Multihousing ka-boom

In what may be the loudest sound of footsteps walking away from a deal, the group led by Tishman Speyer Properties has now left the 110 red brick buildings to creditors. After paying a record $5.4 billion for Stuyvesant Town and Peter Cooper Village at the market's height in 2006, the property is now worth less that $2 billion.


Buzz on the deal abounds. Richard LeFrak, whose family built LeFrak City, a 5,000-unit affordable housing complex in Queens, has already expressed interest in managing the properties.

Tishman and its partner BlackRock Realty—which defaulted on the $4.4 billion debt used to finance the deal and had spent several weeks trying to restructure it—said that transferring control of the property to the lenders was the “only viable alternative to bankruptcy.”

Tishman’s decision to walk away left unanswered questions about rents and services in the 11,227 apartments.

City Councilman and Peter Cooper resident Dan Garodnick said the mega-deal carried implications for tenants citywide.

“People will be looking to us for a solution that respects the needs of the tenants and the city’s affordable housing policy goals,” he said.

Freddie Mac may consider providing financing to the buyer of the Manhattan apartment complex. U.S. government-owned Freddie Mac is one of the creditors of the complex.

Among all the questions looming: Who will negotiate with the tenants on rental concessions?

New York’s highest court ruled in October that the owners of the Manhattan community improperly raised rents on thousands of units. The financial consequences of the ruling, however, are difficult to quantify because the court didn’t address a number of issues, such as how much rent the tenants should now pay and whether its interpretation of the law should be retroactive.

In December, a lower court approved a structure under which the owner, a partnership led by Tishman Speyer Properties, and the tenants group began working to resolve these issues. But now, with the Tishman partnership moving out of the picture, Alexander Schmidt, the attorney representing the tenants says he hopes CW Capital, the servicer that represents the investors holding the $3 billion first mortgage on the property, will take up the talks.

Schmidt said that the servicer has until the end of the month to sign onto the negotiating process. “I can’t imagine their being able to sell the buildings without this contingent liability being reduced to a sum certain,” he said. The tenants group estimated that current and former residents of 4,000 apartments are owed back rent and damages totaling $215 million.The Tishman venture has reached out to CW Capital to start the property-transfer process, but other creditors may try to seize control. Those close to the deal say the servicer won’t start negotiating with the tenants until after it takes over the property.