Tishman Speyer and BlackRock, the owners of Stuyvesant Town and Peter Cooper Village in Manhattan, turned over the main mortgage for the 11,200-unit complex to a “special servicer”. Special servicers are given the power to renegotiate the terms of a failing loan and possibly sell the assets to pay off bondholders holding $3 billion in bonds. The current value of the buildings is thought to be $1.8 billion.
According to Fitch Ratings, a global credit rating agency, the transfer resulted from a request for relief from the owners, who don’t expect to be able to continue to service their debt. According to their press release, “Fitch expected the transfer of the loan to special servicing as cash flow generated by the property remains insufficient to service the debt. Debt service reserves are expected to be depleted by the end of December.”
Fitch cites “potential legislative changes to rent stabilization laws” as one of the variables in the ultimate settlement of the debt. Last month’s court decision refusing the owners the right to pull buildings receiving city subsidy funding out of rent regulation made the $5.4 billion deal unsustainable for the owners, who now owe an additional $200 million in back rent and damages to tenants.