How is advocating for the wholesale destruction of this peaceful residential neighborhood any better than the brutal Robert Moses style urban renewal planning this project represents?
I am well aware of the hyperbole in the comparison I am about to make, but it's like saying, "ethnic cleansing, as deplorable a practice as it is, is justified in this instance because we're removing the correct impurity." [/handwringing]
The resident advocates looking for landmark protection are naive to think that a project built and financed by government largesse would be economically sustainable when premised on such a distorted set of market cues. The free lunch on this one is over.
Tishman Speyer bought 80 acres of Manhattan real estate in convenient superblock form, but they also bought the residential atmosphere of Harvard Yard. They'd be stupid to trash 50 years of graceful plane trees and the discreet cloistered luxury of green, light, and space.
Re-branding this project as an exclusive eco-enclave and as a model for adaptive reuse seems to me the correct tone. A more bohemian BPC if you will. Just think of the opportunities inherent in the economies of scale for a condo complex this large that generates it's own electricity and does innovative things with greywater and the like.
In the end, though this complex will likely be a success, it isn't a model for cities to employ, for - as is correctly noted, the urban qualities and mixed use nature are lacking. But more importantly, this may turn out to be a model for just the kind of efficient density needed to fully leverage public transportation and proximity from the sprawling inner ring suburbs surrounding cities across the country. What is in itself a failure of urbanity, could very well facilitate a reinvigoration of true urban character to many American cities.
I really think that the only failure (other than the obvious nature of the architecture) economically of this enclave is the extreme overpayment by Tishman for the bundle. So, they f***d up.
There are multi-millionaires (and I know a few) who have lived here forever and invested in their Hamptons and Bucks County homes. Tishman is not up against a generally poor group of tenants.
The market rate apartments (while recently overpriced) have been historically quite reasonable and since renovations have progressed quite lovely. Still, they will NEVER warrant what Tishman paid, unless torn down, so let's let the rodent tails fly!!!
At a Pair of Gigantic Apartment Complexes, a Planting Project to Match
By VINCENT M. MALLOZZI
Published: April 20, 2008
Ten thousand more trees will soon be growing in Manhattan. Give or take one or two.
Their roots will settle in the grounds of Stuyvesant Town and Peter Cooper Village, the sprawling complexes that stretch for almost 10 blocks northeast of 14th Street near the East River, in one of the largest landscaping overhauls in Manhattan’s history.
“When this project is complete,” said Erik Pauzé, the lead gardener, “we will have landscaped 60 of the 80 acres that make up these two properties.”
The project was undertaken by Tishman Speyer, the developer that bought the two apartment complexes from MetLife in October 2006, for $5.4 billion.
The work began this month and the target date for its completion is June 30, giving it an urgency that brings dozens of gardeners to the neighborhood.
“On any given day, we might have 120 people here, gardening, installing flowers, trees and sprinkler systems,” Mr. Pauzé said.
The daunting task involves 200,000 plants — including 10,000 trees, 3,123 shrubs and 120,906 perennials. It is 20 percent complete, with healthy dogwood and cherry trees already sprouting buds. Truckloads of canopy trees, perennials and shrubs will be delivered in the coming weeks.
The project is the creation of Peter Walker and Partners, a landscape architecture firm based in Berkeley, Calif.
“This is probably the largest planting project we have ever done,” Mr. Walker said. “Tishman Speyer already had quite a remarkable piece of real estate, but they brought us in to raise the bar by transforming the grounds and making the place look even more stunning.”
Combined, Stuyvesant Town and Peter Cooper Village comprise 110 buildings, each 13 or 14 stories, that stretch from 14th Street to 23rd Street, between First Avenue and Avenue C.
On Thursday, Carole Jurman, 64, sat on a shade-covered bench in Stuyvesant Town and watched several gardeners go about the business of beautifying the place she has called home for the past 37 years. Since Tishman Speyer bought the properties, rent increases, Ms. Jurman said, have forced some of the 25,000 residents, including several of her longtime friends and neighbors, to pack up and leave.
Ms. Jurman said that while she was “thrilled to see all the wonderful planting,” she was saddened that so many families had to move, and that they will not be around to smell the roses, not to mention the magnolias and skip laurels, when they bloom.
“I feel bad for all of them,” said Ms. Jurman, who lives in a rent-stabilized apartment but would not reveal how much she paid. “There’s almost no place left for middle-class families to live in New York. It’s a terrible situation.”
