Florida Lost $250 Million on New York’s Stuyvesant Apartments

Class action lawsuit on this property, brought on by tenants being denied renewal can't be helping. Says rent stabilization rules are not being honored..What a disaster.

I said it for the other thread & I'll say it for this one, WOW

I don't get it:

"Manhattan apartment rents fell as much as 10 percent in August from a year earlier, the Real Estate Group of New York said on Aug. 25. Vacancies are growing and tenants aren’t moving as the city’s unemployment rate climbed to a 12-year high of 9.6 percent in July."

If "tenants aren't moving" how can "vacancies be growing"? Plus i know plenty of people moving out of Manhattan altogether or just swapping for a sweeter comp in a new place. I considered that they might be talking about Stuy town and not Manhattan in general but since no one wants to pay market rates there anyway isn't people staying as some rent is better than now rent?

This place raised my buddies rent 30 percent in 2 years when things were good. Now the place is 4-5 percent vacant and nobody will move there from hearing stories like what I just stated. Tishman Speyers has no clue how to handle a residential complex. 30 percent in 2 years! Also cant be luxury and renting as a college dorm at the same time. Decide which one you want to be

Sorry about the double-post - it was a streeteasy problem.

I said in another thread that B&L, my landlord, didn't want to lower my rent - UNTIL I told them thanks but no thanks. Come winter it's going to be worse.

i wonder what the banks are carrying the investment at. or whoever bought the debt, in whatever form.

samadams, the ads for PCV, "Manhattan without Sacrifice"

right. i love my apartment, but i've got to wonder who will be my next landlord.

I imagine that they probably modeled people upgrading to better apartments and leaving as the good times rolled. With incomes being squeezed, they are being forced to remain in Stuy Town longer than they planned. It is poorly written as the sentence contradicts itself. I'm only guessing with my interpretation.

This complex that the paid 5.4 billion for is worth maybe 3 billion. Thats 2.4 billion in losses to spread around, but NYers are not underwater right?

Impairment charge coming.

One nice thing about Condos. Once the sponsor leaves unit owners control their own destiny. NO worrying about the building going bankrupt via leveraged buy out or leases not being renewed in violation of rent stablization laws.

that's why you enjoy your condo. i prefer my rental, even with the uncertainty. if i were relying on RS it would be a different matter, but someone relying on RS wouldn't be able to afford a manhattan condo anyway. opting for RS means they are willing to accept the uncertainty in return for a good deal.

that's what the elderly here should have done!! bought a condo.

LMAO.. that one project is enough to bring down a good sized bank. The other theory which has been percolating in my head is the extent to which residential LLs were pricing rents => based on a "bubble" sales comp carry?

Meaning, the LLs said since most people want to buy, lets' price 20% off what a carry for the same sized unit would /could be bought for with a 0% down and IO loan... and as the bubble grew bigger we know what happened to rents? now it's back to reality.

PROVIDED, RS, that someone doesn't pay their common charges so you become responsible for them.

And PROVIDED, with the new Fannie / Freddie rules, New Dev is able to reach the 70% sold threshold.

And PROVIDED that you don't lock in a price significantly higher than current rents.

And PROVIDED that the price doesn't go down so you don't lose your equity or more.

And PROVIDED that you don't lose your job and can't rent the place out at a price higher than your costs.

And PROVIDED that property taxes don't increase to the point that you can't afford them anymore.

And PROVIDED that you plan to stay the 10-15 years it will take you to recoup transaction costs.

And PROVIDED a whole bunch of other things, too.

Sounds just like what people should do: BUY NOW OR BE PRICED OUT FOREVER!

Archstone is the next one in trouble - bought by Lehman at the peak of the market, and constrained by rent stabilization (80/20 buildings all). That's why they don't lower their rents, preferring to give nonsensical benefits like 3 free months. And also why they have such high vacancies.

How about PROVIDED that RS wasn't talking about new developments.

And PROVIDED that rents go up over time.

And PROVIDED that if you are renting and you lose your job, you are in bad shape anyway.

And PROVIDED that if property taxes rise rents will rise too since landlords will pass on the costs.

And PROVIDED that prices increase over time so it doesn't take near as long as you say to recoup transaction costs.

