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 Black Rock – is running out of cash, the Wall Street Journal reports.
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.
Excuse me, but aren’t these investors and developers supposed to be smarter than the rest of us? Despite all the warning signs, evident when the purchase was consummated, they went forward on that proverbial wing and a prayer.
Well, their aircraft sank instead of soaring, and their prayers have gone unanswered.
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.
Withal, the New York Daily News says that the complex’s tenants association wants to take another shot at buying the property now that it’s reportedly just months away from default. Said association president Alvin Doyle:
“If we had the opportunity, I think we would. We’d like to try to control our community, if we can.”
It’s unclear whether a bid for the 80-acre property would be considered by Tishman Speyer. The complex is not officially for sale.
But foreclosure could change all that.
Licensed Associate Real Estate Broker
Senior Vice President
Charles Rutenberg Realty
127 E. 56th Street
New York, NY 10022