For those of you who don’t know New York City very well, on the East River there is an 80 acre, 9 square block city-within-a-city called Stuyvesant Town/Peter Cooper Village that is home to 56 residential buildings – about 11,500 apartments for 25,000 residents.
And the entire thing was just foreclosed on over the weekend – a $5.4 billion foreclosure. As the great 1980’s philosopher Yakov Smirnoff would say, “What a country!”
The over-leveraged, deadbeat “homeower” in this case is not a dentist from California or a general contractor from Las Vegas. This time, it’s Tishman Speyer Properties, a once-powerful real estate giant that did what many Americans did at the top of the bubble – something arrogant and foolish.
Tishman was and is in many ways a symbol of the real estate fever that swept this country. Each summer during the bubble years, they would invite thousands of real estate industry people to a lavish party at Rockefeller Center (which they also own) for a Lobster Bake. They were literally raining lobster down upon anyone with a BlackBerry.
I’m told the event last summer was much more muted than the one I attended a few years back.
The Wall Street Journal broke the story and the New York Times has a huge article up about the turning over of the neighborhood to its creditors. The reason things didn’t work out is exactly the same one that millions of us know all too well, just on a much larger scale…
The rents collected did not cover the mortgage payments, as the new owners failed in their efforts to increase net income by steadily renovating and deregulating vacant apartments while raising rents substantially.
I’ll finish by congratulating the seller, MetLife, who got top dollar for the development in 2006 when Tishman and its partner (believe it or not BlackRock) came to the table with a ludicrous offer. MetLife built it in the 1940s and in hindsight, let it go at exactly the right time.