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Stuyvesant Town Reserves Depleted, Default Likely To Come In December

Tyler Durden's picture





 

Tishman Speyer's 2006 acquisition of Stuyvesant Town for $5.4 billion apparently is about to turn terminally sour. The "biggest deal for a single American property in modern times" which never managed to be profitable from day one, is on the verge of completely exhausting reserve accounts tied to $3 billion of securitized accounts.The premise - take the 11,227 rent-stabilized u,nits apartment complex and convert them to market-rate. Alas, the timing could not have been worse due to an implosion in the NY rent market, coupled with legal difficulties - to date only 4,350 of the units have been converted to market rate, while the remaining rent-controlled units will likely increase in number due to a recent court ruling.

According to RealPoint the original reserve fund which had a balance of $650 million in 2007 when Stuy Town's debt was first securitized is down to a meager $49.7 million. The origianal reserve fund set consisted of a $190 million general reserve as well as a $60 million replacement reserve, both of which have been depleted, as well as a $400 debt-shortfall service fund, which has now declined to just over 10% of its initial balance.

The reserve fund was drawn down by $7 million month to date, versus $13.3 million in July and $19.6 million in June, with an average decline in the reserve fund of $11.3 million per month. At this rate Stuy Town's reserves will be completely wiped out in four months, sometime in December.

To demonstrate what a colossal failure Tishman and Blackrock's assumptions have been from the very beginning, the property has a $23.8 million monthly debt service, while on the revenue side, according to first quarter data, the property generates $136.5 million in annual cash flow, or $11.4 million monthly, a $12.4 million monthly shortfall (a cap rate of about + infinity).

And to demonstrate just how bad (and getting progressively worse) real estate in New York is, midtown's Dream Hotel, owners Hampshire Group have notified special servicer LNR Group, that it wold not make any more payments on the $100 million loan against the property. According to CREDirect, in 2008 the property's cash flow dropped 11 percent to $7.8 million as occupancy fell 3% to 84%, with a DSCR drop from 1.41x in 2007 to 1.26x. Things have since deteriorated, not just for the now defaulted Dream, but for a vast majority of all other New York hotels who have been struggling with declining bookings and room rates.

As usual, there will be a way to spin this and make it seem like this is favorable news for REITs, whose stock prices are now completely disconnected from the reality of collapsing cash flows, declining DSCRs and reserve rates, and reduced rental rates.

h/t the Bankster

 


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Sun, 08/30/2009 - 12:43 | Link to Comment JohnKing
JohnKing's picture

Quick, call CALPERS, sell more REIT's to the fiduciary boys!

 

green shoot!

Sun, 08/30/2009 - 12:45 | Link to Comment Veteran
Veteran's picture

Man, what a shithole.  Who in their right mind wants to live in the projects anyway? New York sucks

Sun, 08/30/2009 - 15:54 | Link to Comment SteveNYC
SteveNYC's picture

Haha! I walked past Stuy Town today, couldn't help but think of this unfolding drama on the way past.

These guys had every intention of screwing the rent-control tenants (ok, who get an unfair deal in NYC, always have, BUT, try being a big RE developer in the city and upping the rent of a 90 year old woman, BAD, BAD PR!) to meet their investment returns.

I would imagine with the cash shortfall they simply thought they could get a perpetual negative amortization deal on their mortage to finance this thing until they beat all the tenants' heads in.

Reap what we sow!

Sun, 08/30/2009 - 12:51 | Link to Comment Ruth
Ruth's picture

why don't we just keep monetizing the whole system, keep smoking green shoots, it's just the tip of the iceberg, they'll need to pump up the volume a bit i'd say to keep up with this one, commercial's not like residential, this is gonna be ONE BIG MESS

Sun, 08/30/2009 - 13:08 | Link to Comment Anonymous
Sun, 08/30/2009 - 13:25 | Link to Comment Sqworl
Sqworl's picture

New name Bailout City...

Sun, 08/30/2009 - 15:07 | Link to Comment Anonymous
Sun, 08/30/2009 - 13:26 | Link to Comment msorense
msorense's picture

A little off topic but this interview with economist Michael Hudson is a must listen - TD you might want to post this one.

 

http://www.kpfa.org/archive/id/53994

Sun, 08/30/2009 - 14:33 | Link to Comment Veteran
Veteran's picture

interesting.  thanks for the link

Sun, 08/30/2009 - 14:39 | Link to Comment Enkidu
Enkidu's picture

Interesting - and depressing...

Sun, 08/30/2009 - 14:42 | Link to Comment Thoreau
Thoreau's picture

Great interview. Thanks.

Sun, 08/30/2009 - 15:06 | Link to Comment Sqworl
Sqworl's picture

SOS..Banana Republic...thanks for link

Sun, 08/30/2009 - 17:14 | Link to Comment D.O.D.
D.O.D.'s picture

Wow, the end is certainly near... thanks for the link!