George R. Hatzmann, a managing director of Tishman Speyer who is overseeing the landscape project, said, “Rent increases are a part of life in the city, but we do our best to stay consistent with market prices.”
Mr. Hatzmann said that 40,000 annuals and 100 hanging flower baskets would be in place by May 11, Mother’s Day. But he would not divulge the amount of money that Tishman Speyer is spending on the project.
“It’s a significant price, but it’s well worth it because it enhances quality of life and makes this a better place to live,” he said during a walking tour on Thursday. “It’s a great way to enhance the look of the property for the people who live here, and for people who might live here in the future.”
Dr. Bianca Alfonso, 35, who practices internal medicine at nearby Beth Israel Medical Center, moved into a two-bedroom apartment in Stuyvesant Town last year. She, too, declined to reveal how much rent she paid, but called her new neighborhood “the best-kept secret in New York.”
“It’s really the best of both worlds,” said Dr. Alfonso, who is married with two small children. “Once you’re in here, surrounded by all of the parks and the beautiful landscaping, you feel as though you’re living in the suburbs. But when it’s time to go to work, you just step outside, and you’re back in busy downtown Manhattan.”
Matthew Donham, an associate landscape architect, said that “one of the biggest challenges regarding this project is making sure that whatever we plant in large masses holds up against the scale of these buildings.”
Mr. Donham stopped to point out a spot in Stuyvesant Town where double rows of oak trees would soon be planted. “Depth and contrast with different sized plants and an assortment of colors is what works best on the eye,” he said.
He said that the enormousness of the project meant his company had to buy stock from nurseries across the country. The ginkgo and sweet gum trees, for example, came from Oregon.
“We made a lot of nurseries very happy,” Mr. Donham said.
Copyright 2008 The New York Times Company.
Report: Stuy Town Deal 'Most Prominent Trouble Spot'
by Dana Rubinstein | September 8, 2008
dandeluca via flickr.
A new report speculates that Tishman Speyer's record-setting, $5.4 billion purchase of Stuyvesant Town and Peter Cooper Village in 2006 may be in trouble.
Barron's is reporting that the purchase is the commercial mortgage market's "most prominent trouble spot" among Manhattan deals, according to Reuters:
"In a statement to Barron's, Tishman Speyer said the deal is 'a long-term investment.'More mini-Macklowes in the making?
Barron's also said two Harlem complexes were carrying hefty debts, with the owner of one close to defaulting on $225 million of senior debt and $25 million of junior debt. Problems at these complexes can be attributed to loose commercial-mortgage underwriting guidelines, Barron's said."
© 2008 Observer Media Group,
Longtime Stuyvesant Town, Peter Cooper residents face change
By JASON SHEFTELL
DAILY NEWS REAL ESTATE CORRESPONDENT
Thursday, September 25th 2008, 5:21 PM
An aerial view of Stuyvesant Town and Peter Cooper Village, the housing complexes between 14th and 23rd Sts., from First Ave. to the East River.
Joyce for News
Tishman Speyer's George Hatzmann at the Oval
Peter and Kathleen Nardoza walking outside their Stuyvesant Town apartment. They have lived in the complex since 1948.
Since the $5.4 billion purchase of Stuyvesant Town and Peter Cooper Village from MetLife in October 2006, new owner Tishman Speyer has found itself at odds with an established tenant base as it fights an aggressive strategy to raise rents and oust rent-stabilized residents not complying with rental board guidelines.
At the same time, the real estate giant that owns Rockefeller Center has planted flowers, shrubs and trees, added indoor amenities, updated apartments with granite countertops and wine-storage refrigerators, opened a second leasing office, improved community partnerships and upgraded playgrounds. New renters seem delighted.
Not surprisingly, market-rate rents at the 110-building, 11,223-unit complex have increased, sometimes as much as 10%-20%. Some long-term rent-stabilized tenants have received letters asking them to prove they are using their rent-stabilized apartment as their primary residence.
If they don't, they face lease-renewal problems.
"There is no doubt the Tishman Speyer business plan requires the change of property from stabilization to market rate within a short period of time," says New York City Councilman Dan Garodnick, who was born in Stuyvesant Town and now lives in Peter Cooper Village, and whose parents still live in Stuyvesant Town. "There's definitely a disconnect between their vision of turning this property into a luxury rental community and the working-class housing for which it was meant."