And PROVIDED that you get a tax benefit reducing your monthly costs when you own.

And PROVIDED a whole bunch of other things too.

Sure, LICC - live on in your fantasy world of ever increasing property values.

"PROVIDED that if property taxes rise rents will rise too since landlords will pass on the costs."

First of all, landlords can't merely "pass on costs" that the market won't bear. Second of all, property tax in NYC is a function of the rent roll, and therefore when rents go down so do property taxes.

You really don't know what you're talking about.

Buy now or be priced out forever!

What a fool.

My favorite quote:

“Rents are not going up like they normally would, landlords are making concessions like free rent and people have not moved out at the rate anticipated,” said Williams, who came to the SBA after nine years as a managing director at Fir Tree Partners, a New York hedge fund.

Do you think this guy understands that rents "normally" go up 1-3% a year, in line with CPI since it comprises 30-40% of CPI, with the full bearing of the Fed to counter things when they don't? Somehow I don't get the feeling this knucklehead was counting on 1-3% rent increases to keep from going belly-up.

Stevejhx, I didn't follow the other thread long enough. What is landlord now saying? I remember the "thanks but no thanks" thing, but haven't followed your posts since.

steve thinks that property taxes go down? Really? Please tell me the last time property taxes ever decreased year over year? And you think other people are fools?

that was snortworthy. unintentionally, of course, but still.

isnt it almost impossible to get a property tax cut?

Yet again, LICC, you show how ignorant you truly are. Property taxes get lowered ALL THE TIME:

http://350bleecker.com/newsletters/html/225.html

The market value of a rental building is determined by its income stream; the market value of co-ops and condos is based on a hypothetical income stream estimated from functionally-equivalent market rental buildings. But we've been through this before, and you denied (hilariously) that the city government knew how much buildings are worth.

Property taxes go down not only here, but everywhere in the country:

http://www.twincities.com/dakota/ci_13204735?nclick_check=1

inonada - they have the doorman following up with me trying to convince me that there are no vacant apartments, and that the rental market is increasing. I said cool, if that's the case, I told him to tell them to have them make me their best offer & I'll think about it.

They don't want a vacant apartment in December.

Property taxes can go down. There's an established procedure for this, and propertly represented buildings have been successful at it.

I dont think that a normal homeowner can get it lowered though. from what I understand the legal costs are huge

Sure steve, if you bring litigation you may be able to win a lawsuit to lower property taxes. I'm sure everyone can count on that every year. Thanks for a good laugh.

Doesn't work that way. The city has a process

Again, LICC, petitions for certiorari are made ALL THE TIME.

http://www.cooperator.com/articles/941/1/Challenging-Your-Real-Estate-Taxes/Page1.html

They're not lawsuits. They are administrative proceedings. Every jurisdiction in the country has a process like this.

You are really, truly ignorant. No wonder you live by the Newtown Creek.

"Property taxes get lowered ALL THE TIME:"

Um, Steve, correct me if I'm wrong, but isn't this showing a negotiation for the decrease of the assessments? Meaning that taxes will be lower than anticipated, but still effectively rising Y/Y? That would NOT be a real tax decrease in the way you're discussing here.

"live by the Newtown Creek, die by the Newtown Creek"

... what's the Latin for Long Island City's motto?

bjw, it MAY be a y/o/y increase, it may not be. It depends on the market. Look at what is happening to FL. The same thing can happen here. What the city can do if assessments fall is change the tax percentage rate, as it did last year. But that doesn't stop taxes from falling.

And we're talking about a rental building, whose value is defined by its rent roll.

That's funny, Steve. I always like it when the other side has to "convince" you that the market is running away from you in their favor.

Steve, I wouldn't argue it's impossible - it can indeed happen. I think the point is that a) it's pretty unusual, and b) the example you posted doesn't show it actually happening (the assessment increases from 2008 to 2009).

bjw, it will happen here. it may even be part of some negotiated package brokered by the parties with the aid of the city. this place can't fail completely (although the current investors, well, that's different).

we're in a different world with this one.

