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Peter Cooper Village and Stuyvesant Town

(NEW YORK CITY, NY) -- The most expensive real estate deal of its kind in American property annals collapsed today.

Legendary New York City developer Tishman Speyer Properties and its partner, BlackRock Realty, turned over the 75-year-old, 110-building, 11,227-unit Stuyvesant Town and adjoining Peter Cooper Village apartment community to a consortium of creditors.

The partners purchased the property from MetLife for $5.4 billion at a 2006 auction. They paid cash and took out loans totaling $3 billion to pay for the real estate which runs from 14th Street to 23rd Street and overlooks the East River in Manhattan.

The partners once had reserves of $890 million for capital improvements, interest payments and renovations.  But the national real estate downturn, beginning in 2007 and strong rent protections for tenants by New York City slowed the partners' plans to upgrade the apartments and raise rents to cover mortgage payments, as Real Estate Channel previously reported.

Robert Tishman

By going the transfer-title route, Tishman Speyer principals Robert Tishman, Jerry Speyer and Rob Speyer avoided placing the 80-acre property into Chapter 11 protection under the U.S. Bankruptcy Code.

Tishman Speyer and BlackRock transferred title this morning after defaulting earlier this month on a $3 billion debt payment. The partners had been negotiating since November 2009 to restructure their debt load but couldn't find new lenders to do so.

(Please see related Real Estate Channel postings):

• Clock Ticking on Tishman Speyer's $4.5B Loan Payments, Jan. 26, 2009
• Manhattan's Stuyvesant Town and Peter Cooper Village Finances Continue to Lag, Fitch Reports,  Aug. 31, 2009  
• Tishman Speyer and Partners Face $200M in Rent Overcharges at Manhattan Apartments. Oct. 22. 2009

Rob Speyer

In a prepared statement this morning, the partners said:

"We have spent the last few weeks negotiating in good faith to restructure the debt and ownership of Stuyvesant Town and Peter Cooper Village.

"Over the last few days, however, it has become clear to us through this process that the only viable alternative to bankruptcy would be to transfer control and operation of the property, in an orderly manner, to the lenders and their representatives."

The action today is an embarrassment to Tishman Speyer Properties, long regarded as one of New York City's stellar real estate organizations. The company controls trophy Manhattan properties like the Chrysler Building and Rockefeller Center.

Jerry Speyer

Metropolitan Life built the complexes for World War II veterans in the 1940s when the city needed new housing, according to The New York Times. MetLife received tax breaks and other incentives in return for maintaining low rents. "The buildings became home for generations of workers searching for an affordable spot in Manhattan," The Times reported.

Under one scenario, Tishman would have been offered a long-term contract to operate the complex, but it rejected that plan.

Lenders will now be looking for new managers for Stuyvesant Town, and its smaller adjacent property, Peter Cooper Village, where the rents are typically higher and the apartments more spacious.

 

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