Via The New York Times
The owners of Stuyvesant Town and Peter Cooper Village, the sprawling sister complexes overlooking the East River in Manhattan, will miss a $16 million loan payment on Friday, which would put them in technical default on their mortgages, and the 20,000 residents in limbo.The $5.4 billion purchase of the complexes' 110 buildings and 11,227 apartments by Tishman Speyer Properties and BlackRock Realty in 2006 made headlines. But the denouement at Stuyvesant Town and Peter Cooper has cast a pall over what had been a comfortable harbor for the city's middle class since the complexes opened in the late 1940s.
"It worries me," said Anne Granberry, a nurse who moved into Stuyvesant Town in June. "They haven't told us anything."
Tishman Speyer declined to comment, although executives who had been briefed on the matter said the partners could not pay the entire amount due.
City Councilman Daniel R. Garodnick, who lives in Peter Cooper Village, said Tishman Speyer notified him on Thursday afternoon that it would not make its mortgage payment on Friday.
Tishman Speyer and its partner have 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.
Banking and real estate executives say that untangling the financial structure and either foreclosing or devising a new deal will take months. Aside from the $3 billion in mortgages, there is another $1.4 billion in secondary, or mezzanine, loans and almost $1 billion in equity invested by the partners, a Florida pension fund, the Church of England and others.
Also in the mix are the government-controlled mortgage giants Fannie Mae and Freddie Mac, which together hold a bond that is secured by as much as $2 billion of debt on the property. Those two companies will get paid first with whatever revenue comes from the property, but they are not involved in the negotiations.
The latest appraisal puts the value of the complexes at only $1.9 billion, about 65 percent less than the purchase price. So the investors and the debt holders for the mezzanine loans are likely to be left with nothing. The mortgage lenders must apportion the losses and decide whether to sell the properties, or to restructure the loans in the hope that Stuyvesant Town and Peter Cooper will be worth more at some point.
The tenants wonder what will happen next.
"For so many years, this was the epitome of stability for middle-class New Yorkers," said Mr. Garodnick, who has lived there for much of his life. "Now there are endless questions about its future."
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.
"People used to move in and settle down here," said Soni Fink, a tenant since 1961. But, she said, the turnover increased as the new owners began moving single executives and New York University students into expensive apartments. "Now there are moving vans in the circle all the time. You hardly ever saw moving vans in here unless someone died."
Ultimately, Tishman Speyer, like many similar buyers, was unable to convert rent-regulated apartments to market-rate rents as quickly as it had anticipated. Rents fell as the recession deepened, and then last fall the state's highest court ruled that the owners had improperly deregulated and raised rents on about 4,400 of the apartments while getting special tax breaks from the city.
The 15-story red-brick buildings are in good shape, tenants say, but they noted that the maintenance and security staffs had been cut. And the owners may owe $200 million in rent overcharges to thousands of tenants as a result of the court ruling.
Correction: January 7, 2010
An earlier version of this article misspelled the given name of Soni Fink, a tenant at Peter Cooper.
Partners Near Default on Stuyvesant Town [NY Times]
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