There's a valid argument that rent stabalization distorted the market place by creating a two tiered structure. Probably why prices rose like they did prior to last year..

doesn't matter. TS had numbers. they chose to buy. nobody had a gun to their head.

aboutready, by "here" do you mean Stuy Town/PCV? Are you considering moving to avoid the potential sh!tshow?

bjw, there is a lag b/c y-o-y increases in property taxes are capped, so it will take a longer time for them to go down here than they do elsewhere. But it can indeed happen.

It may or may not lead to a change in the assessment rate - if income taxes remain robust there may be no need. And recall that certain types of property tax - rent tax and vault tax - were completely eliminated.

when have i ever avoided a shitshow, bjw?

no, i like my apartment. but i am glad i have multiple options if something goes wrong. but really, something will get brokered. who is going to dislocate these elderly? can you imagine the press. these tenants are angry, and they are represented.

and someday in the future we may have working washing machines. lawn maintenance, probably not so much, at least in the near term.

yes, bjw, i did mean PCV/ST.

steve keeps referencing Newtown Creek, even though Chelsea is by far a much less healthy environment to live. Talk about ignorant.

Actually I didn't notice that before. Steve gave an example where the actual tax amount paid went up to support his assertion that tax burdens go down. Wow.

Tishman is also doing a bad job getting the illegals out. I know people still living in 2 beds that do not belong there.

Clarification of above - Chelsea is a much less healthy environment to live than LIC.

No, LICC, I gave an example of a tax DECREASE. Then there's the now-defunct vault tax, commercial rent tax, and the STAR program that decreased property taxes. What is holding property taxes up now is the increase in the percentage of assessed value that went up, and the 6% annual cap on property tax increases, which delays increases over time.

You know not of what you speak.

When the dollar amount of taxes paid goes up, that is an INCREASE steve. Please try to follow along.

Please try to follow this logic, LICC:

Tax Year Assessment Proposed Assessment Reduction Percent Decrease

2008-2009 $6,480,000 $6,000,000 $480,000 7.40%
2009-2010 $6,840,000 $6,300,000 $540,000 7.89%

The city lowered the tax by $1 million over 2 years. How is that tax going up?

Apparently your ability to add and subtract is as bad as your ability to choose a place to live.

To ease your understanding about the difference between up and down, here is an article about a time in the not-too-distant past when property taxes DECREASED in the city:

http://www.nytimes.com/1989/07/02/realestate/perspectives-new-york-city-s-property-taxes-the-homeowners-break-on-assessments.html?pagewanted=all

Remember: up means the numbers are getting bigger, down means they're getting smaller. This is the sequence we follow:

0 1 2 3 4 5 6 7 8 9

After that, you put a one before each of these digits:

10 11 12 13 14 15 16 17 18 19

At this point you increase 1 to 2, and 9 starts at the 0 again:

20 21 22 23 24 25 26 27 28 29

Then to 3, 4, 5, 6, 7, 8, 9 again, at which time we move to 3 digits:

100 101 102....

This is how we count in America, LICC. These numbers are an invention of the Arabs'. We have been doing it for a long time. I know that you're used to doing math in Roman numbers, where, in fact, IV is less than V, but we no longer use this system as it's ineffective.

Steve, this was my point earlier: in either case (assessment and newly proposed assessment), the tax burden actually increase Y/Y. What's happened is that they've negotiated less of an increase by lowering the assessment, but that's still a net increase in taxes. Unless I'm reading this completely wrong. But that's what it looks like.

You know steve realizes he looks foolish again when he goes to all these lengths to distract from the subject.

So for 2008-2009, the assessment was $6,000,000, and for 2009-2010 the assessment was $6,300,000. And in steve's bizarro world, that is a decrease. steve, whether in Rome or in Riyadh, you are wrong again.

Let me try to educate you: INCREASE - to make greater or larger. DECREASE - to cause to reduce. Now the next step - $6,300,000 is and INCREASE (greater or larger) than $6,000,000. Keep reading that and sooner or later you will understand.

bjw, it's not as high as what it would have been without the assessment reductions. so take out the reductions, do the percentages, and then calculate the total taxes that would have been collected.

$6.3 million is less than $6.48 million.

http://350bleecker.com/newsletters/html/225.html

So in 2007-08, the assessed value was $5,715,000. Then it went up to $6mm. Now it is $6.3mm. Therefore "[t]he city lowered the tax by $1 million over 2 years." I think we need to go back to the counting lesson a few posts up and try again.

