The Wall Street Journal is reporting that the purchaser of two colossal apartment complexes on Manhattan’s east side, Peter Cooper Village and Stuyvesant Town, has abandoned them to its creditors, after it defaulted on the on the $4.4 billion debt used to help finance the deal. The complexes were purchased as part of a venture between Tishman Speyer Properties and Blackrock Inc. in 2006.
The 2006 $5.4 billion sale represented the biggest real estate deal in U.S. history. Cooper Village and Stuyvesant Town comprise more than 11,000 units over a sprawling 80 acres. The Journal reports that the properties’ value has potentially plummeted to less than $2 billion.
According to The Journal:
The property’s owners signaled they would be unable to reach a deal with lenders and instead decided to allow creditors to proceed with what amounts to an orderly deed-in-lieu of foreclosure, which means a borrower voluntarily gives the property back to lenders to avoid a foreclosure proceeding.
A default has appeared imminent for months, with reports long speculating that owners could hold out on default until February at the latest. And what about the residents? In September 2009, The New York Times reported that the 25,000 tenants were unlikely to face rent increases or evictions in the event of a loan default, but that the complexes could suffer from a protracted period of reduced maintenance.
The enclave is an iconic development built in the 1940s to house returning WWII veterans, with the help of eminent domain and public subsidies. “Stuyvesant Town and Peter Cooper Village are remarkable for remaining an affordable, middle-class community amid Manhattan’s spiraling luxury housing market,” wrote Brad Lander, then director of the Pratt Center for Community Development in New York City in Shelterforce in 2006 following the properties’ sale. Lander has since been elected to the New York City Council, representing parts of Brooklyn.