Speyers Throw In the Towel, Hand Stuy Town to Lenders
Eliot Brown Jan. 25, 2010, 10:03 a.m.
More than three years after it began, real estate giant Tishman Speyer’s ambitious and high-priced quest to control a chunk of the East Side of Manhattan has come to a close.
Early Monday morning, Tishman Speyer and partner BlackRock issued a statement saying they intend to transfer control of the 11,200-unit Stuyvesant Town/Peter Cooper Village to their creditors. (The decision was first reported late last night by the Wall Street Journal.)
And so ends the bumpy ride for the Speyer family, which became the public face of the failed deal, the largest ever for an individual property. In all, the buyers rounded up $6.29 billion to buy the complex: $5.4 billion to buy the site and another $890 million for debt service and other reserves.
Of that, the $1.89 billion in equity is now completely gone, with investors such as California pension funds CalPERS and CalSTRS, a Florida pension fund and the Church of England left with nothing from their investment. (Analysts have put the value of the complex now at $1.8 billion, a number that only reflects current income on the property. The actual value is likely higher, as eventually an owner would be able to remove units from rent regulation.)
Decisions over the complex, including issues such as who will manage it and whether it will be quickly flipped in a sale or not, will presumably be handled by CW Capital, the special servicer that represents the senior debt holders.
This is certainly not the way Tishman Speyer wanted things to end.
Since the default, the firm issued statements that pledged a commitment to the property and co-CEO Rob Speyer had told multiple people that he intended to hold on.
But in the past week and a half, creditors have turned up the heat, with a group of mezzanine debt holders taking early steps toward foreclosure now that they’d stopped receiving their debt payments. There is a tremendous tangle of debt holders involved in the property, including the bondholders of a $3 billion senior loan that had been securitized and numerous holders of $1.4 billion in mezzanine debt.
In its statement, Tishman Speyer and BlackRock said it became clear that the buyers would not have been able to hang on solely through negotiation, and bankruptcy was not a desired outcome.
Here’s the full statement:
“We have spent the last few weeks negotiating in good faith to restructure the debt and ownership of Stuyvesant Town/Peter Cooper Village. It was our hope in these discussions that our partnership would remain as part of the long-term ownership.
“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, in an orderly manner, to the lenders and their representatives.
“We have no intention of putting ST/PCV into bankruptcy. We make this decision as we feel a battle over the property or a contested bankruptcy proceeding is not in the long-term interest of the property, its residents, our partnership or the City.
“Tishman Speyer would not consider a long-term management contract to continue operating the property that does not involve ownership. Without a restructuring that would keep our ownership group as part of the equity, we felt it best that the new owners install a new management team.
“We are fully committed to an efficient transition of the property’s operation and are offering to continue managing the property during this period to make the transition smooth and seamless for the residents.”