Sun, 08/30/2009 - 20:01 | Link to Comment Anonymous
Sun, 08/30/2009 - 20:10 | Link to Comment Careless Whisper
Careless Whisper's picture

Brilliant

Sun, 08/30/2009 - 22:21 | Link to Comment Rollerball
Rollerball's picture

Truth.  Thank you.

Mon, 08/31/2009 - 02:02 | Link to Comment Carolyn
Carolyn's picture

Wow, Mr. Hudson makes it so clear.  Thanks to him, I can now clearly see the bottom of my financial future as it comes up to smack me in my face!  (BTW, as it so happens, my cousin lives in Iceland.  Maybe I should fluff up the sleeping bag and spare pillow for her to use when she lands on my doorstep in a few months with all her earthly possessions stowed neatly in her handbag.)

Mon, 08/31/2009 - 05:09 | Link to Comment Anonymous
Sun, 08/30/2009 - 13:31 | Link to Comment BrianOFlanagan
BrianOFlanagan's picture

What they should do is take it public.  The market will love it.  Bankruptcy is a good thing ya know, just force the debholders to extend to infinity. Equity gets a super long-term option and debt holders get paid sometime in the next century.  Everybody wins!

 

Sun, 08/30/2009 - 13:56 | Link to Comment Anonymous
Sun, 08/30/2009 - 14:00 | Link to Comment Howard_Beale
Howard_Beale's picture

Dear TD--I really miss your "Weekend Reading" section. And no I'm not too lazy to scour it out myself but it was a real treat to have the TD Sunday Times.

Sun, 08/30/2009 - 16:32 | Link to Comment slowcoder
Sun, 08/30/2009 - 14:00 | Link to Comment Anonymous
Sun, 08/30/2009 - 15:57 | Link to Comment dnarby
dnarby's picture

Oh, grrrreaaaat...  Just what we need, a hyper-partisan propagandist to weigh in.

With any luck he'll have a coronary before he can get anything shot.

Sun, 08/30/2009 - 14:02 | Link to Comment Anonymous
Sun, 08/30/2009 - 17:23 | Link to Comment Anonymous
Sun, 08/30/2009 - 22:26 | Link to Comment Rollerball
Rollerball's picture

Leather is too noisy to hunt in.  And I wouldn't waste a bullet on an elk.  You'll just hear the thump after my knife penetrates the throat.

Sun, 08/30/2009 - 23:39 | Link to Comment PenGun
PenGun's picture

 You have never seen an Elk. They live around here. I saw a female the other day. Maybe 600 lbs. A male is 1000 lbs and very nasty. The most dangerous thing here and we have Cougars and Black Bear eveywhere.

 

 I'll watch with interest if you'll take one on with a knife.

Sun, 08/30/2009 - 14:06 | Link to Comment Miles Kendig
Miles Kendig's picture

Watch out
You might get what youre after
Cool babies
Strange but not a stranger
Im an ordinary guy
Burning down the house

Hold tight wait till the partys over
Hold tight were in for nasty weather
There has got to be a way
Burning down the house

Heres your ticket pack your bag: time for jumpin overboard
The transportation is here
Close enough but not too far, maybe you know where you are
Fightin fire with fire

All wet
Hey you might need a raincoat
Shakedown
Dreams walking in broad daylight
Three hun-dred six-ty five de-grees
Burning down the house

It was once upon a place sometimes I listen to myself
Gonna come in first place
People on their way to work baby what did you except
Gonna burst into flame

My house
Sout of the ordinary
Thats might
Dont want to hurt nobody
Some things sure can sweep me off my feet
Burning down the house

No visible means of support and you have not seen nuthin yet
Everythings stuck together
I dont know what you expect starring into the tv set
Fighting fire with fire

Sun, 08/30/2009 - 14:15 | Link to Comment Sqworl
Sqworl's picture

Conversion budget was burned by contractor and subcontractor...Kaching..The replacement value for vanity made the military look cheap!

Sun, 08/30/2009 - 14:20 | Link to Comment Anonymous
Mon, 08/31/2009 - 03:50 | Link to Comment Anonymous
Sun, 08/30/2009 - 14:23 | Link to Comment windhorse2000
windhorse2000's picture

Msorense:.... thanks for the post,....."Dress Rehearsal For Debt Peonage" with economist Dr. Michael Hudson, brilliant!.....must hear interview!

Sun, 08/30/2009 - 14:27 | Link to Comment madmax
madmax's picture

There is a green shot in this somewhere, damnit...I just know there is! 

Sun, 08/30/2009 - 15:59 | Link to Comment dnarby
dnarby's picture

They're growing in various closets and storerooms in the projects.

Mon, 08/31/2009 - 09:33 | Link to Comment TeresaE
TeresaE's picture

Nah, they are growing under stolen electricity in empty homes and businesses all over the country.