"bjw, it's not as high as what it would have been without the assessment reductions"

So in other words it went up by less. Key word to note here is "up".

if you ask for a decrease in your assessment, and they have you schedule for $6.48 and $6.84, then their agreeing to $6 and $6.3 instead is indeed a reduction.

that's a different issue than convincing them that not only has your value declined today, but it will continue to not appreciate.

aboutready's comment was pointless in relation to this discussion.

steve has unintentionally brought comedy to the boards again . . .

LICC, actually this thread is about PCV/ST, so you're presence is kind of useless. go back to your swamp.

aboutready lives in PCV and is criticizing someone else's home? Wow.

and in a declining market does it really seem so inconceivable that someone with over 11000 would hire very good legal counsel and get the property reassessed?

that's about the 10th time you've posted that, LIC. witty and smart.

If I (i) bought an apartment in 2007 for $5,715,000, (ii) listed it for sale in 2009 for $6,840,000, (iii) reduced the asking price to $6,300,000 and (iv) wrote up a listing highlighting the "price reduction" of $540,000, how much fun would aboutready have attacking my concept of "reduction"?

This is the same concept. The city opens with an ask (assessment), the property owner contests the assessment and the matter settles where it settles. In steve's example, if the city opened with an assessment of $10mm for 2009-10 (vs. actual $6mm in 2008-09) and the parties settled at $6.3mm then the city would have "reduced" tax by $3.7mm.

In other words, the more the city raises taxes, the more it reduces them. They say you learn something new every day. I guess this is what I learned today.

but sidelinesitter property taxes are relative to all other properties. multipliers change yearly based on total amounts to be collected. so the city is raising everyone's assessments in a like fashion, then applying a multiplier that will give them their revenue. their agreeing to reduce yours is a reduction.

aboutready, I hear you, but at this point I think we're mostly arguing semantics. The net result is that from one year to the next, the tax burden has actually nominally increased. It's increased by less than originally anticipated (hence, the decrease). My initial point is that it is pretty uncommon to see a decrease in the nominal amount - of course it could happen, but the opposite is more likely, at least in my experience. It sounded like that was what Steve was explaining.

One response:
"their agreeing to reduce yours is a reduction"...in the fantasy world where everyone else pays the bill as presented and you are the only one to contest it and get a reduction

Better response:
"their agreeing to reduce yours is a reduction" No, it's a smaller increase. A reduction is when they go down.

"but sidelinesitter property taxes are relative to all other properties" I'm a bit simple, but to me dollars are dollars. When I have to pay more of them that I paid before it feels like an increase. Wait, maybe that's because it is.

you guys are missing the point of this thread. Tishman is f%*& and so is anybody else who purchased 2005 on. Huge problems coming to NYC this year.

Yes, LICC, the way to prove the property tax is going up is by using column headers that read:

Tax Year
Assessment
Proposed Assessment
Reduction
Percent Decrease

"the tax burden has actually nominally increased. It's increased by less than originally anticipated (hence, the decrease)"

And the reason for the overall increase was that property tax assessments are capped - therefore, if the property increases in value 50% in 5 years, but property taxes are capped at 20% in a 5-year period, which they are in NYC, then it will take over 10 years for the increased value to show up in the assessment.

But again, as with LICC's BFF JuiceMan, the concept of a "lag" is beyond him.

Indeed, LICC seeks to have it both ways: he claims that the mortgage interest deduction reduces owners' carrying costs - which it doesn't - rather than income taxes - which it does. Yet he denies that a decrease in taxes is a decrease in taxes.

Hmm!

Issues of valuation and rate are separate. Changes are phased in over five years. It's fairly complex which is why experts are hired to argue the case.

Those saying the rate only goes up or prices have to go down 70% are disgruntled renters or ex-Manhattan owners trying to make themselves feel better.

There are many very good reasons to rent versus buy, but some of the talk here goes beyond that.

Howz this for opacity... ask three different nyc tax assessors, you always get 3 different answers....NYC RE tax law is almost as bad as its zoning laws...

W67 agreed. I've dealt with some experts on this. They do not claim otherwise.

Riversider owning anything in NYC right now is the dumbest thing on earth much cheaper to rent.

