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Peter Cooper Village and Stuyvesant Town

(NEW YORK, NY)--One of the biggest Manhattan real estate loan defaults this year could arrive in June when Tishman Speyer runs out of cash for payments on six loans totaling $4.5 billion for the 56-building, twin apartment complex known as the Stuyvesant Town and Peter Cooper Village, according to Fitch Ratings.

The New York-based ratings agency issued the alert after finding on Jan. 15 that the developer's general reserve balance is completely depleted, and the debt service reserve balance has decreased to $127.7 million from the initial $400 million total.

Jerry Speyer

Tishman Speyer principals Robert V. Tishman, Jerry Speyer and Rob Speyer, along with Blackrock Realty, bought the 62-year-old property in central Manhattan in 2006 for $5.4 billion, a premium  New York real estate observers said at the time.

Tishman Speyer's strategy in paying the high price was to raise rents as many of the leases were ending on the 11,227 apartments, increasing the value of the asset.  But that hasn't happened, Fitch analysts find.

"Although the property's performance remains consistent, the cash flow generated from the property continues to require significant reserves to cover debt service obligations," according to Fitch analysts Sue Ann Butera and Adam Fox.

Robert Tishman

"Property cash flow is not expected improve from 2008,  based on the borrowers restated budget for 2009," the analysts believe.

"As a result, according to Fitch's calculations and the (developer's) 2009 budget, the borrower has approximately six months of reserves remaining to cover the trust portion of the total debt on the property.

"Should the loan default, Fitch expects the servicer to advance debt service on the trust portion."

The securitized balance of the Stuyvesant Town/Peter Cooper Village Loan consists of five pieces of a $3 billion note.

Rob Speyer

There is an additional $1.5 billion of mezzanine debt outside the trust.

Fitch rated four of the five notes, ranging from $202.3 million to $1.5 billion.

The agency reviewed the transactions on Oct. 29, 2008 and lowered the shadow rating of the Stuyvesant Town/Peter Cooper Village loan to below investment grade "as a result of slower than anticipated conversion of rent stabilized units to market."
 
In addition to the residential component, the complex contains about 100,000 square feet of retail space, 20,000 square feet of professional office space, and six parking garages with 2,260 licensed spaces.