Stuyvesant Town debt holders weigh foreclosure

NEW YORK: Stuyvesant Town and Peter Cooper Village debt holders demanded payment from Tishman Speyer Properties LP and BlackRock Inc within 10 days, a step toward foreclosing for New York’s largest apartment complex, said two people familiar with the matter.

A group led by Winthrop Realty Trust which holds about US$300 million (RM1 billion) in senior mezzanine debt said in a letter it intends to pursue “rights and remedies” including a foreclosure sale, according to the correspondence. The parties could act within 90 to 180 days, said the people.

“The sharks are circling in the waters,” said New York City Councilman Daniel Garodnick, a Peter Cooper Village resident as well as its council representative. “This is a point of great concern.”

Tishman Speyer and Blackrock missed a US$16.1 million payment on the apartments last week. Their plans to cover the debt by raising rents were thwarted Oct 22 when the state’s highest court ruled in favor of tenants who claimed some increases were illegal. Tishman Speyer and BlackRock paid US$5.4 billion for Stuyvesant Town and Peter Cooper’s 11,200 apartments in 2006. In October, Fitch Ratings valued the property at US$1.8 billion.

The group that sent the letter demanding payment also includes Deutsche Genossenschafts-Hypothekenbank AG, a mortgage bank based in Hamburg; Hartford Financial Services Group Inc; and Dublin-based Allied Irish Banks plc, the people familiar with the letter said.

Tishman Speyer hasn’t made a workout proposal to the mezzanine lenders in the group, said Steven Ostrow of the Philadelphia law firm White and Williams LLP in an e-mailed statement. Ostrow said the firm is representing “several” participants in a senior mezzanine position among Stuyvesant Town debt holders.

“The senior mezzanine lenders intend to pursue their remedies,” including a foreclosure of the pledged equity interests of the borrowers, he said in the e-mail. The group has no further comment, he said.

Eric Jurist and Uwe Kirchner of DG Hypo and Shannon Lapierre, a spokeswoman for Hartford, declined to comment. Catherine Burke of Allied Irish said she didn’t have any immediate comment.

New York City Housing Preservation and Development Commissioner Rafael Cestero said Jan 8 that the city’s “overriding concern” was to keep rents within reach of “the hardworking middle-class families of New York.”

Local officials must make good on that pledge, Garodnick said. The city should consider providing tax-exempt financing or other assistance, he said.

“We cannot simply let this opportunity slip away,” Garodnick said.

Bud Perrone, a spokesman for New York-based Tishman Speyer, declined to comment yesterday.

Tishman Speyer and BlackRock, also based in New York, each invested US$112.5 million in Stuyvesant Town out of total equity financing of US$1.9 billion. They took out a US$3 billion mortgage from Wachovia Bank and US$1.4 billion of mezzanine debt.

The mortgage was packaged with other commercial properties loans and sold as securities. The biggest holders are Fannie Mae and Freddie Mac, the US government-owned home-loan finance companies.

Other investors include the Government of Singapore Investment Corp, manager of more than US$100 billion of the city-state’s foreign reserves. GIC reported losses from its investment on Jan 12.

General reserves of US$190 million on Stuyvesant Town and Peter Cooper are depleted. A debt service reserve of US$400 million, which Tishman Speyer had used for payments, dwindled to US$5.64 million as of December, according to credit-rating company Realpoint LP.

Contents of the letter about a possible foreclosure were reported on Jan 12 by the REIT Newshound. – Bloomberg LP

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