Generally speaking, there are no "real" reductions in property taxes. As stated earlier, it's a dance: the c ity raise the taxes on a parcel, the owner files certiorari, the taxes are reduced FROM THE RAISED AMOUNT, but still higher than last year's taxes, so the 'real" net-net is still a tax increase. They only time this is really different is for those who have failed to do the dance before (i.e. certiorari), and wake up and realize there is money to be saved so the first year they do it there is a good chance of a real tax decrease.

"And the reason for the overall increase was that property tax assessments are capped - therefore, if the property increases in value 50% in 5 years, but property taxes are capped at 20% in a 5-year period, which they are in NYC, then it will take over 10 years for the increased value to show up in the assessment."

You really have to look at where you are pulling info from: this is true FOR ONE PROPERTY CLASS, and that class is NOT the one Coops and Condos fall into (it's for property Class 1 - 1,2 and 3 family dwellings). Coops and Condos are Class 2 property and must be assessed exactly like rental apartment buildings. In fact, you can look at your building and see exactly which rental buildings were used to calculate the AV of your Coop/Condo building, and THOSE buildings were assessed based on their RPIE statements. (NB this was dinner table discussion during my entire childhood; as young as 7 years old I was going out with my dad looking at properties as he was an Assessor for NYC for like 30 years; eventually getting to be top Assessor in NYC given a special district not based on geography like every other one, but a district made up of basically all the most expensive office buildings in Manhattan. Brother was also NYC Assessor until his recent shift to Nassau County6 Assessor. My grand uncle was one of the first Dept of Finance Tax Commissioners, who got my dad the job in the first place, etc, etc,etc).

steve was trying to argue that renters are immune from the effect of property tax increases because, partly, if rents go down landlords will pay less taxes because taxes are based on rent rolls. This is another one of steve's flawed arguments. All this talk about challenging assessments hasn't changed the fact that in the example steve was using to try to support his argument, THE AMOUNT OF TAXES PAYABLE INCREASED for the three years shown. Even if the assessment challenge reduce the amount of the increase, it still INCREASED. The owner of the building can't pass on a rent reduction because he is paying less in taxes, because he is PAYING MORE IN TAXES than the prior years.

steve loses another argument - shocker.

30yrs, we are talking about a different situation here. a rental landlord. the use of a different class was for illustrative purposes. appeals can work.

riversider wants the fed to fail, the dems to fail, maybe gs to fail. but thinks that's all ok because everything will be back to normal for the condo market in 2012ish. clearly meeting riversider's needs. so riversider can scoff at the foolish mortals who didn't time so well. or who weren't able to meet their needs because they were profligate.

btw, back to the OP. what was the trigger for the florida pension plan taking a complete loss on the books for the investment? they were told they had to do so by the trustees, but the Fitch downgrade doesn't seem sufficient even under pension plan laws to cause a 100% loss assumption.

any ideas?

ar: Florida pension owns equity ("The SBA bought in 2007 its share of a limited partnership run by Tishman Speyer Properties LP and Blackrock Inc., owners of the property"), so I think it's easy to see taking a 100% impairment when the debt has been downgraded, the property is free cash flow negative and the reserve account is nearly exhausted.

In economic substance, the debt already owns this asset, and we are drawing closer to the day when either the debt also owns it in legal form or else new equity comes in to recap the deal and TS and partners (including Florida) get flushed.

Agree that I wouldn't expect 100% impairment for a debt holder at this point. At least the more senior classes. Junior classes could easily be flushed though.

i think it depends what level of debt they hold

riversider wants the fed to fail, the dems to fail, maybe gs to fail. but thinks that's all ok because everything will be back to normal for the condo market in 2012ish. clearly meeting riversider's needs. so riversider can scoff at the foolish mortals who didn't time so well. or who weren't able to meet their needs because they were profligate.

Wrong, Wrong , Wrong, and maybe right.
It appears you've thrown your own prejudices into reading my illustrations. So I'll explain it.

We all have skin in the game, so it is to none of our advantage if the things go bad.
That said some of our leaders do seem to act irresponsibly and childish so why not point it out.... And it is good when our financial institutions do well, but they sholdn't do it at the expense of the greater economy...