Amid the controversy, children's laughter was all you could hear last Sunday at Stuyvesant Town's main square, called the Oval. Residents old and young sunbathed, played catch on perfectly manicured lawns, dipped their feet in one of New York's only large-scale fountains, shopped at an outdoor produce market, kibitzed on park benches and soaked in life at the greenest 80 acres of residences in all of New York City. You couldn't find disenchantment out there if you tried.
"Real estate is a people business," says George Hatzmann, the Tishman Speyer managing director heading up the project. "Like any other industry, you have to constantly service your customer and offer them the highest level of satisfaction. Here, there are a lot of people to please."
Despite the landlord-tenant tug of war, Stuyvesant Town and Peter Cooper Village remain among of the finest places to live in the city. As Tishman repurposes the property into a more luxurious area, leasing offices are constantly filled with young professionals, with 880 apartments rented from May to July, the most since Tishman took over.
Older tenants, however, contend that the transience of new renters damages the stability of the family-oriented housing complex, built in the 1940s for returning World War II veterans and the middle class.
Considering that a tenant committee, led by Garodnick, put together a strong rival bid of $4.5 billion to buy the property, one has to wonder if Tishman Speyer could ever win over existing residents.
"If they cool it and lay off legitimate stabilized tenants and start working with all tenant bases, attitudes and outlook could change," says Garodnick, whose office set up a hotline to help fearful tenants.
Tishman Speyer, however, sometimes isn't wrong about people owning homes elsewhere. I spoke to two residents who received letters asking them to verify second home ownership. Both were in violation of the rent-stabilized lease agreement. One owned a home in New England; the other on the upper West Side, allowing a daughter to take over the Stuyvesant Town unit.
Both complained about construction and students being allowed to put up walls so that they could add roommates to reduce the amount of rent per tenant. One complained about a Tishman policy allowing pets.
Both contended that Tishman was having trouble renting the units at market-rate prices, which start in Stuyvesant Town at $3,055 for one bedrooms, $3,875 for two bedrooms and $5,215 for three bedrooms. In Peter Cooper Village, one-bedrooms start at $3,420.
The New England second-home owner said he was trying to sell his home so he could stay at Stuyvesant Town under the rules.
Some of the newer, younger residents attend New York University, and others work in the financial service industry. They seem to love where they live. Five-year resident Emily Rokeach held her toddler nephew's birthday party at a Stuy Town playground. Living with a roommate in a converted one-bedroom, Emily recently renewed her lease despite an increase of about $300.
"Living here makes life in this crazy city feel calming," she says. "Before I lived here, I thought it was impossible to get in unless you were rent- stabilized. I didn't know anyone could live here. You just get a lot of space inside and out. That's why I stay. Kids sell lemonade near flagpoles.
I just love that."
The oldest residents, those not violating stabilization laws, feel the same.
Last Sunday, I met 97-year-old Rose Dubinksy sitting in a wheelchair at the Oval facing the fountain. She's lived in Stuyvesant Town for over 45 years. In the 1940s, she remembers going to Washington, D.C., to hand First Lady Eleanor Roosevelt a letter in the White House. Stuyvesant Town gave her a better life. It still does.
"They had plays and musicians all the time on the grounds," she says, smiling. "You have to have money to live here now, but they always make improvements. This is the best place to live in all of New York City."
Peter Nardoza, an original Stuyvesant tenant, found housing when he returned home from Africa. He raised children in Stuyvesant Town, still living with his wife in a three-bedroom apartment. He doesn't pay attention to the controversies.
"While all the terrible things happen in the world, like fires in California and hurricanes down South, I get to sit here in Stuyvesant Town and look at beautiful trees all day long," says Nardoza, a rent-stabilized tenant.
While rent-stabilized and -controlled tenants pay anywhere from $300 and up, long-term tenants fear they won't be able to afford future rent increases as values near market level. Some no longer feel at home.
"My floor has young college kids coming home at all hours of the night making noise," says a 20-year plus Stuyvesant Town resident who just retired as a teacher in the city school system. "When I feel this different from my neighbors, it's time for me to go. I have to wonder if this is what the new landlords want."
One tenant blasted residents skirting the stabilization laws. "A lot of people had it really good here paying next to nothing in rent and having second homes on some nearby beach," she said, also asking not to be identified. "Everyone has to pay the piper sometime."
