Tishman Speyer Properties surrenders 11,227-apartment complex to creditors

The Peter Cooper Village and Stuyvesant Town complex in 2006. From Nicole Bengiveno/The New York Times

This is from The New York Times:

The owners of Stuyvesant Town and Peter Cooper Village, the iconic middle-class housing complexes overlooking the East River in Manhattan, have decided to turn over the properties to creditors, officials said Monday morning.

The decision by Tishman Speyer Properties and BlackRock Realty comes four years after the $5.4 billion purchase of the complexes’ 110 buildings and 11,227 apartments in what was the most expensive real estate deal of its kind in American history.

The surrender of the properties, first reported by the Wall Street Journal, ends a tortured real estate saga that saw the partnership make expensive improvements to the complex and then try to rent the apartments at higher market rates in a real estate boom. But a real estate downturn and the city’s strong rent protections hindered those efforts, leaving the buyers scrambling to make payments on loans due for the properties, which have been a comfortable harbor for the city’s middle class since they opened in the late 1940s.

[...]

This month, the partnership headed by Tishman Speyer defaulted on $3 billion in debt on the properties, and in the last few days secondary lenders have been calling to replace the partnership.

I am just amazed at how this huge property deal went belly up by Tishman Speyer. I've read plenty of news stories of Americans losing their homes to foreclosure due to job losses, speculation, or even just buying too much housing than they could afford. But with the souring economy potentially forcing New Yorkers out of the Stuyvesant Town and Peter Cooper complex, Tishman couldn't afford the overpriced payments when they purchased the complex at the height of the real estate boom. This story is just another example of how the over-speculation and frenzied spending during the real estate bubble is still wreaking havoc on the U.S. economy after the bubble exploded. Now the creditors have an 11,227-apartment complex that is well below the original $5.4 billion purchase value--the Wall Street Journal reports that the complex is now valued at around $1.8 billion. What is more, a number of big investors, including the California Public Employee's Retirement System, the Church of England, the Government of Singapore Investment Corp., and the Hartford Financial Services Group, that bought into this property are about to see much of their investment stake being wiped out.

Talk about a real estate disaster here.