Riversider.... a little part of my dreams/goals/aspirations died when I lost the bid on 1965 Bwa... you think maybe maybe this bubble did a LOT MORE HARM than good to the economy. I wish we'd just let the game play out as its meant to be and not do this drag out and politicize the financial losses game Obama and all the still puffers of RE are doing.

sidelinesitter, i'd be very cautious reading the news about this. errors everywhere. and how could an equities holder write something down to zero before it is trading at zero? unless there is no stake in the limited partnership left, which leads me back to my first question. i agree with you, debt won't be made close to whole here, but i'm wondering what exactly triggered the charge off. the situation has been generally been known for ages, and it could be of course muni ratings requirements. that's my point.

but that makes me wonder also. does downgrading trigger blackrock (or stone's, i can never keep them straight), calper's and tishman's need to book a complete loss? those were the only equity holders i was aware of, at least from the original deal.

samadams, i think that was what sidelinesitter was saying. but this will be interesting. i wonder how comparable it is to the debt holders of circuit city. in pcv/st these were mostly sold in slice and dice products, i believe.

so riversider can scoff at the foolish mortals who didn't time so well. or who weren't able to meet their needs because they were profligate.

Didn't read that last part.. This is just utterly silly

ar, let me guess... the powers that be think the value is closer to "write-off" situation.. it looks bad politically in any financial setting to keep coming back for mini-cuts... looks absolutely great when written to 0, and then trades at 10%.. now you are a HERO for getting something for nothing. Don't discount the human element in this # game.

W67.
No doubt there was a bubble. And consumption based on the home equity loan was not sustainable. As far as the politics of it. I don't like it either. Unfortunately 90% of the politicians give the other 10% a bad name.

but w67th, i get that. but who decides whether or not somebody is the hero? if one investment concern writes down value to zero, what does that do to the others who haven't? and why would you go first so early? unless of course it isn't early at all. which is my point.

bought any condos recently?

"how could an equities holder write something down to zero before it is trading at zero?"

Very easy. First, it's not equity, it's debt. Second, if there is negative cash flow, the debt costs more than the income received to finance it. Ergo, no one will buy it.

LICC, in recent years property owners have only been able to cover 75% of tax increases with increased rents. The value of a good has nothing to do with the operating costs - see the OP: Tishman Speyer can't just willy-nilly raise rents to cover the cost of their debt. Nor can they with taxes or anything else. The market determines the income. Case closed.

And this year's tax assessments are based on LAST YEAR's rental income. You will have a very steep decline in assessed values next year, and hence property taxes. Unless the city raises the percentage.

You really don't know what you're talking about.

no condos... just fanning the passions on SE : )

As to your question, a committee decides. it's not up to you, but the rating agency that'll look at your state's liabilities/assets... am assuming as part of a budgeting/new debt issuance, the city/county/state had to fess up...

steve, sidelinesitter was saying it was equity. i knew there wasn't really any equity in this deal, other than the initial investors (sort of), and i hadn't heard about florida, but given what they do these days, who am i to know if they did a mini-pcv/st ipo without my knowing. good lord.

w67th, that's what i thought, but didn't know enought to opine on.

so a muni rating agency (right?) said this is toxic shit and it's worth zero.

that was my question. i would have posited it, and i used to do muni blue sky and LISs (years ago) but i never worked on the failure side.

http://1.bp.blogspot.com/_pMscxxELHEg/Sp2PHzYezEI/AAAAAAAAGRg/leqrPtoWC38/s1600-h/just+awful.bmp

"30yrs, we are talking about a different situation here. a rental landlord. the use of a different class was for illustrative purposes. appeals can work."

Well, I'm never big on using something for illustrative purposes which acts differently than what you are trying to illustrate. It's like using a caterpillar turning into a butterfly to illustrate how frogs turn into bats - they don't.

As far as "appeals can work", it's not that they CAN work, they are built into the system, so of course they "work", but the way they work is close to Sisyphean.

Much confusion here. Suggest remedial rereading of the original article.

