Even God is losing money on Stuy Town
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