January 25, 2010 2:23 PM
Manhattan's Largest Apartment Complex Returned to Creditors
Posted by Ross Todd
By Brian Baxter and Ross Todd
The sale of New York residential properties Stuyvesant Town and Peter Cooper Village three years ago resulted in accolades (and at least seven-figure fees) for lawyers advising on the $5.4 billion acquisition. But as The Wall Street Journal reported early Monday, an investor group led by Tishman Speyer Properties has decided to hand over the sprawling Manhattan apartment complex to creditors. The news comes after the venture between Tishman and BlackRock Inc. defaulted on $4.4 billion in debt used to help finance the deal.
"It has become clear to us through this process that the only viable alternative to bankruptcy would be to transfer control and operation of the property, in an orderly manner, to the lenders and their representatives," the venture said in a statement to the WSJ. "We make this decision as we feel a battle over the property or a contested bankruptcy proceeding is not in the long-term interest of the property, its residents, our partnership, or the city."
Fried, Frank, Harris, Shriver & Jacobson real estate chair Jonathan Mechanic was named a Dealmaker of the Year by The American Lawyer in 2007 for his work advising Tishman and BlackRock on the acquisition. Fried Frank real estate partner Harry Silvera and corporate partner Daniel Bursky also lead the team from the firm working on the deal.
Mechanic told Bloomberg in December that Tishman co-CEO Rob Speyer shouldn't be blamed for deals that have lost value. "The world turned upside down,” Mechanic said at the time. “If I told you Lehman wouldn’t exist or Bear Stearns wouldn’t exist, you would have asked me if I was out of my mind...Tishman Speyer and Rob were part of that world, and they’re one of many that suffered.”
“When you go back to the history of the deals he’s done and the profits he’s made for investors, you had years of tremendous returns,” Mechanic said.
In August 2006, insurance giant MetLife decided to entertain offers for the two residential developments to take advantage of the explosion in the value of real estate assets. MetLife turned to Greenberg Traurig real estate cochairs Robert Ivanhoe and Daniel Ansell for the sale of Manhattan’s largest apartment complex, which consists of 110 brick buildings and more than 11,000 apartments on 80 acres of land adjoining the East River.
Tishman and BlackRock led a joint venture that won an auction for the property. The $5.4 billion deal was the largest individual property sale in U.S. history, coming at a time when interest rates were low, debt was cheap, and the real estate market was hot.
Tishman and BlackRock used $4.4 billion in debt to finance their acquisition of Stuyvesant Town/Peter Cooper Village, and earlier this month the partnership owning the complex defaulted on $3 billion in debt payments. In October a New York appellate court ruled that Tishman and BlackRock could not deregulate rent-controlled units in the complex while continuing to accept public tax benefits. Here's a story on the New York Court of Appeals ruling from our colleagues at the New York Law Journal.
The ruling severely restricted the ability of the landlords to raise rents to market levels in order to meet mounting debt payments. According to the NYLJ, Skadden, Arps, Slate, Meagher & Flom’s Jay Kasner represented Tishman, while Greenberg New York litigation chair Alan Mansfield advised MetLife in the case. Alexander Schmidt of New York’s Wolf Haldenstein Adler Freeman & Herz represented plaintiffs.
Efforts by Tishman and BlackRock to renegotiate loans in order to hold onto Stuy Town/Peter Cooper Village were unsuccessful. (A team from Venable is representing CWCapital, the special servicer on the deal.) The complex reverted to creditors on Monday, after several lenders asked that Tishman be replaced as manager for the property.
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