Investors ‘walk away’ from $5.4 B Stuyvesant Town purchase, leave taxpayers on the hook (FAN FRED CALPERS)

A First Avenue view in New York of Peter Cooper Village, foreground, and Stuyvesant Town apartment complexes in October. Photo: Brian Harkin WSJ

Yep. Don’t want those pesky regular working class Americans to ‘walk away, jingle mail’ on their underwater homes, but it is fine for Tishman Speyer Properties and BlackRock Realty to walk away leaving taxpayers on the hook. Because this kind of decision is made every day in business, Americans are waking up to the fact that they are the only people attempting to stay while underwater when their contracts allow them to walk away as these investors are doing.

Just like many underwater homeowners, these investors had almost no skin in the game, all free money, our money, FAN FRED and public pension funds who invested with them will be on the hook and you know what that means, taxpayer funded rescue to follow.

The investors bought this property which was originally designed for returning vets to have low cost housing, planning to increase the rents to market rates. The courts put the kaibosh on that and since they cannot make a profit and are now underwater they are walking away.

WSJ:

A group led by Tishman Speyer Properties has decided to give up the sprawling Peter Cooper Village and Stuyvesant Town apartment complex in Manhattan to its creditors in the collapse of one of the most high-profile deals of the real-estate boom.

The decision comes after the venture between Tishman and BlackRock Inc. defaulted on the $4.4 billion debt used to help finance the deal. The venture acquired the 56-building, 11,000-unit property for $5.4 billion in 2006—the most ever paid for a single residential property in the U.S. The venture had been struggling for months to restructure the debt but capitulated facing a massive debt load and a weak New York City economy that has undercut rents and demand for high-priced apartments.

The property’s owners signaled they would be unable to reach a deal with lenders and instead decided to allow creditors to proceed with what amounts to an orderly deed-in-lieu of foreclosure, which means a borrower voluntarily gives the property back to lenders to avoid a foreclosure proceeding.


“It has become clear to us through this process that the only viable alternative to bankruptcy would be to transfer control and operation of the property, in an orderly manner, to the lenders and their representatives,” the venture said in a statement to The Wall Street Journal. “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.”…

CalculatedRisk:

From the NY Times: Huge N.Y. Housing Complex Is Returned to Creditors

The owners of Stuyvesant Town and Peter Cooper Village … have decided to turn over the properties to creditors, officials said Monday morning.

The decision by Tishman Speyer Properties and BlackRock Realty comes four years after the $5.4 billion purchase of the complexes’ 110 buildings and 11,227 apartments in what was the most expensive real estate deal of its kind in American history.

More from the WSJ: Tishman Venture Gives Up Stuyvesant Project

The venture acquired the 56-building, 11,000-unit property for $5.4 billion in 2006 … By some accounts, Stuyvesant Town is only valued at $1.8 billion now … all the equity investors—including the California Public Employees’ Retirement System, a Florida pension fund and the Church of England—and many of the debtholders, including Government of Singapore Investment Corp., or GIC, and Hartford Financial Services Group, are in danger of seeing most, if not all, of their investments wiped out.

January 25, 2010. Tags: , , , , , , , , , . Economy, Finance, Foreclosures, Housing, Obama Administration, Politics, Popular Culture, TARP, Taxes, Wall St.

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