The country’s biggest life insurance company, MetLife, has benefited from the red-hot real estate market, selling off some of its prized holdings.

Last year, it sold the MetLife Building at 200 Park Ave., a 58-story, 2.8 million square-foot office tower, for $1.72 billion, the highest recorded price for an office building in America. The buyer was a joint venture of Tishman Speyer Properties, the New York City Employees’ Retirement System, and the New York City Teachers’ Retirement System.

Industry leaders expect MetLife to record another history-making event if it sells the Peter Cooper Village and Stuyvesant Town rental properties that make up the largest apartment complex in Manhattan, totaling more than 11,200 units in 110 buildings spread over 80 contiguous acres.

“We believe current market conditions are very favorable, and we have decided to test the market to gauge buyer interest in these properties,” the head of real estate investments for MetLife, Robert Merck, said. “MetLife believes there is a lot of capital seeking high-quality real estate of this caliber, and anticipates that it will see excellent market pricing for these properties.”

The consensus of real estate leaders is that the complex could fetch about $3.3 billion. Roughly 25% of the apartments are leased at market rates, with the rest protected by rent stabilization. Nevertheless, balanced upon a price of $350,000 a unit, the $3.3 billion price is realistic.

A recent study by Real Capital Analytics shows that the average price per unit of Manhattan properties offered for sale in May was $574,000. In addition to the rental units and retail sites, a new purchaser might be able to construct additional towers on an undeveloped portion of the site.

One thing is certain: Purchasers from around the world are interested in owning the site, including real estate opportunity and pension funds, individuals, and private investors and REIT’s.

One very active REIT purchaser is the nation’s largest apartment REIT, Archstone-Smith. Last week, it acquired the Westmont, a 163-unit, 16-story rental building on Columbus Avenue between 95th and 96th streets. The purchase price was $87.8 million.

Last month, Archstone-Smith entered a contract to purchase the 20-year-old, 207-unit apartment complex at 750 Columbus Ave. between 96th and 97th streets, the KeyWest. It is paying about $115 million, or $550,000 a unit, to the Gotham Organization.

In Manhattan, Archstone-Smith owns 12 communities, representing 3,908 units, including those under construction.

In the first seven months of the year, the company purchased the Marlborough House, at 245 E. 40th St.; 180 Montague St. in Brooklyn, and the Gershwin on Eighth Avenue and West 50th Street.

Another possible purchaser from MetLife is Equity Residential, which in February purchased the 135-unit apartment house at 600 Washington St. In November 2005, it purchased three rental high-rise towers, Trump Place on Riverside Boulevard, consisting of 1,325 rental apartments. Equity paid about $809 million, or $580,000 an apartment unit and $723 a square foot of rentable apartment space.

There are now more than 30,000 new condominium units in various stages of development in the city. So, if MetLife was to sell its rental portfolio, which would increase the number of additional condominiums available for sale or rental, how would the market react?

“I expect incentives to increase over the remainder of 2006 and into 2007” the president of the City Investment Fund, Thomas Lyndon, said. “Whether actual price cuts will be necessary to move the inventory is a question mark.

“Developers will use every means to hold pre-sale contracts and close them before instituting price cuts to increase absorption,” he said. “I would expect certain projects in fringe locations, which had a large number of buyers who purchased for investment, to actually have dropped their deposits if price cuts are not offered. It will be very challenging for a large project when prices are not going up every month.”

“On the supply side, in contrast, we may be approaching a situation of imbalance,” a principal at Worldwide Development, David Lowenfeld, said. “With large numbers of building permits issued for new condominium construction, and a spate of residential apartments being converted to for-sale housing, there is a strong chance that in secondary markets, new supply will exceed the continued strong demand.”

“If the condominium market continues to soften, it could create a silver lining for acquisition and maintenance of rental housing units,” a senior real estate partner at the law firm of Stroock & Stroock & Lavan, Leonard Boxer, said.”The vibrancy and diversity of our city is dependent upon our ability to both maintain and increase the rental housing stock, at all levels, so people who work here can afford to live here. Today, not only are we seeing a limited number of new rental units, but existing rental housing units are diminishing as a result of conversions.”

According to Mr. Lydon, “The strong rental market will set new highs and help push certain renters into the buyer pool.”