"sidelinesitter, i'd be very cautious reading the news about this. errors everywhere"
I take the general point about being cautious about what I read in the press. In this case, however, the executive director of the pension fund that took the write-down is QUOTED in the article saying what part of the capital structure his fund owns. To wit: "Florida is a junior partner in the Tishman/Blackrock venture, Williams said, with an equity-only investment and none of the mezzanine debt held by senior partners. He said the equity stake “could be wiped out.” "
Could he have been misquoted? I suppose, but this doesn't look like a situation where the reporter got speculation from cab drivers and blogs and published it as fact. I mean, he interviewed the source. I think I'll take my chances on the source in this case.

"and how could an equities holder write something down to zero before it is trading at zero?" - The partnership is private. It doesn't trade.

"those were the only equity holders i was aware of, at least from the original deal." So they syndicated part of the equity. Not unusual. Now we know.

samadams: "i think it depends what level of debt they hold"
ar: "samadams, i think that was what sidelinesitter was saying"

No, what I was saying was that they hold equity. Not that I disagree with samadams' statement, as it relates to debt holders. But the Bloomberg article is about an equity (i.e.., LP interest) holder.

side I would imagine that they hold the riskiest trench of debt.

tranche

but my point is that i had heard that blackwhatever, calpers and ts were the "equity" investors. maybe i was wrong but i followed it very closely.

and regardless of what class of investor, the fact that a $250 million investor just wrote down everything to zero means something is rotten in the state of the east village.

and you're wrong. privately held equities still have a value. you still don't mark them down to zero without a reason, and a very compelling reason.

I would imagine that they hold what the executive director of the fund says they hold, which is an "equity-only investment and none of the mezzanine debt."

Unless we think he's lying, which wouldn't be such a smart thing for a public official to do with respect to a high-profile investment boo-boo like this.

sidelinesitter, you don't get what i'm asking. i agree with you. and then the question is why and what does it mean?

why would somebody write off completely the value of an investment and announce it without some info?

side that is astonishing that they would do 250 million in equity for a pension. Isnt that against a pension's charter?

"maybe i was wrong but i followed it very closely." The equity holder quoted in the article says you're wrong

"and you're wrong. privately held equities still have a value." I certainly hope so. I work in a private equity firm. Note that I didn't say that privately held equities don't have value; I said that st/pcv is privately held, so your premise that a holder can't write an equity position down to zero while it is trading above zero is inapplicable, because this equity doesn't trade.

"you still don't mark them down to zero without a reason, and a very compelling reason" You've done as much as anyone on this board to publicize in various threads the stunning extent to which the acquirors' business plan fell flat on its face, so you know it's ugly. See my first post. The debt is under water and on the verge of default. Reserve fund basically gone. The equity is at the bottom of the heap and they're toast. There is your very compelling reason.

"and regardless of what class of investor, the fact that a $250 million investor just wrote down everything to zero means something is rotten in the state of the east village" This we can agree on without qualification

"side that is astonishing that they would do 250 million in equity for a pension. Isnt that against a pension's charter?" I really don't know anything about pension fund charters, portfolio concentration limits, etc., but I certainly agree that this large a concentration in such a junior security in a capital structure this levered is appalling, regardless of the letter of the charter. Someone was asleep at the fiduciary switch.

Note how careful the fund guy was to point out to the reporter that the investment was made before he joined. Translation: "Put that one on my predecessor's tab."

something is not right here. I dont think its possible for them t have 250 in equity on this. Maybe he mispoke, maybe I am wrong .

I don't think he misspoke. The same thing is reported elsewhere, for example the Miami Herald
http://www.miamiherald.com/news/florida/AP/story/1211846.html

Putting it in perspective, $250mm is less that a quarter of 1% of a $106.5 billion fund. This doesn't make the investment any less dumb, but it's not as if someone put $250mm of a $1 (or $2 or $10) billion fund into this.

sideline its still a crap shoot with money that is suposed to be invested conserv. I bet there will be lawsuits over this.

What's funny about this whole story is how the State of Florida, which itself had perhaps its biggest real estate bubble since the Marx Brothers filmed Coconuts thought the Peter Cooper investment made sense. How Fitch performed it's due diligence in assigning ratings and why investors bought bonds in this scheme which assumed voiding rent stabilized agreements(read legal risk) and why everyone thought what was basically at best a middle income housing project could bill itself as luxury.

aboutready, you don't understand how private equity or real estate investment funds work, particularly with respect to capital structure. I agree with everything sidelinesitter has posted on this topic.