Another US pension has written off its investment in Tishman Speyer’s Stuyvesant Town deal, with warnings there is only a small chance of recovering equity from the transaction.
Florida State Board of Administration is the second state public pension to write down to zero its commitment to the deal. Tishman and BlackRock bought the 80-acre multi-family complex for $5.4 billion in 2006, with Florida commiting $250 million in 2007.
According to a report by Bloomberg, Ash Williams, executive director of the SBA, told a meeting in Tallahassee today that it was “carrying that investment at zero because the market softened dramatically”.
Stuyvesant Town, NY
Asked by Florida Attorney General Bill McCollum what was going to happen to the investment, Ash responded: “Is there potential for recovery? Yes. Is it a strong possibility? No.”
Florida SBA spokesman Dennis MacKee confirmed the comments, saying the investment was now being carried on the books at a “zero cost valuation”.
California State Teachers’ Retirement System has also permanently written down its $100 million investment in the New York deal, according to a performance review of its real estate investments released last week.
CalSTRS committed the capital in May 2007 but following the credit crisis, and problems deregulating the New York multifamily complex, the investment is now valued at “$0 as [its] impairment is considered to be a permanent condition”, the pension said. Like CalSTRS, Florida was a limited partner in the Stuyvesant Town/Peter Cooper Village Partners fund.
Williams said the equity stake could be “wiped out”. He added: “We’ve had an unfortunate experience, we regret it and we’re taking steps so it doesn’t happen again.”
When Tishman bought Stuyvesant Town, its strategy hinged upon the success of converting much of the 56-building complex’s rent-stabilised units into market-rent properties.
Tishman assumed Stuyvesant Town and Peter Cooper Village would be able to increase its net operating income (NOI) from a reported $112 million in 2006 to $160 million in 2008. However, data from commercial mortgage research company Trepp in the nine months to the end of September 2008 shows that NOI was $101 million.
Last week, Fitch Ratings said that the deal’s original $650 million debt service reserves were likely to run out by the end of the year. In the scenario, the ratings agency said, a default on the loan was likely without an equity infusion or recapitalisation by the owner.