The announcement by Tishman Speyer LP and BlackRock Realty of their intent to return Peter Cooper Village/Stuyvesant Town (PCV/ST) to its lender is unlikely to trigger additional near-term, negative rating actions from Fitch Ratings, the agency says.
While it may be the intent of the Tishman-BlackRock joint venture to transfer control of the asset, Fitch says its analysis of the asset does not change as a result of any near-term transfer of ownership. Fitch's value estimate of $1.8 billion is based on applying a 7% capitalization rate to the adjusted second quarter of 2009 financials.
On Sunday, Tishman Speyer and BlackRock, as sponsors for the $3 billion securitized PCV/ST loan, announced their intent to transfer the control of the property to CWCapital Asset Management (CWCapital) via a deed-in-lieu of foreclosure. CWCapital is the designated special servicer for the five commercial mortgage-backed securities trusts containing the $3 billion loan. The loan transferred to special servicing on Nov. 6, 2009, due to the sponsor's request for relief.
PCV/ST comprises 56 multi-story buildings, situated on 80 acres, and includes a total of 11,227 apartments. Tishman and BlackRock acquired the property with the intent of converting rent-stabilized units to market rents as tenants vacated the property; however, the conversion of units has since been determined to be illegal by the New York State Court of Appeals. In addition to the $3 billion securitized balance, there is an additional $1.5 billion of mezzanine debt held outside the trust.
Holders of the $1.5 billion in mezzanine debt, which is secured by ownership interest in the borrowing entity, may have remedies available to them, which Fitch says would delay or prevent a deed-in-lieu. Fitch expects that a deed-in-lieu agreement may be a prolonged process as these agreements are highly negotiated transfers between the borrower and lender.
Mark Edelstein, head of Morrison & Foerster LLP's real estate group, told the Wall Street Journal that the underlying question now becomes ‘who will take the keys on behalf of which level of debt.’
Fannie Mae and Freddie Mac are among the creditors with a claim, BusinessWeek reports, adding that mezzanine debt holders include a Winthrop Realty Trust affiliate and Gramercy Capital Corp.
In addition, the BusinessWeek report notes that an investment team led by WL Ross & Co. CEO Wilbur Ross may bid on the property.
"We are not really capital-constrained, so we can put up whatever is needed," Ross told BusinessWeek, adding, "We're prepared to go all the way."
SOURCES: Fitch Ratings, Wall Street Journal, BusinessWeek
