On Wed. Aug 19, the Wall Street Journal had an article on Tishman Speyer.
Although mainly focused on office properties, it discusses some of the problems with Stuyvesant Town.
To quote:
Recall that there were a number of bidders for that property, Tishman's was the most aggressive bid. In order to win, their pro-forma had to be the most optimistic in terms of estimtated market rent growth, and more importantly in terms of rollover of rent regulated apartments. The economy, yes, took care of #1. But more importantly, theynever got the kind of rollover they projected---and they were not the only ones.
It happened at Riverton Houses, now foreclosed upon,and it happened at other buildings. A number of buyerswho paid top dollar for rent stabilized buildings assumed very unrealistic rates of tenant rollover. Some hoped to achieve rollover through litigation (getting rid of deadbeats, non-primary residents); through natural causes; and through buy-outs, although in many cases not nearly enough was offered to entice residents to go.
Bottom line : They paid too much--even if the economy had held up. The underwriting was justified by these rollover and rent growth rates.
Although mainly focused on office properties, it discusses some of the problems with Stuyvesant Town.
To quote:
"An even bigger problem is the Peter Cooper Village and Stuyvesant Town transaction. A venture of Tishman and BlackRock Realty Advisors financed its $5.4 billion purchase of the complex with $4.4 billion in debt. As the weakening New York economy hinders the venture's ability to boost the rental income of the complex, the project is running the risk of defaulting.
The venture is burning through its interest reserve used to pay the
difference between the property's cash flow and debt service. It is
expected to be depleted by early next year. "
Recall that there were a number of bidders for that property, Tishman's was the most aggressive bid. In order to win, their pro-forma had to be the most optimistic in terms of estimtated market rent growth, and more importantly in terms of rollover of rent regulated apartments. The economy, yes, took care of #1. But more importantly, theynever got the kind of rollover they projected---and they were not the only ones.
It happened at Riverton Houses, now foreclosed upon,and it happened at other buildings. A number of buyerswho paid top dollar for rent stabilized buildings assumed very unrealistic rates of tenant rollover. Some hoped to achieve rollover through litigation (getting rid of deadbeats, non-primary residents); through natural causes; and through buy-outs, although in many cases not nearly enough was offered to entice residents to go.
Bottom line : They paid too much--even if the economy had held up. The underwriting was justified by these rollover and rent growth rates.
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