Stuyvesant Town Finally Defaults
The most anticipated event in New York commercial real estate, the (technical) default of long-suffering Stuyvesant Town is finally a fact. Bloomberg reports: "Tishman Speyer Properties LP and BlackRock Inc. will miss a bond payment today on debt from their $5.4 billion purchase of Stuyvesant Town and Peter Cooper Village in 2006, according to a spokesman for New York City Councilman Daniel Garodnick."
The Stuy Town tennants association is now panicking:
ST/PCV Tenants Association Statement on Tishman Speyer Loan Default
The news that Tishman Speyer has defaulted on the $16 million mortgage payment due today, January 8th, is the sad, but inevitable result, of a predatory and speculative business plan designed to drive out long term tenants of a stable, middle-class community. The default is the first step in what will likely be a long legal process.
Stuyvesant Town and Peter Cooper Village tenants are understandably concerned about what this means for the community. Based on the information that is available to your Tenants Association, we believe that little, if anything, will change in the immediate future. Rent should still be paid in the same way it always has been paid. You should direct service and maintenance requests to the same telephone numbers or through the same web site as you have in the past.
However, we urge all tenants to join us in increasing vigilance with respect to maintenance and service and to report any gaps or lapses to us at our Message Center 1-(866)-290-9036) or through our website contact form <http://www.stpcvta.org/contact.htm>.
As always, the Tenants Association will work closely with our elected representatives to ensure that CW Capital, the special servicer to whom control is now transferred, maintains services and the condition of the property.
The legal processes that begin today may also present opportunities for the tenants of this community. The Tenants Association, in concert with Council Member Dan Garodnick, Assembly Member Brian Kavanagh, State Senator Tom Duane, Borough President Scott Stringer, and Congresswoman Carolyn Maloney – will ensure that the residents of this community have a seat at the table and that their voices are heard - loud and clear – in determining the future of our community.
Linked here is the letter sent to tenants on Wednesday by Council Member Garodnick. It has even more significance now that default is a reality.
Al Doyle, President
Stuyvesant Town - Peter Cooper Village Tenants Association
As a reminder Stuy town was acquired in 2006 by Tishman Speyer for $5.4 billion and most recently was valued at $1.9 billion, 65% below the purchase price.
If you think the CRE collapse is contained, think again. The chart below shows the total amount of CMBS delinquencies, courtesy of RealPoint. Don't look for green shoots here.
Here is RealPoint's forecast for what will happen in the near-term. Note the potential default language on Stuy Town, which after today will move from hypothetical to factual.
Overall, following the delinquency reporting of the $4.1 billion Extended Stay Hotel loan and the experienced average growth month-over-month, we now project the delinquent unpaid CMBS balance to continue along its current trend and grow to between $50 and $60 billion by mid 2010. Based upon an updated trend analysis, we now project the delinquency percentage to grow to between 5% and 6% through the first quarter of 2010 (potentially approaching and surpassing 7-8% under more heavily stressed scenarios through the mid-2010). This outlook is mostly due to the reporting of several large loans from recent vintage transactions that continue to show signs of stress and default, along with continued balloon maturity defaults from more seasoned transactions. In addition, while we maintain our negative outlook for both the retail and hotel sectors for the remainder of 2009 and into 2010, we are closely monitoring the negative trends surrounding several large struggling multifamily loans that have near-term default risk.
On the other hand, as three new issue deals have closed in the past two months and more new issuance is expected to come to market in 2010, some of the delinquency growth we have experienced month-over-month in 2009 may yet be offset somewhat by any new issuance’s speed to market in 2010. In addition, liquidations of severely distressed defaulted loans have picked up speed in the latter half of 2009, while modifications and forbearance at the loan level continue to be discussed between borrowers and special servicers that may also result in a delinquency “leveling-off” period.
Despite these issues, our historical scenario and trend analysis regarding recent default activity and the potential for future delinquency growth presents the following:
- Over the past six months, delinquency growth by unpaid balance has averaged roughly $3.19 billion per month. Assuming ongoing monthly pay-down and liquidation activity, if such delinquency average were increased by an additional 25% growth rate, and then carried through the first quarter 2010, the delinquent unpaid balance would top $53 billion and reflect a delinquency percentage above 6% by March 2010. Carried through mid-2010, the delinquent unpaid balance would top $65 billion and reflect a delinquency percentage just above 8% by June 2010.
- In addition to this growth scenario, if we add-in the potential default of the now specially-serviced $3 billion Peter Cooper Village / Stuyvesant Town loan spread through multiple CMBS deals via a pari passu structure, the delinquent unpaid balance would top $56 billion and reflect a delinquency percentage over 7% by March 2010. Carried through mid-2010, the delinquent unpaid balance would top $68 billion and reflect a delinquency percentage over 8.5% by June 2010.
We will soon publish the latest edition of our CRE collapse monitor, focusing on CMBX 2 in the next iteration.