Both tenants and owners need to move toward better relations so long-term residents do not feel that they live under a cloud of uncertainty.
That said, any resident in violation of the rent-stabilization law needs to take steps to make sure Stuyvesant Town is his or her primary residence.
Late this fall, five indoor amenities will open in glass rooms surrounding the Oval. Designed by architecture firm Cetra Ruddy, they are the Oval Kids, Oval Film, Oval Lounge, a concierge service and Oval Study, and are the first year-round indoor amenities in the complex's history. There will be a $250 charge for membership with a $25 monthly fee. Tishman could consider waiving the fee for residents of 20 years or more.
As beautiful as Stuyvesant Town may be, it's equally complex. This is Tishman Speyer's first residential complex, and it's a gigantic one. As one real estate lawyer put it, "If they can just hold on a little longer, a property this size in New York City isn't going to lose them any money."
It's the reputation that's at issue now.
© Copyright 2008 NYDailyNews.
Tishman Speyer Unveils Stuy Town Movie Theater, Library
by Adam Rose
October 16, 2008
Landlord Tishman Speyer plans this weekend to officially open its four new residential amenities at Stuyvesant Town and Peter Cooper Village, including a private movie theater and a library.
Collectively billed as the Oval Amenities, these four services—aside from the theater and the study and library, there’s a kids activity center and a pool table-equipped lounge—will join concierge services and a fitness center for the tenants at the 11,000-unit apartment complexes.
Tenants can opt into the four new services for $20 monthly, plus a one-time $250 fee per household, as long as they make a three-month commitment. Guest passes for non-residents or resident nonmembers will be $20 each. Existing gym and concierge members will enjoy a substantial discount.
The new facilities were designed by firm Cetra/Ruddy, and will be operated by American Leisure, a company that manages gyms, lifestyle centers and spas. Housed in a quartet of "crystalline glass enclosures" that blend modern aesthetics with the red-brick housing-project-style architecture of the apartment buildings, the facilities were attached to the sides of four existing buildings that ring the central oval at the heart of the complex.
These square annexes introduce a little angularity to a hub that is decidedly curvy. Each one is surrounded by hedges and a bluestone terrace with seating, and according to Cetra/Ruddy founding principal Nancy Ruddy, the "mullion-free glass" floor-to-ceiling windows create "an indoor/outdoor experience for residents using the space." The same firm redesigned the leasing office on First Avenue, the concierge and the gym. Tishman Speyer would not disclose how much the new facilities cost.
On Monday, Stuyvesant Town tenants were treated to an open house of the new spaces. Dozens toured and asked questions of the handful of American Leisure employees on hand serving sandwich wraps, popcorn, wine and cheese.
Prices weren't listed in the glossy pamphlet being passed out, and when one curious middle-aged resident asked a smartly dressed membership coordinator about the costs, she spent two minutes rattling off the list of benefits, before being cut off and asked again—"how much?"
Sign-ups are just beginning, and although there's already a waiting list to rent out the spaces for private events (price to be determined), it's unclear how many of Stuyvesant Town's 25,000 tenants will bite. The new amenities seem aimed at market-rate tenants, still the minority, many of whom are young professionals with kids. (Full disclosure: This reporter is a market-rate Stuy Town tenant.)
The market-rate residents are the ones most squeezed by recent rent hikes, says Susan Steinberg, vice president of the Stuyvesant Town-Peter Cooper Village Tenants Association, as Tishman Speyer seeks to close the gap between its revenue and the payments it makes on the $3 billion mortgage it took out to buy the properties for $5.4 billion in 2006.
"They're being issued outrageous increases of 25 percent and higher," Ms. Steinberg said of market-rate tenants. "Some of them are saying, 'I'd much rather buy a house in New Jersey.'"
The tenants association says it welcomes the new amenities, even though it wasn't consulted about putting them in. Still, it has some reservations. "The term 'amenities' for us means something that comes with the complex—washing machines, playgrounds and things of that nature," Ms. Steinberg said. "We hope the tenants enjoy it, but they sure would enjoy it more if it were not going to cost them."
A Tishman Speyer representative said the landlord is preparing a statement on the amenities.
© 2008 Observer Media Group,
Last edited by brianac; October 17th, 2008 at 06:17 AM.
