Just Walkin' Away From It All

In another sign that the commercial real estate collapse is nowhere near over, the landlords of Stuyvesant Town, New York City's largest group of apartments, have simply walked away from their $5 billion plus real estate deal and are handing the keys back to lenders.

Tishman Speyer Properties LP and BlackRock Inc. will cede control of Stuyvesant Town-Peter Cooper Village to lenders after the value of Manhattan’s largest housing complex fell and they were prevented from raising rents.

Tishman, which bought the property with BlackRock Realty Inc. in 2006 for $5.4 billion, missed a $16.1 million debt payment on Jan. 8. Creditors with a claim on the complex include mortgage finance companies Fannie Mae and Freddie Mac and holders of so-called mezzanine debt including a Winthrop Realty Trust affiliate and Gramercy Capital Corp.

“We make this decision as we feel a battle over the property or a contested bankruptcy proceeding is not in the long-term interest of the property, its residents, our partnership or the city,” Tishman and BlackRock said in an e- mailed statement today.

The New York-based investors bought the 80-acre development from insurer MetLife Inc. near the top of the market with plans to remodel and raise the prices of rent-regulated units to market rates. Those plans were challenged by a recession, slackening demand for rentals and a legal victory for tenants who claimed some rent increases were illegal. In October, Fitch Ratings valued the property at $1.8 billion.

The companies decided to hand over the property after failing to reach an agreement to keep some level of ownership, according to the statement today. Tishman Speyer said it wouldn’t consider a long-term contract to manage the complex that doesn’t involve ownership.

(More after the jump...)



Can you blame them?  They lost $3.6 billion on the property in just real estate value alone, forget the costs to run the place.  And the real problem is they had an international cadre of investors -- and of course state and local investors -- who just got skunked.

Other investors include the Government of Singapore Investment Corp., manager of more than $100 billion of the city- state’s foreign reserves; the Florida State Board of Administration, the California Public Employees’ Retirement System and the Church of England.

Florida and BlackRock have written down their stakes to zero, according to Dennis MacKee, a spokesman for the Florida State Board, and Brian Beades, a BlackRock spokesman.

Yep, the state of  Florida bought into a huge apartment complex in NYC.  But it's a write-off...and taxpayers will foot that particular bill as a result.  Nice work if you can get it.  The C of E?  They're out $80 million or so.

And this is really only the beginning of the CRE problems in 2010, folks.

Oh, and if you're wondering how the residential real estate market is doing?  December was the biggest drop in existing home sales in 40 years.

Sales of previously owned U.S. homes suffered a record drop last month as the boost from a popular tax credit waned, raising doubts the housing market recovery can be sustained without government support.

The National Association of Realtors said on Monday that existing home sales fell 16.7 percent in December to an annual rate of 5.45 million units.

It was the sharpest decline on records dating to 1968 and the slowest sales pace since August. Analysts had expected a less severe drop to a 5.90 million unit pace.

"Today's numbers clearly indicate that the rebound in housing demand observed so far has been largely supported by government programs and therefore that the recovery is far from becoming self-sustaining," said Anna Piretti, an economist at BNP Paribas in New York.

Good thing Obama's thinking about proposing a spending freeze for the rest of his term, huh?  It's not like we'll need another stimulus package to stop a massive real estate collapse or anything, right?