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— Dealwatch —
 The collateral damage from the largest real estate deal ever -- Tishman Speyer properties' and BlackRock Inc.'s $5.4 billion purchase
of Stuyvesant Town/Peter Cooper Village from Metropolitan Life
Insurance Corp. in 2006 -- is starting to boil to the
surface. 2009 Oct. 30: Tishman, BlackRock take down 'for rent' sign: Tishman Speyer Properties and BlackRock Realty have put a moratorium on renting available apartments so they can figure out what to do with the apartment complex in light of a recent court decision that ruled the owners raised rents illegally on some 4,000 apartments. - Gerald Magpily Oct. 27: SL Green to give Tishman, BlackRock room: Two New York-based REITs, SL Green Realty Corp. (NYSE:SLG) and its Gramercy Capital Corp.'s (NYSE:GKK), said Tuesday they want to be involved in the restructuring of debt for the Manhattan residential complex that was purchased at the height of the real estate boom in 2006. - Gerald Magpily Oct. 23: Buyer's remorse for Tishman, BlackRock?: A New York state court judgment on Thursday ruled that the present owners along with previous owner MetLife Inc. raised rents illegally on rent-stabilized tenants while the owners received tax subsidies. The judgment could set back the cash-strapped Tishman and BlackRock even deeper in a financial hole. - Gerald Magpily Oct. 15: StuyTown foreclosure may open window: The Stuyvesant Town Peter Cooper Village Tenants Association wants to bid for the complex once again. "If we had the opportunity, I think we would," association president Alvin Doyle told the Daily News. "We'd like to try to control our community, if we can." - Gerald Magpily Oct. 14: Church of England could lose in StuyTown: The list of losers from Tishman Speyer Properties and BlackRock Inc.'s record $5.4 billion purchase of sprawling New York City apartment complex Stuyvesant Town Peter Cooper Village in 2006 is getting longer. With the downturn of the residential real estate market, The Wall Street Journal reports that besides the principal buyers other investors in the deal such as the Government of Singapore Investment Corp., insurance company Hartford Financial Services and even the Church of England are in danger of losing most or all of their investments. - Gerald Magpily Sept. 11: Tishman, BlackRock are way underwater: Tishman Speyer Properties and Black Rock Inc. have lost more than $3.2 billion on their $5.4 billion acquisition of Stuyvesant Town Peter Cooper Village complex in New York City in 2006, according to credit rating agency RealPoint LLC. With the downturn of the residential real estate market, RealPoint says the property is worth about $2.13 billion, less than half of what Tishman and BlackRock paid for it. - Gerald Magpily Sept. 9: Tishman, BlackRock could default on StuyTown loans: Tishman Speyer Properties and BlackRock Inc. will be down on their knees pleading for extra cash from investors including the nation's largest pension fund, California Public Employees Retirement System, to help pay off the nearly $4.4 billion in loans it used to acquire Stuyvesant Town Peter Cooper Village in Manhattan for a record $5.4 billion in 2006. Should the owners of the middle-income complex fail to convince CalPERS or any other investors, real estate analysts predict that Tishman and BlackRock could default on their loans. - Gerald Magpily Sept. 2: Florida fund has black eye from Stuytown deal: The collateral damage from the largest real estate deal ever -- Tishman Speyer properties' and BlackRock Inc.'s $5.4 billion purchase of Stuyvesant Town/Peter Cooper Village from Metropolitan Life Insurance Corp. in 2006 -- is starting to boil to the surface. The Florida state pension fund announced Tuesday that it lost $250 million on its investment in the deal, which was consummated during the height of the real estate bubble. - Gerald Magpily FEELING THE PINCH Oct. 2008: For some, Tishman Speyer Properties' $5.4 billion purchase in 2006 of Manhattan residential complex Peter Cooper Village and Stuyvesant Town symbolized the peak of the real estate boom. Now, the bubble has burst, and the New York-based real estate company is starting to feel some pain as several bonds tied to the 80-acre middle-income development were downgraded by Moody's Investors Service last week following a Standard & Poor's downgrade just a few weeks earlier. Rewind two years ... Oct. 2006: With their $5.4 billion purchase of Stuyvesant Town and Peter Cooper Village from Metropolitan Life Insurance Corp., New York real estate giant Tishman Speyer and BlackRock's real estate division take 80 acres and 110 buildings in Manhattan, reportedly marking the biggest real estate deal for a single property in U.S. history.
MetLife put the sprawling complex on the block Aug. 30, 2006 asking $5 billion. The price tag didn't scare off contenders--the auction reportedly drew 12 bids by Oct. 5. At the time, MetLife's broker, CB Richard Ellis Group Inc., said it hoped to make a decision before the end of the year. A Dow Jones report Oct. 17 said it was the largest play for a single property in U.S. real estate history. THE CONTENDERS The unprecedented real estate asking price of $5 billion was so large that some investors had to find partners to make a competitive bid for the complex. The auction garnered so much attention that investors like Donald Trump reportedly shied away from the deal fearing too many interested buyers could result in a bidding war, driving the price too high for him to see a reasonable rate of return. Although MetLife was tight-lipped about the bidders, analysts expected the following parties would come forth with offers:
At the time of the deal, of the 11,232 apartments in Stuyvesant Town Peter Cooper Village, about 70% were rent regulated meaning the owner of the complex could only raise the rent based on the legal limit set by the New York City Rent Guidelines Board. Any apartment that rents below $2,000 and whose owner makes an annual income of less than $175,000 for two consecutive years falls under rent regulation. In a statement Tuesday, Oct. 17, 2006, Tishman Speyer's president and chief executive said:
In 2001, MetLife began legally deregulating apartments by renovating vacant ones and factoring those costs into the previous rent with the legally set rent increase so as to push the final rent to a new tenant above the $2,000 threshold. At that point, the landlord can charge whatever rent the market will bear. These regulations limit in the short-term how much revenue an owner could generate from the complex. At the time of the auction, about 27% of the 11,232 apartments rented at market rates. According to the New York Times, MetLife's marketing documents anticipated that 600 more units would be decontrolled in 2007 and 1,000 more in 2008. But, a MetLife marketing book says by 2018, the percentage of market rate apartments in the development could sharply increase to 70%. That would mean the new owner would be able to double rents reaping nearly $519 million a year at Stuyvesant Town and $170 million at Peter Cooper, according to the Times. There too are some environmental issues on the property. A MetLife memo states that Con Edison has been testing for possible soil and groundwater contamination that most likely was the result of the operation of natural gas plants on the site before the complex was built. MetLife assured potential buyers that the problem most likely would be solved by excavating the polluted soil. STUCK IN THE CROSSFIREStuyvesant Town Peter Cooper Village is home to nearly 25,000 residents. Because it is considered the last bastion of middle-class housing in Manhattan, some residents and local politicians feared a deal would only accelerate the complex's direction into luxury housing. The Garodnick-led bid was an attempt to preserve the affordable housing, but a buyer like Tishman Speyer is most likely looking for a return on its investment, which runs contrary to maintaining affordable housing.
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