Overleveraged 11,000-Unit NYC Apartment Complex Teetering On Foreclosure

In New York City, The Wall Street Journal reports:

• One of the biggest, most high-profile deals of the commercial real-estate boom is in danger of imminent default, say people familiar with the matter, signaling the beginning of what is expected to be a wave of commercial-property failures. The sprawling Manhattan apartment complex known as Peter Cooper Village and Stuyvesant Town -- acquired for $5.4 billion in 2006 by a venture of Tishman Speyer Properties and a unit of BlackRock Inc. -- is running out of cash. 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.

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• Lenders who financed the deal first projected the complex's net operating income would triple to $336 million in 2011 from $112 million in 2006, according to Deutsche Bank AG. But net income is projected to be $139 million this year, according to Realpoint LLC, a credit-rating agency.

• Investors who bought into the deal were confident that real-estate manager Tishman Speyer would be able to greatly boost profits by raising rents in Manhattan's sizzling apartment market. But today, the 56-building, 11,000-apartment property is suffering from a slowing New York economy, a lawsuit that has hindered the owner's ability to convert rent-controlled units to market rentals, and the debt load.

For more, see An Apartment Complex Teeters (High-Profile Tishman/BlackRock Property in New York in Danger of Default).

See also, New York Magazine: WSJ: T Minus Four Months Until Stuyvesant Town Defaults.