N.Y. / Region|N.Y. Housing Complex Is Turned Over to Creditors
N.Y. Housing Complex Is Turned Over to Creditors
By CHARLES V. BAGLI JAN. 25, 2010
The Peter Cooper Village and Stuyvesant Town complex in 2006. Credit Nicole Bengiveno/The New York Times
The owners of Stuyvesant Town and Peter Cooper Village, the iconic middle-class housing complexes overlooking the East River in Manhattan, have decided to turn over the properties to creditors, officials said Monday morning.
The decision by Tishman Speyer Properties and BlackRock Realty comes four years after the $5.4 billion purchase of the complexes' 110 buildings and 11,227 apartments in what was the most expensive real estate deal of its kind in American history.
The surrender of the properties, first reported by the Wall Street Journal, ends a tortured real estate saga that saw the partnership make expensive improvements to the complex and then try to rent the apartments at higher market rates in a real estate boom. But a real estate downturn and the city's strong rent protections hindered those efforts, leaving the buyers scrambling to make payments on loans due for the properties, which have been a comfortable harbor for the city's middle class since they opened in the late 1940s.
"We have spent the last few weeks negotiating in good faith to restructure the debt and ownership of Stuyvesant Town/Peter Cooper Village," said the statement by the partnership. "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."
Metropolitan Life built the complexes for World War II veterans in the 1940s, when the city was in desperate need of new housing. It received tax breaks and other incentives in return for maintaining low rents. The buildings became home for generations of workers searching for an affordable spot in Manhattan.
But with the real estate market soaring in 2005, MetLife decided to sell. Tishman Speyer and BlackRock won an auction the following year.
This month, the partnership headed by Tishman Speyer defaulted on $3 billion in debt on the properties, and in the last few days secondary lenders have been calling to replace the partnership.
Under one scenario, Tishman would have been offered a long-term contract to operate the complex, but it rejected that plan. Lenders will now be looking for new managers for Stuyvesant Town, and its smaller adjacent property, Peter Cooper Village, where the rents are typically higher and the apartments more spacious.
The surrender of the property is a huge blow to Tishman Speyer, which controls Rockefeller Center and the Chrysler Building. When it spearheaded the Stuyvesant Town purchase, it projected itself as the best stewards of such an iconic property.
But instead Tishman Speyer and its partner BlackRock found themselves facing a mountain of debt. It had been negotiating since November to restructure $3 billion worth of loans and to hold on to the properties, which cover 80 acres east of First Avenue, from 14th Street to 23rd Street. But their reserves, once stuffed with $890 million for capital improvements, interest payments and renovations, were left virtually depleted.
The rents collected did not cover the mortgage payments, as the new owners failed in their efforts to increase net income by steadily renovating and deregulating vacant apartments while raising rents substantially.
For tenant advocates and urban planners, the sale underscored the loss of affordable housing in the city and the highly speculative financial structures that, they warned, would only end in disaster.
A version of this article appears in print on January 25, 2010, on Page A12 of the New York edition with the headline: Stuyvesant and Cooper Surrendered to Creditors. Order Reprints| Today's Paper|Subscribe
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