Walking Away from a Mortgage: Stuyvesant Town Reloaded

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Walking Away from a Mortgage: Stuyvesant Town Reloaded

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2014 May 14, 4:16am 5,938 views 4 comments

by corntrollio ➕follow (0) 💰tip ignore

Now Fortress wants to buy it for $4.7B:

http://www.bloomberg.com/news/2014-05-13/fortress-said-to-be-preparing-bid-to-buy-stuyvesant-town.html

The New York-based private-equity firm is seeking financing for an offer valued at about $4.7 billion, said the person, who asked not to be identified because the discussions are private. A deal would involve bringing in equity partners to contribute cash, the person said.

Stuyvesant Town, Manhattanâ€™s biggest rental community, is currently under the control of CWCapital Asset Management LLC, which is owned by Fortress. CWCapital is a special servicer in charge of representing bondholders after owners Tishman Speyer Properties LP and BlackRock Inc. walked away from their investment in January 2010, one of the highest-profile casualties of the property-market crash. New York apartment values have since jumped as rental demand rebounds.

I mentioned what happened when Blackrock and Tishman Speyer bought Stuy Town during the boom:

http://patrick.net/?p=1237559&1047837#comment-1047837

It would be a repeat of what happened during the bust. My favorite example is Stuyvesant Town in NY. Tishman Speyer and Blackrock bought it for $5.4 billion in 2006. They only put $112 million down each themselves, and the rest was raised as part of a fund, which included Calpers ($500 million), Calstrs ($100 million), the government of Singapore ($775 million in loans and equity), the Church of England, and various pension funds (a Florida one put in $250 million) as investors:

http://www.nytimes.com/2010/01/26/nyregion/26stuy.html?pagewanted=all

When the value of the property went south, Tishman and Blackrock walked away from $4.4 billion in loans. If they were individuals, we would be talking about the morality of walking away, but since it's a business, it's just a good business decision, right?

Let the popcorn consumption begin!

#housing

Comments 1 - 4 of 4 Search these comments

1 EBGuy 2014 May 14, 5:07am

Perhaps a happy ending for those who held paper backed by the project? Barclays estimated in a May 2 report that the property could fetch $4 billion to $4.3 billion in a sale, which would result in zero losses to bondholders.
PS - the Fed has nothing to do with this...

2 MMR 2014 May 14, 7:18am

As someone who lived there, good luck with the rent control. Most of the complex has mediocre subway access but still costs over 3000/month rent while the rent control folks were paying less than 500. That problem will not get resolved anytime soon as the rent control folks are well organized.

3 EBGuy 2014 May 14, 9:07am

Here's another feel good, let's do it again story.
In a twist of deja vu, SunCal is back to redeveloping the Oak Knoll project in the Oakland Hills â€” a 167-acre, former naval hospital site with the potential for more than 900 homes.
Irvine-based SunCal has now bought the same site twice: once in 2005 for $100.5 million and again last week from the Lehman Brothers estate for an undisclosed sum.

4 Blurtman 2014 May 14, 1:32pm

And Tishman Speyer continued to borrow money after defaulting. I guess the FICO cartel doesn't record their lousy credit history.

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