Stuyvesant Town Gamble Costs Church of England £40m
The Guardian reports: The Church of England has lost £40m from a disastrous investment in a buyout of two vast Manhattan housing complexes, Stuyvesant Town and Peter Cooper Village, that collapsed into default after struggling under huge debts incurred at the peak of the US property bubble.
The complexes were bought for $5.4 bil. (£2.86 bil. then) in 2006 by a consortium led by a New York investment firm, Tishman Speyer, and the fund management group BlackRock, in the biggest US residential property deal on record. But after struggling for months to keep up repayments on loans attached to the buyout, Tishman today handed over the entire estates to its creditors, making the deal a landmark victim of the plunge in property values.
Financial backers of the deal will see their investments largely wiped out. Among the big losers are Singapore's sovereign wealth fund and California's huge state pension fund, Calpers.
The church commissioners, who manage the Church of England's assets, revealed that they are writing off "around £40m" put up for a 4% stake in Stuyvesant Town in June 2007.
Residents of the 11,000 apartment units in Stuyvesant Town were staunchly opposed to the Tishman buyout, which was highly leveraged by debt and predicated, in part, on cutting the number of tenants paying below-market rates under "rent controlled" deals.
Popular among soldiers returning from the war when the flats were completed in 1947, the blocks, which together are the size of a small town, are surrounded by pedestrian pathways and leafy parkland. Over the past three years, Tishman has become deeply embroiled in litigation to get veteran residents to pay more rent and has even used private detectives in an attempt to catch tenants suspected of breaching leases that require them to use the flats as their primary residences.
Tishman and its partners failed to make a $16m loan repayment this month. In a statement, Tishman said it had spent the last few weeks "negotiating in good faith to restructure the debt and ownership" of the properties but concluded that surrendering ownership was the only alternative to bankruptcy. "We make this decision as we feel a battle over the property or a contested bankruptcy proceeding is not in the long-term interests of the property, its residents, our partnership or the City," said Tishman.
Experts say the valuation of the estates has slumped to barely $2 bil. Ben Thypin, of Real Capital Analytics in New York, said the 2006 buyout was at the "height of the foolishness" at the peak of the American property boom: "They paid way too high a price. It was purchased at the peak of the market with too ambitious assumptions."
View the full article on The Guardian: Stuyvesant Town Gamble Costs Church of England £40m
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Posted by: Matthew Stone