“The popularity of living in New York City has never been greater,” a partner at Apollo Real Estate Advisors LP, William McCahill, said. “The potential of Peter Cooper/Stuyvesant Town coming on the market, combined with the 30,000 new condo units and several thousand conversion units, will strain the market.

“We will see the same old story: Well-located, well-designed projects will do well,” he said. “Those that have inferior design or location will see some price compression until the market absorbs the units. Conversion units will have the additional challenge of competing with older designs, lower ceilings, and full real estate taxes on the unit.

“My general feeling is that the road for conversion could get a little bumpy. However, if New York City maintains its high level of desirability any pain felt in the market should be short-lived,” Mr. McCahill said.

“The next 12 months in American homeownership will reveal whether the market is in a bubble,” a principal at Stellar Management, Robert Rosania, said. “It is simply foolish to believe that New York City will completely avoid any and all slowdowns in the for sale housing sector.

“Its not rocket science, when ownership costs have more than doubled, prices must go down,” he said. “Fundamentals are worse now than a year ago. Conversions are a riskier proposition, because their requisite financing and economic underpinning is burdened by greater aggregate debt from inception. Considering the net margins on most of the conversions from rental to condominium is around 20%, many of the real estate investors who purchased rentals for conversion will get crushed.”

“At the present time the condo market is moving along deliberately,” the president and co-founder of Bellmarc Realty, Neil Binder, said. “That’s a nice way of saying that things could be better, but we’re all paying our bills. I think the conversion of Peter Cooper/Stuy Town will not have an appreciable impact on total supply and demand in Manhattan. Most of these apartments are large and rent-stabilized, many tenants will continue to reside in the apartments for a long time.”

“One year ago, the condo market was on fire, prices for condos tripling, land prices soaring, and the conversion of large rental projects in Manhattan in a near frenzy,” the chairman of the national real estate practice at Greenberg Traurig LP, Robert Ivanhoe, said. “The peak seemed to occur last summer and fall, marked by the sales of several large apartment complexes at extremely low cap rates, all based upon values predicted on conversions.

“Lenders were ready to finance 90% of acquisition price, plus capital improvements, negative carrying costs until the project could be converted and units sold at the high prices available at that time, even though, in some of these projects, there were many rentstabilized tenants making vacancy and sale of the units beyond the control of the new ownership,” he said.

“Today the market has certainly cooled for new condominiums whether through conversion of new question or new construction -the question is now how much? A cooling market, need to wait out rent regulated tenants, increasing interest rates and perhaps most importantly, a pull back by the lenders financing these projects has slowed the market for conversions from the torrid pace of a year ago. The direction of interest rates and psychology of this fragile market will determine where we go from here,” Mr. Ivanhoe said.

“Buyers are taking longer to go to contract and many rescissions are occurring during the attorney review period for a conversion from a rental to a condominium or cooperative apartment,” Mr. Lyndon said. “Issues such as ground leases on co-ops or cond-ops, 421 real estate tax abatement, and the proposed finishes and renovations for the apartments being offered are subject to much more scrutiny. The underlying fact is that buyers have many options, and do not feel the pressure to close.”

“I think the large majority of conversion properties sell at a discount to new construction, although some of the conversions do have superior locations,” the managing director of RBS Greenwich Capital, Chuck Rosenzweig, said. “The velocity in the condo market has clearly slowed down and construction costs in the past year have generally gone up at a higher rate than condo pricing. There will be a differentiation in the market between the higher-quality, better-located buildings and those that are either in less desirable residential locations.”

I have to concur with the president of Levine Builders, Jeffrey Levine, when he says “New York City is a world capital with a population in excess of 8.2 million people, and the demand for housing from both local, domestic, and international buyers is constant.

“Inasmuch as prices have risen for a number of years, talk of a real estate bubble has impacted the psyche of the buyers and, for the moment, prices have stabilized and, at certain levels, moderated downward,” he said. “In the near future, as these lower price point products are absorbed, the market will have to adjust to the paradigm of higher prices.”

“Next year will be a good year for new home buyers in New York City,” Mr. Lowenfeld said. “Those seeking to buy in the best neighborhoods will find more options and better-quality products as developers compete for buyers. Those looking for a bargain, and New Yorkers always are, will find them in New York’s emerging neighborhoods.”

Mr. Stoler is a television broadcaster and senior vice president at a title insurance company. He can be reached at mstoler@newyorkrealestatetv.com.