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."
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.