CRE Dominoes: Stuyvesant Town About To Go

Tishman and Blackstone teamed up to acquire Stuyvesant Town in New York back in 2006 for a whopping $5.4B. The project encompasses some 11,000 apartments across 54-buildings. The acquisition strategy included efforts to convert rent-controlled units to market-rate units, but a lawsuit has put the ice on that (sounds like Page Mill Properties and East Palo Alto).

As of the end of September, it had $33.7 million left of the $400 million in interest reserves set up to service its debt, according to the people familiar with the matter. At its current burn rate of about $16 million per month, the reserve could be depleted before the end of the year, the people said. Others have said the venture could avoid default until February.

The WSJ is reporting that investors include none other than our very own CalPERS ($500M equity), amongst other very large names such as the government of Singapore (GIC), Gramercy Capital, SL Green, amongst others. $1.5B of the debt that fueled the acquisition is agency debt, and Realpoint is now estimating the properties value at $2.1B, 38% of the acquisition value. That means that virtually all the other equity that was invested in this deal is wiped out.

The duo that acquired the property projected that income would come in at about $336M by 2011. As of now, they’re at $139M, a far, far cry from the original expectation. So if you want to know how fast you can go from a hero to a zero, the answer is about three years.

Hang on to your hats, we’re going to see some pretty high-profile deals collapse here in the next few months.

[via WSJ]

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