Property Grunt

Tuesday, January 26, 2010

It's Over

Stuyvesant Town Turned Over to Creditors

The owners of Stuyvesant Town and Peter Cooper Village, the sprawling sister complexes overlooking the East River in Manhattan, have decided to turn over the two complexes to creditors, officials said Monday morning.

The decision by Tishman Speyer Properties and BlackRock Realty comes four years after the $5.4 billion purchase of the complexes’ 110 buildings and 11,227 apartments in what was the most expensive real estate deal in American history.

The decision to surrender the properties comes after the developers failed to make payments on loans due for the properties, which have been a comfortable harbor for the city’s middle class since they opened in the late 1940s.

Tishman Speyer and its partner had been negotiating since November to restructure $3 billion worth of debt and to hold on to the properties, which cover 80 acres east of First Avenue, from 14th Street to 23rd Street. But their reserves, once stuffed with $890 million for capital improvements, interest payments and renovations, are now virtually depleted.

Metropolitan Life built the complexes for World War II veterans in the 1940s, when the city was in desperate need of new housing. It 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.

But with the real estate market soaring in 2005, MetLife decided to sell. Tishman Speyer and BlackRock won an auction the following year.

The rents collected did not cover the mortgage payments, but like other investors and developers at the time, the partners had a plan to increase net income by steadily renovating and deregulating vacant apartments while raising rents substantially.

For tenant advocates and urban planners, the sale underscored the loss of affordable housing in the city and the highly speculative financial structures that, they warned, would only end in disaster.

Yeah. As if we did not see this coming.