TISHMAN TURNS UP HEAT, ELECTRICITY ON RENTERS
By KAJA WHITEHOUSE
Posted: 4:17 am
October 23, 2008
Residents of iconic apartment complexes Peter Cooper Village and Stuyvesant Town will soon be paying for their own electricity, The Post has learned.
The 11,000-unit apartment complex is in the process of converting to a metered system as part of a series of cost-saving initiatives being pushed by Stuy-Town's new owner, real estate developer Tishman Speyer, people familiar with the matter said.
The metered system is expected to be announced to the complex's 19,000 residents in the next few days. It will be rolled out as part of a larger plan to reduce overall energy usage by 20 percent over the next three years.
Employees and tenants of the storied apartment complex, however, say this is just one of several recent moves by the complex's management to pass costs on to residents.
Utilities are currently included in the rent and have been since the first World War II veterans and their families moved in 61 years ago.
Other cost-cutting efforts include some outsourcing of calls from residents to call centers in India. Among the types of calls affected are those involving billing and tenant complaints.
Some employees also complain of being cut off from overtime pay - but only when working on rent-controlled apartments. The workers still get overtime pay for helping higher-paying market-rate renters.
A Tishman spokesman vehemently denied the overtime claim, saying, "It's not true. It's not our policy."
And Tishman officials estimate the energy-savings plan, which will include new appliances and an upgraded ventilation system, will cost the company up to $30 million.
Financial incentives by the New York State Energy Research & Development Authority, which has partnered with Tishman on the effort, could offset those costs by $10 million.
Still, there's no denying times are tough for the developer.
Tishman, which paid an eye-popping $5.6 billion for the 80.4-acre plot of land in 2006, has been burning through cash in its effort to convert the largely rent-stabilized family apartments into a hot spot for high-income earners willing to pay market-rate rents.
Last month, rating agency Standard & Poor's estimated the property's value had declined 10 percent.
Copyright 2008 NYP Holdings, Inc. All rights reserved.
Buyers of Huge Manhattan Complex Face Default Risk
By CHARLES V. BAGLI
Published: September 9, 2009
Three years ago, the sale of the 110 red brick apartment buildings at Stuyvesant Town and Peter Cooper Village in Manhattan amounted to the biggest American real estate deal in history.
Now the buyers are running out of time and money. Jerry I. and Rob Speyer and their partner, BlackRock Realty, who together paid $5.4 billion for the quiet middle-class redoubt near the East River, have nearly exhausted an additional $890 million set aside for apartment renovations, landscaping and interest payments. Rents are down 25 percent from their peak.
Real estate analysts say that the partnership’s money will run out as soon as December and that the owners are at “high risk” of default on $4.4 billion in loans. Two real estate executives who have been briefed on the finances insist that the owners can hold out, but only until February.
On Thursday, the partnership will go before the Court of Appeals in Albany to try to overturn a lower court decision that could force them to pay hundreds of millions of dollars in rent rebates to thousands of tenants.
Regardless of the outcome at the Court of Appeals, Stuyvesant Town and Peter Cooper Village are in trouble. City officials have been monitoring the looming crisis, worried that the financial problems could eventually lead to default, deferred maintenance and disinvestment at a complex that has served as an oasis of affordability in Manhattan for middle-class New Yorkers. Some 6,875 of the 11,227 apartments at the two adjoining complexes are rent regulated.
“We are absolutely keeping an eye on it,” said Rafael E. Cestero, the city’s housing commissioner. “It’s an iconic complex.”
“We’re not doing this to bail out anybody who was part of the original transaction,” he added. “Those folks are going to take their lumps. We are looking at how we can ensure that the rent-stabilized units and the families that live there and families that could live there in the future could be insulated from the unwinding of this deal.”
Rob Speyer, who is co-chief executive of Tishman Speyer Properties with his father, Jerry, acknowledged the problem, saying that it went beyond the need for a cash infusion from the partners and their investors, which include Calpers, the giant California pension fund that is the nation’s largest, as well as other pension funds.
“The asset is going to require a restructuring,” he said. “Once the court case is resolved, we’ll speak to our debt holders as well as our fellow equity investors.”
But between the $5.4 billion purchase price and four “reserve funds” with $890 million, Tishman Speyer and BlackRock spent $6.3 billion acquiring Stuyvesant Town and Peter Cooper Village from the original owner, Metropolitan Life.
