset about a third of the size of the 3.14 million s/f 200 Park Avenue, for a little over $900 million. Both C&W and CBRE, along with another prominent brokerage firm, Eastdil Secured, are considered frontrunners for the assignment.

Although brokers insist that the sale will happen, MetLife's announcement last week that it was going to embark on a disposition of the two neighboring residential developments could hardly be called certain some observers argue given the ambiguity of the language the insurance company used in its press release.

MetLife said that it is "evaluating" options with respect to the developments that included the "possibility of marketing the assets for sale."

"Should market pricing not reflect our expectations, we will not sell the properties at this time," said Robert Merck, head of real estate investments for MetLife, further clouding the sale's likelihood.