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Stuy Town deal moved to special servicing

A $3bn A-note from the $5.4bn Tishman Speyer, BlackRock transaction has been transferred to CWCapital after the owners 'requested relief', Fitch Ratings revealed.

A $3 billion senior mortgage backed by the troubled New York multifamily complex Stuyvesant Town and Peter Cooper Village has been transferred to special servicing, Fitch Ratings has revealed.

The A-note was transferred following a “request for relief” by owners, Tishman Speyer and BlackRock Realty Advisors. A spokesman for Tishman said: “We requested that the joint venture’s loan be moved to special servicer in order to facilitate negotiations on a restructuring of the debt load.”

We requested that the joint venture’s loan be moved to special servicer in order to facilitate negotiations on a restructuring of the debt load.

Tishman Speyer spokesman

In September, the US’ government clarified tax rules relating to struggling securitised loans, confirming borrowers could hold restructuring talks with special servicers before a default actually occurred.

The $5.4 billion Stuyvesant Town deal had been widely anticipated to enter special servicing before the end of the year, with debt service reserves expected to be depleted by the end of December.

Fitch said there would be “many factors” involved in a workout of the loan and its recovery, including “possible modification, potential legislative changes to rent stabilisation laws, commitment of the loan sponsors, the remaining seven-year term of the loan and the low loan per unit ($267,213).” As well as the $3 billion securitised balance, Fitch said, there was an “additional $1.5 billion of mezzanine debt held outside the trust”.

Two weeks ago, Tishman and BlackRock were dealt a devastating blow in the fight over their deal after New York’s highest court ruled the firms improperly deregulated rents at the sprawling 80-acre complex.
New York State Court of Appeals sided with tenants of Stuyvesant Town and Peter Cooper Village, who had claimed Tishman and BlackRock, and former owner Metlife, should not be allowed to convert rent-stabilised properties into market rate apartments while at the same time being part of a city tax abatement programme for major renovations.

Speculation is mounting as to whether the special servicer will foreclose on the deal, or work out a deal whereby Tishman continues to manage the complex, which comprises 11,227 apartment units.

Kevin O’Shea, managing partner and head of the real estate practice at the law firm Allen & Overy, told Bloomberg a sale was more likely than a restructuring because the complex has lost so much value. Stuyvesant Town is believed to be worth around $1.8 billion, according to Fitch.

BlackRock has written its investment down to zero, while in September, Florida State Board of Administration said it was carrying its $250 million commitment to the deal at “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 in August.