Tishman’s Stuyvesant Town Fund May Run Dry This Year

It's a horrendous complex. Looks like a public housing project.

stevejhx...what does it mean,if anything to the rents. "although the property's performance remains consistent...does that mean they're renting all the apartments..

it does look like a housing project but the rooms are large and if the price every went under $2k, i'm there.

Julia, it means just that: performance is consistent, just not enough to cover costs, so to cover the costs they pay them out of a reserve fund. To prevent bankruptcy they must replenish the reserve fund, but may not be required to by the financing covenants. I'm not familiar with the details of that.

Yo... J/S... think of it as a waterfall of money with different catchments.... at the end of all expenses the "reserve" must be kept full... if not the equity must step up... if not a covenant in their credit agreement gets broken and then the fun starts... usually banks will start to ratchet up security, limit cash outflows, require weekly cash stmts, generally hasten the demise of the company... cause the credit guys have already handed this off to the workout guys.... and the credit (marketing) guys are mere spectators at this point.

Lots of people are gonna get haircuts.... it'll be a slow bleed until they end up in Delaware... :)

P.S... you know that saying the banks are never there when you need them...... :)

The big question is whether performance sucks because there are too many empties (because rents are too high) or are they settling for rents they can get and they're not enough.

talljay - until very recently I was still hearing of unreasonable increases for renewals of market rate leases, and very weak retention rates. I think you have it all: way too many empty apartments, too high rental rates, and the rents that they are getting are not enough. Piss poor investment decision.

It's not going to help their marketing strategy to start laying off workers (although you can see why they have), and the grounds here have looked pretty poor already since MetLife took off.

w67th - who would actually take the loss (other than the banks, of course)? Wouldn't TS have set up a sub to purchase the complex? They didn't put much of their own cash in as equity, as I recall.

As of December the would not budge from $3100 for a one bedroom..they were giving one month free.

From the FDR it may look like the projects but inside its really well maintained and landscaped. Where else in downtown manhattan can kids go sledding? Basketball courts, paddle tennis, volleyball, numerous playgrounds. Great place for families. TS is losing money because they're not converting rent stabilized units to market rate as fast as planned. They underestimated tenants desire to hold on to thier apartments. They have also issued many notices of eviction to rent stabilized tenants that were not justified (to those who simply own 2nd homes, and accused them of non-primary resident status) Also, with the economic downturn they can't keep giving market rate renters double-digit increases. They bought at the peak of the Manhattan real estate market.

"As predicted"

Yes by many other people here and on curbed as soon as the deal was announced.

W67th,
I think the quote you're thinking of is Twain's: A banker is a fellow who lends you his umbrella when the sun is shining, but wants it back the minute it begins to rain. I love that quote. Have a good weekend everybody....

Right about now, Tish and Black are doing a stare down, who's gonna pony up... if they were smart they had an equity agreement outlining the % they would kick in, this may be moot if either or both believe its good money after bad. If they are sophisticated this will be a non-emotional choice... but I've seen stupider finance people)....

The banks you must realize have the same group of work-out/credit officers working usually the same industry... so if they saw other "RE" deals get sour... they'll be much less apt to be lenient on this deal... and i suspect all of the players have significant deal fatigue at this point... so no matter how much stupid money goes after bad.... I will guarantee you this will end up in Delaware...

They'll do some stutter steps at each breach of covenant... the sponsors will present new $ and new projections... they won't meet these new projections... new covenant breach.... new projections... (wow I'm getting deal fatigue just writing about this).... (just to give you a flavor of what's happening behind the scenes)....

Sorry about the ramblings AR... just re-read ur Q...I'd say TS/Black's different funds would most likely have held a portion of the paper they sold to get this deal done... would you buy it if the sponsors didn't have skin in the game? Sub as in a method to limit their losses.... no, no banker worth their salt would ever let the credit agreement not have access to the actual assets... no matter how many subs... TS/Black create... :)

thxs postivecarry :)

"They'll do some stutter steps at each breach of covenant... the sponsors will present new $ and new projections... they won't meet these new projections... new covenant breach.... new projections..."

Waste of time and it won’t get this far. No way they will have this kind leash in this credit market. One set of projections with bank advisors crawling up their ass the entire time, no f*cking around on this one. The mental masturbation and pie and the sky forecasts are a thing of the past. This is going to happen quick.

"I will guarantee you this will end up in Delaware"

Without some sort of game changer (e.g. free money) I agree

will this lower the rents???

w67th - hell no, I wouldn't finance it. But I've been reading some truly crazy shit about some commercial deals where ltv exceeded 100%. I can't remember the terms of this deal, but I recall being amazed that so little cash went into the pot. We shall see. They're my landlord, next time a landlord wants to run a credit check on me, I think I'll laugh (or throw a shoe at them?).

Julia, no, the market will lower the rents.

what happen to current tenants in this end up in Delaware?

admin.. nothing those tenants are the CF keeping this whole thing going.... in BK you restructure the liab not assets..

Let's be realistic here. This was financed as a CMBS/mezz deal at the top of the market. Nothing unique about this deal other than the size. Thus, the entire mortgage loan and mezz tranches were taken down at closing by lenders not affiliated with TS and made to various single purpose entities created by TS. If there is any recourse to a credit entity, it is limited to non recourse carve-outs. Thus, unless TS wants to protect what little $ it put into the project or wants to do something silly and incure recourse by say having the SPE's file bankruptcy, TS can hand the keys to the servicer tomorrow and be done with it.

OJ (JM)... it'll depend on how much stupid money goes after bad :)

Julia... ultimately... me thinkz... not bc of bankruptcy... bc the overall RE market is headed that way. U remember what I said about financial flexibility? If you don't have it then you can't cut deals.... if you are leveraged to the hilt... very little room to drop your prices (sorta like GM/Airlines)... The next buyer will (if smart) buy at a price that let's them earn money renting out apts at "real" market.... not some covenant in a credit agreement i.e. all 1bdrms will rent for $3000. :)... just hang in there.....

I'm more of a Gen X cynic than a New-Ager, but I still think it's interesting that the Tishman-Speyers will end up losing perhaps their shirts in this business cycle, when they created their wealth in the G. Depression.

Remember Olympia and York? The Canadian developers who went bankrupt after building BPC and London's Canary Wharf.

In the words of Frank Zappa "It can't happen here"

" If there is any recourse to a credit entity, it is limited to non recourse carve-outs. Thus, unless TS wants to protect what little $ it put into the project or wants to do something silly and incure recourse by say having the SPE's file bankruptcy, TS can hand the keys to the servicer tomorrow and be done with it."

huh? This is true if the asset value covers the debt but my guess (huge leap, I know) is there is a little margin of difference that TS is on the hook for. Can't just walk away from an underwater property without consequence.

I think the more interesting question would be what happens to the development, tenants and rents after the entity that owns it (some shell TS and Blackrock set up, I am sure), declares bankruptcy? Will banks take ownership? Will someone buy it from the banks at a discount? Will the government step in?