Capping a slow and steady financial fall, two real estate giants are handing Stuyvesant Town and Peter Cooper Village over to creditors.
Tishman Speyer and BlackRock Realty were unable to maintain their financial commitment to the sister properties.
A spokesman for the partnership says transferring control became the only viable alternative to bankruptcy, after it couldn't make a $16 million loan payment earlier this month.
It is still uncertain who the new owners will be, but Tishman representatives said the company would handle the property management in the meantime, saying they wanted a "smooth and seamless" transitional period.
Tishman and BlackRock bought the apartment complexes in 2006 for almost $5.5 billion, in what was the most expensive deal in U.S. real estate history.
Manhattan Council Daniel Garodnick, who lives in Peter Cooper Village, said the complexes' 11,000 apartments still need maintenance and the 25,000 tenants need undisturbed services.
"This has always been a stable community without a whole lot of issues, where if people have problems, repairs that need to get fixed, they get fixed, quickly," said Garodnick. "We don't want a situation where the property falls into any deterioration in any way, not even for a moment. And if there is a transition, we will insist that it be a seamless transition, one where tenants don't even feel it."
Other residents are unsure of what to expect under new management.
"I'm nervous. I'm rent-stabilized and I've been here for a long time. I don't know what they're trying to do," said one resident. "I don't know if they're trying to sell it off."
"It's been great living here, the amenities and stuff. But I don't know what the fallout's going to be with the change in ownership," said another tenant. "It's hard to say at this point. Wait and see what happens."
The developers had planned to convert many of the rent-stabilized units into luxury housing, but they were unable to keep up payments as the venture was hit hard by the slowing real estate market.
The partnership was also dealt a blow recently when a state court ruled $200 million in rent increases were not legal.
The complex's tenant association tried to buy the complex in 2006 but was outbid.
Al Doyle, the head of the association, said if given the opportunity, his group will bid again.
"Then we could assure it would remain affordable, and we can maintain the property to the standards we were used to and that everyone will be protected," said Doyle.
Other potential bidders are still unknown.