CWCapital Asset Management, the special servicer charged with foreclosing on the New York residential complex, Stuyvesant Town, can start preparing to auction off the 80-acre property after getting court approval yesterday.
The firm launched foreclosure proceedings roughly four months ago, after the owners of Stuvyseant Town and Peter Cooper Village, Tishman Speyer and BlackRock Realty, missed a $16 million debt payment in January.
Yesterday, federal district court judge Alvin Hellerstein granted a motion to foreclose, ruling that CWCapital and Bank of America, which are acting on behalf of the securitised mortgage bondholders, were owed $3.67 billion in principal mortgage loans and interest.
The residential complex, which includes 11,227 apartments – many rent-regulated – was acquired by Tishman and BlackRock for $5.4 billion in 2006, with Tishman investing $112 million of equity into the deal. The $3 billion senior mortgage backed by the East Village site was originally transferred to CWCapital for special servicing attention last December when Tishman and BlackRock requested “relief” on the deal.
Hellerstein, who is overseeing the foreclosure process, also said Stuyvesant Town and Peter Cooper Village would be sold at public auction, either as one unit, or sold individually. A date for the auction has yet to be set, however bidders must deposit $100 million to take part.
In the court documents, Hellerstein revealed Tishman and BlackRock owed $666.7 million in interest and fees, including default interest, in addition to the $3 billion senior mortgage.
Acquiring the property at the height of the real estate bubble left Tishman and BlackRock struggling to cover the debt service payments from the start. The firms’ strategy was to convert 8 percent of the units from rent-stabilised rates to higher, market rates each year generating cash flows of more than $330 million a year by 2008.
However, the firms were unable to convert as many properties as anticipated, thereby depleting the deal’s debt reserves, once valued at more than $650 million.
Last year, Tishman and BlackRock were also forced to lower rents on some apartments after a New York court found the two firms, as well as previous owner MetLife, improperly raised rents from rent stabilised rates to market levels.