The deal has become a “poster child” for all that was wrong with that era of easy credit, highly speculative deals and greed, said Ben Thypin, an analyst at Real Capital Analytics, a research firm.
A recent report from Realpoint, a credit rating agency, estimates that the property has a value today of only $2.13 billion — less than half of what the partnership borrowed to buy it.
“The lender has to determine its own interests, as does the equity,” Rob Speyer said. “When the time comes we will be fair and reasonable and hope to get a new deal done.”
The Stuyvesant Town travail has put a dent in the armor of Tishman Speyer, a real estate company that zealously protects its image as the preferred caretaker for the city’s crown jewels: Rockefeller Center, the Chrysler Building and the Met Life Building on Park Avenue. Indeed, Mayor Michael R. Bloomberg said as much in response to criticism when they bought Stuyvesant Town that the city should have supported a rival $4 billion bid from tenants.
Like other developers and real estate managers, Tishman Speyer has been left holding a couple of sour deals now that the real estate and credit markets have collapsed. A partnership led by the Speyers defaulted recently on debt payments for its $2.8 billion acquisition of CarrAmerica, a collection of 28 prime office buildings in Washington.
Its $22 billion purchase of Archstone-Smith Trust, a vast collection of 400 apartment complexes, has also fared poorly. Earlier this year, the banks that financed the deal were forced to pour in another $500 million to give Archstone more time to sell properties and reduce its debt. Tishman Speyer, whose investment fund invested $250 million in the deal expecting to get 13 percent of the profits, declined to participate. Its 1 percent stake was reduced substantially.
Rob Speyer said that in both cases the properties have “a lot of long-term value.” But the bad deals also represent only a fraction of the $35 billion in real estate assets that it owns or manages in the United States, India, China and Brazil. At the top of the market, he said the company also sold $10 billion worth of property over six months in 2007, including the former New York Times Building in Manhattan, which went for $525 million, three times what it paid less than three years earlier.
Despite several bad deals, the Speyers insist their company is still providing investors with “20 percent returns” and has $2 billion to invest in new deals. “You show me anybody who measured up to that standard,” Jerry Speyer said.
Still, the purchase of Stuyvesant Town and Peter Cooper Village was one of the most publicized and controversial of its deals in recent years. The winning bid presumed the partnership could increase profits by replacing rent-stabilized residents with much higher-paying tenants after renovating and deregulating apartments.
But the existing rents covered less than half of the annual debt service on the loans. And they have been unable to convert apartments to market rates as quickly as they had imagined. At the same time, rents, which had escalated for years, suddenly fell sharply as the economy slowed and layoffs prevailed.
Daniel R. Garodnick, a city councilman who lives in Peter Cooper Village, said Tishman Speyer had problems of “its own making.”
“Tishman Speyer is in trouble, and tenants are already seeing the effects,” he said. “Residents are increasingly concerned that the maintenance of the buildings is slipping, even as they are getting hit with a flurry of potential charges for major capital improvements.”
In March, the Appellate Division of the State Supreme Court ruled unanimously that the Tishman Speyer partnership and the prior owner, Met Life, had wrongfully deregulated about 4,350 apartments and raised rents beyond certain set levels, while receiving tax breaks from the city.
Tishman Speyer, Met Life and much of the real estate industry in New York appealed to the state’s highest court, arguing that the court was attempting to overturn “15 years of real estate industry practice that has been endorsed by two government agencies.”
If the Appellate Court is upheld, the market-rate tenants could seek treble damages, which could cost the partnership more than $200 million. Even if it the ruling is overturned, the partnership will still run out of cash and it must renegotiate its loans or face foreclosure. A similar project with a similar business plan, the Riverton in Harlem, is already in foreclosure.
At Stuyvesant Town, there is a $3 billion first mortgage, or commercial mortgage-backed security, and a $1.4 billion second loan, known as “mezzanine debt” held by SL Green, the government of Singapore and others.
Finally, there is $1.9 billion in equity put up by Tishman Speyer, BlackRock and their investors. Tishman Speyer, which generally earns development and management fees from the properties, has about $56 million of its own money in the deal.
“I’d say their equity has been wiped out,” said Craig Leupold, president of Green Street Advisors, “given the decline in apartment values.”
Folks at TS drank waaayyyy too much of the Wall Street Kool Aid.