 

 

 

 

 

 

Sun, 08/30/2009 - 14:41 | Link to Comment Anonymous
Sun, 08/30/2009 - 16:25 | Link to Comment Anonymous
Sun, 08/30/2009 - 16:29 | Link to Comment Careless Whisper
Careless Whisper's picture

Let's give Mister Jerry Speyer a golf clap for his public service as Chairman of the Board of the Federal Reserve Bank of New York. Oh, and all his work for advancing education for the underprivileged while on the Board of The Dalton School.

http://gothamist.com/2009/07/04/nyc_prep_world_reels_over_bravos_ny.php

 

Sun, 08/30/2009 - 16:42 | Link to Comment Anonymous
Sun, 08/30/2009 - 20:29 | Link to Comment Careless Whisper
Careless Whisper's picture

I agree Anon, it was Hurricane Lehman. Let's not forget the $22 Billion deal Jerry Speyer did with Lehman for Archstone-Smith. "Pride goeth before destruction, and a haughty spirit before a fall."  Proverbs 16:18

http://www.nytimes.com/2007/05/30/business/30tishman.html?pagewanted=1&_r=1

 

Mon, 08/31/2009 - 09:34 | Link to Comment TeresaE
TeresaE's picture

Never fear, Barney Frank is currently writing a bill that will take the "repaid" TARP funds and gift to the low income housing units.

Cash for Projects.

I'm sure this will be a winner too!

Sun, 08/30/2009 - 16:43 | Link to Comment RobotTrader
RobotTrader's picture

Just mow the whole place down.

It is place, build a new stadium, a new greyhound racetrack, a a new casino for the gamblers...

LOL....

Sun, 08/30/2009 - 17:30 | Link to Comment deadhead
deadhead's picture

and the Charlie Rangel Memorial Hall of Fame

Mon, 08/31/2009 - 03:53 | Link to Comment Anonymous
Sun, 08/30/2009 - 17:20 | Link to Comment Anonymous
Sun, 08/30/2009 - 17:28 | Link to Comment flaxpin
flaxpin's picture

They could decrease vacancies by decreasing rent instead of simply offering the no broker fee / free one month rent offer.  14th and 1st isn't prime enough to support the $3000 rents they're asking for.

Sun, 08/30/2009 - 17:54 | Link to Comment Anonymous
Sun, 08/30/2009 - 18:17 | Link to Comment Anonymous
Sun, 08/30/2009 - 22:35 | Link to Comment Rollerball
Rollerball's picture

Sheeple blood for the passover/under.

Mon, 08/31/2009 - 01:22 | Link to Comment MsCreant
MsCreant's picture

Went to listen. This is nice, know their stuff but did not know this one.

Mon, 08/31/2009 - 08:32 | Link to Comment Anonymous
Sun, 08/30/2009 - 19:31 | Link to Comment Hephasteus
Hephasteus's picture

$50,000 fishing degrees for everyone. Then outsource the fish. The systems not slaving people any more it's just become a heartless killer.

Sun, 08/30/2009 - 20:49 | Link to Comment Sqworl
Sqworl's picture

HAHAHAHA

Sun, 08/30/2009 - 22:09 | Link to Comment Anonymous
Sun, 08/30/2009 - 19:45 | Link to Comment Anonymous
Mon, 08/31/2009 - 10:24 | Link to Comment Careless Whisper
Careless Whisper's picture

correction: burn the bondholders

Sun, 08/30/2009 - 20:15 | Link to Comment Anonymous
Sun, 08/30/2009 - 22:35 | Link to Comment Anonymous
Mon, 08/31/2009 - 01:29 | Link to Comment MsCreant
MsCreant's picture

Some of this is a huge disconnect. We are not stealing from people, we are stealing from the government.

Congrats on knowing it on a gut level like this. The fog of rage and dispair is the only remote hope we have of things being different. Until we all feel it, until it is more than an abstract idea, none of this can possibly change.

I say this gently, makes me wonder if you are reevaluating the term "friend."

Mon, 08/31/2009 - 03:58 | Link to Comment Anonymous
Mon, 08/31/2009 - 01:33 | Link to Comment Veteran
Veteran's picture

"I realize this isn't a revelation"

 

Hey brother,  your company leaves something to be desired. Reminds me of a few lines from Platoon.  Something along the line of why ol boy joined when everyone else was being drafted. He said it wasn't fair for all the poor people to be drafted.  Another broke dick bums that he had to be rich just to think like that.  Poor people were getting fucked by the man.  Always had, always will

 

PS:  Bunny:  Nothing like a piece of Pussy, 'cept maybe the Indy 5'hundred

Mon, 08/31/2009 - 04:00 | Link to Comment Anonymous
Mon, 08/31/2009 - 08:39 | Link to Comment Anonymous
Mon, 08/31/2009 - 22:45 | Link to Comment Anonymous
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