The First of the Worst
March 1, 2010
By: Sule Aygoren Carranza

By now the tale of the failed Stuyvesant Town/Peter Cooper Village deal is well known. Bought for a record $5.4 billion in 2006 by a JV of Tishman Speyer and BlackRock Realty, the 110-building, 11,200-plus-unit residential property is one of Manhattan’s premier residential complexes.

Yet the economy and legal challenges threw a kink into the buyers’ plan to bring the complex’s units from stabilized to market rates. As a result, the property’s cash flow remained too low to cover debt-service obligations. By year-end 2009, the Tishman-BlackRock JV had not only gone through its $400-million debt-service reserve but also a nearly $200-million general reserve.  ...

... The hyper-liquid credit market was much of what fueled investor appetite for the deal, asserts Woody Heller, executive managing director and head of the capital transactions group at Studley. He notes that the players involved shouldn’t be vilified for what transpired. “If there was one group that bid $5.4 billion and everyone else bid $3 billion—yes, then they’d be at fault. But you had about 20 groups clamoring for this asset and were furious when they weren’t the ones that were selected,” he says. “Everyone was prepared to make the same mistake, and desperate to make the same mistake.”  ...

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