Stuyvesant Town's Owner Set to Default

By Nicole Bode on September 10, 2009 11:05pm | Updated on September 10, 2009 2:06pm

The Peter Cooper Village and Stuyvesant Town apartment complex is seen in New York in this Oct. 17, 2006 file photo. (AP Photo/Mary Altaffer, file)
The Peter Cooper Village and Stuyvesant Town apartment complex is seen in New York in this Oct. 17, 2006 file photo. (AP Photo/Mary Altaffer, file)
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(AP Photo/Mary Altaffer, file)

Real estate titans Tishman Speyer and Black rock are at "high risk" of defaulting by the end of the year on the record-breaking multibillion-dollar loan they used to buy Stuyvesant Town and Peter Cooper Village, the New York Times reports.

The companies paid $5.4 billion for the sprawling East Village properties in 2006 — the most expensive real estate deal in history.

But plummeting markets have since driven the value down to about $2.13 billion, according to a Times analyst. $4.4 billion of that came in the form of loans. Experts told the Times the management could be forced to default by December.

Monthly income from tenants in the 11,227 units — close to 7,000 of which are rent controlled— currently covers only about half of the companies' debt payments, the Times reports.

The companies are set to go before the Court of Appeals in Albany today in hopes of overturning a lower court ruling that would force the owners to refund hundreds of millions of dollars to tenants.

The owners were found to have improperly taken thousands of apartments off the rent-stabilized rolls in violation of their state tax breaks.

The fallout for tenants could be everything from dwindling response on maintenance problems to a full takeover by the city.

"We are absolutely keeping an eye on it," Rafael Cestero, the city’s housing commissioner, told the Times.

Tishman Speyer owners defended their business model.

Jerry Speyer told the Times his company is providing 20 percent returns for investors.

"You show me anybody who measured up to that standard," Speyer said.

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