(6 votes)
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on Fri, 01/08/2010 - 10:42
#186851
When is the wake? I wish to pay my respects and then piss on the grave.
Oops, is this microphone on?
on Fri, 01/08/2010 - 10:52
#186866
Just renamed:
New Jack City
on Fri, 01/08/2010 - 11:06
#186893
anyone think the dolts that bought at the high got a bonus the last 2 years plus is still employed?
most of these so called financial experts should be demoted to washing dishes at denny's.
on Fri, 01/08/2010 - 12:03
#186988
Of course they're still employed. In the world of high finance, what most determines your value and desirability as an employee is the size of the deals you've worked on. NOT, as logic would suggest, the failure or success of your judgment. So if you do ever get the chance to work on a large deal, no matter how idiotic - you should do it! Nobody cares if it loses 2/3 of its value, well maybe your original investors will (but you'll have moved beyond them - suckers!), all they care about is that $5.4 billion on your resume - so impressive - WOW!
on Fri, 01/08/2010 - 11:07
#186895
Yipee... MR. DOLL is BUSY buying equities to make his S&P 1250 target but does not have the funds to make payments on the Stuyvesant loans !! Hoorah for America !!
on Fri, 01/08/2010 - 11:35
#186939
I would advise others who hold underwater mortages to follow Mr. Doll's and Morgan Stanley's lead-- and just walk away from your mortgage obligations. They are telling you a " broken promise to pay" is a business decision, not a moral obligation.
on Fri, 01/08/2010 - 11:59
#186980
Precisely. The biggest scam out there is the idea that a "broken promise to pay" is a moral failing for the (human) individual but simply a rational decision for a (non human) corporation. Essentially this means that the corporation, since it isn't a living breathing human "being", doesn't need to be constrained by moral considerations. That's best left to the suckers...er...humans.
Another brilliant example of soulless corporate logic that benefits the few at the expense of the many. I've begun reading up on how I can incorporate myself, or more accurately my name, thus shielding myself from many "legal" and "moral" unpleasantness. When in Rome.......
on Fri, 01/08/2010 - 14:10
#187276
Post your research with all that. I'd be interested in what you come up with.
on Fri, 01/08/2010 - 14:32
#187317
Second the motion
on Fri, 01/08/2010 - 12:14
#187005
How can you sit there and suggest there's a double standard between social classes? (snark, no reply necessary)
on Fri, 01/08/2010 - 14:44
#187350
I'd like to encourage the same, but doing so just hurts those of us that AREN'T underwater on our mortgages and actually care about the value of our homes.
on Fri, 01/08/2010 - 12:35
#187043
MR. DOLL is BUSY buying equities to make his S&P 1250 target but does not have the funds to make payments on the Stuyvesant loans !!
Very, very good!
on Fri, 01/08/2010 - 11:08
#186900
Do defaults mean anything anymore in today's make believe world?
on Fri, 01/08/2010 - 21:56
#187951
Not until they bring back the debtors prisons, Dubai anyone?
on Fri, 01/08/2010 - 11:13
#186904
Why didn't BlackRock have this event in the 2010 projection post above?
on Fri, 01/08/2010 - 11:14
#186905
Probably the largest example of which there are thousands of others all over the country.
Mid 2006:
Banker: "you want to build / convert condo units? Sure we do that! 1st Bank of Stupid will loan 100% of budget? We can match that"
Developer: "Great, I will start construction tomorrow"
(6 months later)
Developer: "Our costs are running about 20% higher than plan"
Banker: "Don't worry, we will ammend the loan. Any pre-sales yet?"
Developer: "We have a few contracts in the works"
Banker: "Sounds good"
Within 5 minutes of where I live (in a mountain resort in CO) there is several million in new (now bank owned) residential development sitting empty. They don't even plow the driveway and lots in the event someone with money blows into town and wants to take a look.
on Fri, 01/08/2010 - 11:47
#186959
Looking out my west-coast downtown metro high-rise I can see the luxury condo tower that was supposedly unaffected by the downturn. After six months of quiet over there I can still see straight through to buildings on the other side - it's a skeleton; just sitting there with a few lights exposing the emptiness of each floor after the sun goes down.
on Fri, 01/08/2010 - 11:15
#186908
Sweet! This is a day for celebration. Yooowww! CRE bubble - come oonnnnnnnnnnn dowwwwnnnnnn!!!!
on Fri, 01/08/2010 - 11:16
#186909
Please let us know how to turn off
that noisey CRE Collapse Monitor
Alarm - it might get pretty damn
annoying.
on Fri, 01/08/2010 - 11:27
#186929
Reminder,
This is dip. We buy on dips.
Green shoots and bubble gum,
XX
on Fri, 01/08/2010 - 11:21
#186919
Exactly Mr. Doll !! We all see where you are going with the S&P projection and you know what with BB's blessings you may be right on !! hahaha... what a joke....
but yes..you dont have to pay your debts either because BB will take care of it for you. Thanks !!
on Fri, 01/08/2010 - 11:27
#186925
A little here, a little there. No need to worry, the worst is behind us.
