Ratings Intact as Stuy Town Switches Hands
[Update 1: Adds details on the asset's recent under-performance.] Negative rating actions are not likely to follow the transfer of Manhattan's Stuyvesant Town/Peter Cooper Village [pictured above] back to the lender, Fitch Ratings said late Monday. The credit-rating agency indicated its analysis of the asset - valued at an estimated $1.8bn - would not change under any near-term transfer of ownership away from Tishman Speyer Properties and BlackRock Realty. The properties include 56 multi-story buildings spanning 80 acres and 11,227 apartments. News of the intended ownership transfer comes just weeks after Tishman and BlackRock said they would miss a scheduled repayment to senior lenders on a bond used to finance debt from the joint purchase. It marks the second-largest commercial mortgage default after the Extended Stay Hotel default pushed commercial mortgage-backed securities (CMBS) delinquencies up 85 bps in November. Tishman and BlackRock over the weekend confirmed reports of an intended transfer of operations back to the lenders to avoid bankruptcy. The firms for weeks tried to negotiate a restructuring of debt and ownership. "It was our hope in these discussions that our partnership would remain as part of the long-term ownership,” a spokesperson told HousingWire. “Over the last few days, however, it has become clear to us through this process that the only viable alternative to bankruptcy would be to transfer control and operation of the property, in an orderly manner, to the lenders and their representatives.” The spokesperson added: “Tishman Speyer would not consider a long-term management contract to continue operating the property that does not involve ownership. Without a restructuring that would keep our ownership group as part of the equity, we felt it best that the new owners install a new management team.” Tishman and BlackRock, as sponsors for the $3bn securitized loan, would transfer control of the property back to CWCapital Asset Management through a deed-in-lieu (DIL) of foreclosure, Fitch noted. CWCapital is the special servicer on the five CMBS trusts containing the $3bn loan. Fitch said holders of $1.5bn of mezzanine debt, which is secured by ownership interest in the borrowing entity, may have available remedies that could delay or prevent a DIL. Prior to the transfer of the $3bn loan to special servicing in November 2009, Fitch downgraded three of the four transactions containing portions of the loan. The action came as the result of continued under-performance and an adverse New York Court of Appeals ruling. Actions-to-date recognize only half of Fitch's expected losses on the loan. Multi-family CMBS has seen the effect of the Stuy Town-related fallout in the past six months. Fitch indicated in September 2009 the exposure to Stuy Town debt presented "concern" in US CMBS. Moody's Investors Service also said in October it would watch 85 CMBS classes after the New York court ruling in favor of Stuy Town/Peter Cooper tenants presented a negative credit event on the debt. As HousingWire previously reported, credit-rating agency Realpoint projected the delinquency rate on the overall unpaid balance of CMBS may grow as much as 31-58% by mid-2010, factoring in the potential default of the Stuy Town loan. Despite the upset in near-term ownership of the properties, tenants need not worry, according to HousingWire's sources. “This is a rent regulation town, so you can’t evict,” said an urban researcher at New York University who asked to remain anonymous. “Even if the property is declared bankrupt, they’ll be fine.” Write to Diana Golobay.