Posted by: BayAreaComRE | January 26, 2010

Giving the Keys Back…With a Bang.

Most people in the commercial real estate industry have heard that Tishman Speyer, and a legion of investors, have defaulted on over $4.4 Billion in debt secured by the Peter Cooper Village and Stuyvesant Town apartment complex in Manhattan.  The magnitute of this implosion is monumental, and truly serves as a bellwether to the boom-bust nature of this most recent cycle. The $6.29 Billion price-tag for the 56-building, 11,000-unit development that Tishman and it’s investors paid was considered the high-water mark in 2006, but nobody could have forecasted the tremendous drop in value to a current estimated valuation of $1.8 Billion. Burdensome debt, cross-collateralized and esoteric financial instruments, lackluster and declining economic fundamentals, high costs of capital, and a litany of other causes have boiled together in this default stew which is leaving the investment community with a sour taste in its mouth.

The New York Times ran a great graphic (below) highlighting  which investors and partners are getting wiped out at what levels. The next steps are messy, involving creditors, special servicers and a drawn out foreclosure process, not to mention the pain and loss nearly all of the equity and mezzanine debt holders are stomaching. For more, see the links below.

The full NYT article can be found here.

The WSJ article can be found here.

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