Tishman Speyer and BlackRock have defaulted on a debt service payment for the sprawling New York multifamily complex, Stuyvesant Town and Peter Cooper Village, ending months of speculation.
The two firms confirmed in a statement the joint venture failed to make a scheduled debt service payment to senior lenders today. The payment is believed to be $16 million.
Tishman rushed to reassure the complex’s tens of thousands of residents that tenant services and day-to-day operations would not be immediately impacted.
The joint venture has been engaged in discussions with CWCapital, the special servicer acting on behalf of the lenders, and hopes to continue good-faith negotiations toward a potential restructuring of the debt.
Tishman Speyer, BlackRock
Today, Tishman and BlackRock said they would work with the special servicer, CWCapital, to continue “good-faith negotiations toward a potential restructuring of the debt”. CWCapital declined to comment on the default citing confidentiality.
Tishman and BlackRock bought the 11,227-unit residential apartment complex for $5.4 billion in 2006, with Tishman investing $112 million of equity into the deal. 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 struggled to convert as many properties as anticipated heping deplete the deal’s debt reserves, which were once more than $650 million and which had been widely expected to run out at the end of 2009.
Tishman said today the debt for Stuy Town, as the Manhattan East Village complex is widely known, was “secured exclusively by the property and is not cross-collateralised with any others. It does not impact, nor is it impacted by, any other properties in which Tishman Speyer or BlackRock may be invested.”
The deal has been plagued with problems since it closed in 2006. In December, the two real estate investors were forced to lower rents on some apartments at Stuyvesant Town and Peter Cooper Village after a length court battle found the firms, as well as previous owner MetLife, had improperly raised rents from rent stabilised rates to market levels.
The New York Court of Appeals had ruled last October that Tishman’s deregulation strategy violated New York law as Stuyvesant Town and Peter Cooper Village was, at the same time, part of a city tax abatement programme for major renovations. The court sent the case to back to the trial court to decide issues such as damages, which could be hundreds of millions of dollars, and rent levels.