Even God is los­ing money on Stuy Town

Weekend Argus (Saturday Edition) - - AUCTIONS -

IT WAS the most ex­pen­sive res­i­den­tial prop­erty deal ever. It was among the most con­tro­ver­sial. And now it is the most dis­as­trous.

New York’s Stuyvesant Town com­plex, an 11 000-apart­ment bul­wark of af­ford­able hous­ing amid Man­hat­tan’s sky­rock­et­ing rents, has been handed over to its cred­i­tors, af­ter its own­ers failed to keep up debt re­pay­ment s o n t h e i r $ 5 . 4 b i l l i o n boom-time ac­qui­si­tion.

When a con­sor­tium led by the prop­erty gi­ant Tish­man Speyer won an auc­tion for the com­plex on Man­hat­tan’s East Side in 2006, it un­veiled plans to con­vert large num­bers of the apart­ments into lux­ury homes.

This was, af­ter all, prime real es­tate in a city where rents were be­ing pushed ever higher by the eco­nomic boom. Stuy Town’s res­i­dents, t hough, ben­e­fited from his­tor­i­cal com­mit­ments to keep rents be­low mar­ket rates and they had other ideas.

The le­gal stand-off be­tween the two sides might have been enough on its own to wreck Tish­man Speyer’s plans, but then came the calamity on Wall Street and the re­ces­sion, which threw the New York prop­erty mar­ket into tur­moil. The val­u­a­tion be­ing put on Stuy Town is now less than $2bn.

The de­ci­sion to turn the prop­erty over to its cred­i­tors rep­re­sents a huge blow to the pres­tige of Tish­man Speyer and its founder, Jerry Speyer, prom­i­nent phi­lan­thropist and po­lit­i­cal player.

The Stuy Town wipe­out has seemed in­evitable for many months, as Tish­man Speyer faced a dead­line to re­pay a large por­tion of the $4.4bn in debt it had taken on for the prop­erty. It for­mally de­faulted on that debt last month.

“We have spent the last few weeks ne­go­ti­at­ing in good faith to re­struc­ture the debt and own­er­ship,” the de­vel­oper said.

“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… to the lenders and their rep­re­sen­ta­tives.

“A bat­tle over the prop­erty or a con­tested bank­ruptcy pro­ceed­ing is not in the long-term in­ter­est of the prop­erty, its res- idents, our part­ner­ship or the city,” they said.

That, at least, raised a sigh of re­lief from res­i­dents.

Res­i­dents’ groups op­posed the sale from the start, fear­ing that the unique his­tory and cul­ture of the com­plex was about to be crushed in the in­ter­ests of profit.

The site had been de­vel­oped af­ter World War II as af­ford­able hous­ing for vet­er­ans. It was only by promis­ing to keep rents low t h a t MetLi f e, a n i n s u r a n c e group, won per­mis­sion – and tax breaks – to build the com­plex. To­day the flats there of­fer work­ing folk sanc­tu­ary from ris­ing rents that all but ban­ished the low-paid from New York.

A fi­nal death knell for Tish­man Speyer’s own­er­ship came in Oc­to­ber when ten­ants’ groups won a court rul­ing that the de­vel­oper was im­prop­erly charg­ing mar­ket rents on thou­sands of prop­er­ties.

The con­sor­tium that bought Stuy Town from MetLife in 2006 also in­cluded the Wall Street fund man­age­ment gi­ant Black­Rock, a host of smaller pen­sion funds and other in­vestors.

Tish­man Speyer in­vested only a re­ported $112 mil­lion of its own money.

Among those fac­ing losses is the Church of Eng­land. “Even God is los­ing money on Stuy Town,” one blog noted. – The In­de­pen­dent

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