An Apartment Complex Teeters
High-Profile Tishman/BlackRock Property in New York in Danger of Default
By LINGLING WEI and CRAIG KARMIN
The giant Stuyvesant Town apartment complex on Manhattan's East Side, shown Tuesday, was developed by MetLife for World War II veterans.
One of the biggest, most high-profile deals of the commercial real-estate boom is in danger of imminent default, say people familiar with the matter, signaling the beginning of what is expected to be a wave of commercial-property failures.
The sprawling Manhattan apartment complex known as Peter Cooper Village and Stuyvesant Town -- acquired for $5.4 billion in 2006 by a venture of Tishman Speyer Properties and a unit of BlackRock Inc. -- is running out of cash. As of the end of September, it had $33.7 million left of the $400 million in interest reserves set up to service its debt, according to the people familiar with the matter. At its current burn rate of about $16 million per month, the reserve could be depleted before the end of the year, the people said. Others have said the venture could avoid default until February.
The spokesman for Tishman Speyer declined to comment on behalf of the partnership.
The ownership, which includes a roster of high-profile investors from the Church of England to the California Public Employees' Retirement System, has no current plans to inject more capital into the venture, according to the people. Lenders who financed the deal first projected the complex's net operating income would triple to $336 million in 2011 from $112 million in 2006, according to Deutsche Bank AG. But net income is projected to be $139 million this year, according to Realpoint LLC, a credit-rating agency.
Investors who bought into the deal were confident that real-estate manager Tishman Speyer would be able to greatly boost profits by raising rents in Manhattan's sizzling apartment market. But today, the 56-building, 11,000-apartment property is suffering from a slowing New York economy, a lawsuit that has hindered the owner's ability to convert rent-controlled units to market rentals, and the debt load.
Realpoint estimates that the property is worth only $2.1 billion now, less than half of the purchase price. By that measure, all the equity investors and many of the lenders, including Government of Singapore Investment Corp., or GIC; Gramercy Capital Corp.; and SL Green Realty Corp., are in danger of seeing most, if not all, of their investments wiped out. Hartford Financial Services Group, which bought $100 million of the debt tied to the property, said it has "sufficiently reserved for ths asset in the first half of this year."
Some of the nation's largest institutional investors already consider their investment a failure. The $133 billion Florida State Board of Administration committed $250 million to the equity partnership in 2007. It now counts the value as zero. A spokesman for the pension fund declined further comment.
The failure of the high-profile investment also would further rattle the market for apartments, offices, hotels and other commercial property. The market this year has seen increases in loan delinquencies and property foreclosures, stoking worries that it will drag down the nascent economic recovery.
Commercial mortgage-backed securities -- the kind that financed a chunk of the Peter Cooper-Stuyvesant deal -- are high on the list of concerns. Some $700 billion worth of CMBS were issued during the boom years but they have never been tested by a protracted downturn.
The apartment complex was developed by MetLife for returning World War II veterans and remained a middle-class bastion even as rents in other parts of Manhattan skyrocketed. New York's strict regulations prevented the owners from raising rents.
But New York rent rules were eased over the years. When the Tishman/BlackRock venture purchased the property from MetLife in late 2006, the new owners predicted they would be able to convert thousands of protected apartments to higher market rents.
Pedestrians on First Avenue in front of the Cooper Village apartments.
These projections convinced Calpers and the pension funds of several other states to make large equity investments in the deal. Meantime, the Tishman/BlackRock venture put a $3 billion first mortgage on the property and another $1.4 billion of so-called mezzanine debt.
The new owners ran into a slowing economy and resistance from tenants that battled to block rent increases. In one of their most successful challenges, tenants groups filed a lawsuit charging MetLife and the new owners with improperly converting rent-regulated units while receiving tax benefits from the city. The appellate division of the State Supreme Court in March ruled in the tenants' favor. The state's highest court is expected to rule on an appeal this month.
But even a victory by the Tishman/BlackRock partnership likely won't save the deal from a default. One indication: a "special servicer" is in the process of taking over the deal's CMBS debt, say people familiar with the matter. Special servicers are experts in dealing with troubled loans. The transfer to the special servicer, CW Capital, could occur as soon as this month, the people said.
Once that happens, the special servicer likely will try to negotiate with the partnership to restructure the debt.
Major players in these talks will likely be Fannie Mae and Freddie Mac, which together own more than $1.5 billion of the most highly rated, triple-A slices of the CMBS debt, according to people familiar with the matter. They would likely benefit from a fast foreclosure because, as senior lenders, they would be paid back first.