CRE will not do damage the way that residential did.
No shoes will drop the earth will not shatter and the construct will continue for decades to come.
on Fri, 01/08/2010 - 14:54
#187364
Lloyd, is that you?
on Fri, 01/08/2010 - 11:27
#186928
Lot's of people got rich from selling Horseshit.
Greenspan encouraged it, he wanted a huge bubble that would destroy the American economy.
Destroyed by Design.
-MobBarley
on Fri, 01/08/2010 - 11:27
#186930
In other news in true post-holiday spirit UPS stock is up 3$ + since they are laying off an additional 1800 folks now that Christmas has come and gone. I am sure Mr. Doll is right upfront buying UPS shares....
on Fri, 01/08/2010 - 11:59
#186982
I can remember when Dolt got on cnbs and told the public they were buyers of GM....that worked out (not)...it be amazing to see these guys really make a living on their ideas with their own money!!!!11
on Fri, 01/08/2010 - 11:41
#186949
MoMo Mia! Out go the banks, in come the consumer techs.
Robo...hope you have some quality images today.
on Fri, 01/08/2010 - 11:51
#186964
so the black squirrels are gonna take over the joint.
maybe the central playground area doesn't need 6 maintenance workers to keep it clean from 9-6.
if only Tish could take the Met-Speyer out of its heart and raze a building or three around 14th and C for some F'ing parking. geez.
on Fri, 01/08/2010 - 12:25
#187023
the black squirrels rock...love those guys.
on Fri, 01/08/2010 - 11:52
#186968
But but but isn't it unethical not to pay your mortgage if you still have the ability to pay?
Oh, I forgot, "ethics" apply to the peasants only.
on Fri, 01/08/2010 - 11:55
#186976
Ah-Ha!(nelson's laugh)
on Fri, 01/08/2010 - 12:06
#186993
I believe it's Ha-Ha!
But yes I agree with all of the above.
on Fri, 01/08/2010 - 12:46
#187094
I still consider this the opening salvo.....there will be more like this to follow.
on Fri, 01/08/2010 - 12:52
#187102
Garbage piling up. Unfinished buildings falling apart. Wandering homeless. It's deja-vu all over again...
-u4yeah4
on Fri, 01/08/2010 - 13:19
#187146
Their plan was to remove all of the rent controlled tenants and replace them with High paid wall street employees! Glad it Didnt work out well for them.
on Fri, 01/08/2010 - 13:20
#187150
And I bet your neighbors are thrilled to have you around.
on Fri, 01/08/2010 - 13:29
#187168
For epic greed and stupidity this ranks up their with Dubai tower..lol
on Fri, 01/08/2010 - 14:16
#187290
But, but asiablues just gave me Doll's predictions. How come Doll left off his inability to pay his bills?
on Fri, 01/08/2010 - 14:58
#187370
As a Stuy Town Resident myself, I was happy to see the snow plowed this morning. Thank you, Mr. Plow.
on Fri, 01/08/2010 - 15:49
#187481
Say it ain't so!!!!!!
Isn't BlackRock those guys who are in charge of the financial management of the TARP funds (and other facilities)????
<sarcasm>Oh no.....my confidence in the financial private sector is now completely gone.....</sarcasm>
on Sat, 01/09/2010 - 07:18
#188256
The viability of this deal was torpedoed when the new owners were restricted in their ability to get apartments off rent regulation. The payoff would be free market rents and condo sales. Much additional investment would have been necessary to convert these middle income apartments to luxury status. These buildings are indistinguishable from public housing projects from the same era. The payoff would only have occurred from unloading apartments to a bigger sucker.
on Sat, 01/09/2010 - 13:22
#188507
Let's compare two situations:
1. Family of five move from Omaha to California in 2006. They buy an affordable home in California at what they believe are market rates. Home of course is 1/3 the size of what they had in Omaha, but since both parents work they pay $300,000. One of the parents lose their job at the same time California Real Estate Market tanks and their house is now worth $175,000. Family is now underwater by $100,000. After draining all assets, family is forced into foreclosure and is forced to walk away from their home. Right wingers call them the scourge of the earth for not upholding their obligation, and blame them as being the main cause of the economic swoon.
2. Blackrock with a group of investors buy StuyTown for $5.4B at the top of market. Market tanks and Stuytown is now appraised at $1.9B. Blackrock which is solvent, selling near all time highs and is partially owned by Bank Of America decides it's in their best interest to walk away from their StuyTown obligations. Pension/Muni holders are shafted. Right wingers praise Blackrock for their excellent business acumen and immediately call their brokers to add more Blackrock to their portfolios. Saying "It's just business".
Welcome to America and all its hypocrisy. It's just business.