For quite some time now, it has been clear that there was an extremely high probability of Stuyvesant Town defaulting. According to the New York Times, the keys were handed over on Monday.
But it’s not just Tishman Speyer and BlackRock, the general partners, who will lose money. Other investors, such as the Government of Singapore Investment, could potentially lose up to $575M compared to $112M each for both Tishman and BlackRock. Here’s the capital stack (via New York Times):
Also consider the following from the same New York Times piece:
“A partnership formed by Tishman Speyer and BlackRock paid $5.4 billion. The acquisition cost was actually $6.3 billion, because the partnership had to raise $900 million for reserve funds to cover interest payments, apartment renovations and capital improvements.
The rental income did not cover the monthly debt service. But the two partners were betting that they could turn a healthy profit over time as they replaced rent-regulated residents with tenants willing to pay higher market-rate rents.”
Can you think an investor today who would be willing to put up half a billion dollars towards the acquisition of properties whose rental income is insufficient to cover debt service?
Image: Flickr