A Fannie representative declined to comment. A spokesman at Freddie confirmed its holding of the debt. "We don't expect to incur any losses on these securities," he said.
Another big player in the restructuring talks could be Singapore's GIC. The fund owns a $575 million mezzanine loan backed by the property, according to people familiar with the matter. Also, GIC owns about $100 million to $200 million in equity, the people said.
Both investments might be wiped out unless GIC maneuvers to have more influence in the loan workout process, possibly by buying more senior debt. GIC declined to comment.
Stuyvesant Town-Peter Cooper Village Tenants Association seeks second chance to buy building complex
BY Stephanie Gaskell
October 15th 2009
The complex is not officially for sale - but foreclosure could change all that.
The Stuyvesant Town-Peter Cooper Village Tenants Association wants to take another shot at buying the massive apartment complex now that it's reportedly just months away from default.
"If we had the opportunity, I think we would," said association president Alvin Doyle. "We'd like to try to control our community, if we can."
It's unclear whether a bid for the 80-acre property on Manhattan's East Side would be considered by Tishman Speyer Properties. The complex is not officially for sale.
But foreclosure could change all that.
The complex was bought by Tishman in 2006 for $5.4 billion. The tenants association had offered $4.5 billion. And now it's estimated to be worth only $2.1 billion.
A bid could be a welcome offer as Tishman Speyer Properties struggles to pay for the 11,250-unit complex and waits for a court decision that could force them to reduce market-rate rents on 40% of the units back to rent-stabilized prices.
A spokesman for Tishman declined to comment.
City Council member Dan Garodnick, who represents the district, said he's not surprised that the complex is in trouble. "We knew that their assumptions were way off the mark," he said. "As we watch them slowly slip into that direction [of foreclosure], we want to make sure that tenants' concerns are front and center in any restructuring."
Tishman Speyer are a nasty piece of work, it seems.
Knock, Knock, Stuy Town! It's Tishman Speyer Looking for Subdivisions
By Roland Li
October 19, 2009
Tishman Speyer, owner of Stuyvesant Town and Peter Cooper Village, is systematically inspecting each of the more than 11,000 apartments in the complex, according to residents.
The stated purpose of the inspections is to ensure temporary walls comply with building and fire safety codes, an issue the Fire Department has previously raised with the owner. Tenants and elected officials, however, suggested that the inspections were an excuse to evict longtime tenants, allowing the company to convert the units to market-rate rents.
"Without any clear purpose or limits to these inspections, tenants are left to worry that this is just a last-ditch effort to clear out longtime residents," said City Council Member Dan Garodnick, a lifelong Stuy Town resident. "These inspections should not be used as a way to play 'gotcha' with residents."
They also say that Tishman Speyer is unreasonably giving them only 48 hours' notice of an inspection and don't specify inspection times beyond 9 a.m. to 5 p.m. Residents with "unsanitary conditions" have been threatened with eviction and some have had their gas turned off, they say.
Mr. Garodnick displayed a letter from Tishman Speyer, which stated that an architectural consultant and property management representative would inspect an apartment, with inspections taking five to 10 minutes.
"A landlord has the right to inspect, we appreciated that," said Mr. Gardonick, but demanded that Tishman Speyer give tenants more notice in advance of inspections, more specific inspection times, and meet with tenants to address their concerns.
John Marsh, vice president of the Tenants Association, called the inspections a "sweep" that went beyond Tishman Speyer's concern for safety. He said a man's apartment was walked in on when he was sleeping; and a female tenant was in the shower when the inspectors went into her apartment.
A tenant who said she had lived in the complex for 61 years said that inspectors did accommodate her request that they arrive between 1 and 3 p.m., but when she told them to wait outside while she was on the phone, they left after a few minutes.
"The law requires that all temporary walls be compliant with code. We take that very seriously," Tishman Speyer said in a statement. "As a result, we are conducting these inspections. If other hazards are observed during a visit, we work with our residents to address them as well."
Tishman Speyer is currently involved in a lawsuit with tenants that claims the landlord unfairly de-regulated rent controlled apartments. The landlord is also at high risk of defaulting on its loans, as the revenue the complex generates, enough to give it a value of about $2 billion, is far too little to cover payments on its $4.4 billion in debt.