The joint venture led by Tishman Speyer and BlackRock that owns New York's vast Stuyvesant Town/Peter Cooper Village apartment complex on Friday said it missed a loan payment, putting it in a much-anticipated default.
Credit agencies had warned that the joint venture, which has seen the complex's value collapse by more than half since buying it for $5.4 billion in 2006, would likely default as it burned through reserves during a court battle over whether it could deregulate rents and raise them to market prices as swiftly as planned.
Tishman Speyer and BlackRock
The joint venture defaulted on $3 billion in senior mortgages. The impact on the investors was not yet clear.
The simple answer is not so much, said Sheri Chromow, a partner in the real estate group of Katten Muchin Rosenman LLP, a New York-based law firm that does not represent any of the players in the battle.
If they were going to take action one way or the other, I'm not sure they couldn't have taken it yesterday or the day before, she said.
Tishman Speyer-BlackRock said it still hopes to restructure the debt.
The joint venture has been engaged in discussions with CWCapital, the special servicer acting on behalf of the lenders, and hopes to continue good-faith negotiations toward a potential restructuring of the debt, Tishman Speyer-BlackRock said in statement.
A spokesman for the joint venture declined comment. Experts said the talks may be lengthy as there are many stakeholders.
A special servicer can modify or restructure loans, or even liquidate property in order to repay bondholders. Loans are transferred to a special servicer when a mortgage that underlies a commercial mortgage-backed security is in default or imminent default. For
Tishman Speyer-BlackRock's $3 billion of senior loans were transferred to CWCapital in November. That occurred after New York's top court ruled in October that the joint venture had wrongly tried to raise rent-regulated rates to higher market levels.
The joint venture, which bought the 1940s-era complex near the peak of the real estate market, has struggled to keep the deal afloat amid a declining property market. Appraisers say the value of the Lower Manhattan complex, which is home to about 25,000 people, has fallen to $2 billion or less.
Another attorney, who requested anonymity, said legal documents for these kinds of loans differ and might allow the special servicer to speed up a foreclosure.
City Council Speaker Christine Quinn and Councilman Daniel Garodnick, who lives in the complex, said they were concerned about any negative impact on the community.
The joint venture said tenants would not be affected. Today's announcement has no immediate impact on tenant services or the day-to-day operations of the community, it said.
Garodnick called on mortgage finance companies Fannie Mae
A spokeswoman for Freddie Mac, Patti Boerger, said by email she could not detail the company's investment, but said it has no right to take part in restructuring talks.
As a senior investor, Freddie Mac does not have the legal right to compel and would not be consulted regarding modifications to the first mortgage, she said. Ultimate control over modifications made to the first mortgage is vested with the special servicer, CW Capital.
Fannie Mae officials were not immediately available for comment.
(Editing by Leslie Adler)