The Tishman Speyer and BlackRock Realty joint venture that acquired the now-embattled Stuyvesant Town/Peter Cooper Village property in New York for $5.6 billion in 2006 didn’t apply for $1.5 billion in TALF (Term Asset-Backed Securities Loan Facility) support for the property from the New York Federal Reserve, but somebody did. Responding to a Christmas Day report in the New York Post that the Stuy Town owners applied for—and were denied—the $1.5 billion in TALF funds from the Fed, Tishman Speyer released a statement this week refuting any involvement in the application for a federal bailout.
“The owners of Stuyvesant Town and Peter Cooper Village, a joint venture led by Tishman Speyer and BlackRock, never submitted an application to the Federal Reserve Bank for funding through the Term Asset-Backed Securities Loan Facility,” the statement reads. “Recently published media reports stating otherwise are erroneous.”
New York Federal Reserve Bank media relations coordinator David Girardin tells Multifamily Executive that the Fed does not comment on either specific deals or borrowers with regards to any of the Federal Reserve lending facilities, and that the only information made public following a TALF Legacy CMBS subscription date is a list of accepted and rejected CUSIP (Committee on Uniform Security Identification Procedures) numbers, a set of unique, nine-character alphanumeric identifiers used on all North American securities, including commercial mortgage-backed securities (CMBS).
According to the Fed’s Dec. 14 TALF archive, of the 58 TALF applications processed, 55 were approved while three were rejected for either a “failure to meet the explicit requirements specified for legacy CMBS in the TALF program terms and conditions,” or for not passing the New York Fed’s stress test of whether or not the value of the legacy CMBS exceeds the requested loan amount.
A review of the three rejected CUSIPs in the December report indicates that at least one—92978QAC1—applies specifically to the Stuyvesant Town Peter Cooper deal, according to published reports from the Financial Times and a CUSIP search service from Standard and Poors, which identifies the CUSIP as commercial mortgage pass-through certificates originated by Wachovia Bank Commercial Mortgage Trust. Of the original $5.6 billion Stuy Town price tag, $3 billion in securitized debt was originated by Wachovia, portions of which were ultimately spread among five different CMBS pools. Representatives for Wells Fargo, which purchased Wachovia Corp last year, did not return requests for clarification.
No matter what entity applied for TALF support for Stuy Town, the rejection of the application should come as little surprise given the Fed’s qualifying conditions for approval. “TALF is a replacement through the New York Fed for the reverse repurchase agreement market and is intended for AAA securities,” says Brian Olasov, a TALF expert and managing director of Atlanta-based law firm McKenna Long & Aldridge. “The Peter Cooper/Stuyvesant Town CMBS are not AAA securities anymore. They originally were, but they have not been for sometime, and regardless, neither the TARP nor TALF programs have ended up being a great panacea for distressed multifamily assets.”
The Tishman Speyer/BlackRock JV, meanwhile, resumed leasing vacant units this week after attorneys for the ownership group and the Stuy Town residents hammered out an agreement last month returning some 4,400 units to rent control and clearing the way for resuming leasing activity. “As of Jan. 4, we will begin leasing approximately 100 vacant apartments to those who contacted us to be placed on a waiting list,” Tishman Speyer announced in a statement. “A small number of apartments, with interim rents substantially below market, are being offered to current rent-stabilized residents of the community, with the remaining apartments being offered to all others on the waiting list. We are contacting those who joined the waiting list first and will move down the list in chronological order until each available unit is leased.”
According to the statement, the interim rents on the new lease-up apartments have been determined using the same formula that was used to determine interim rents for existing residents pursuant to the rent control agreement, affording each new resident the rights of automatic lease renewal and the succession rights available to rent-stabilized residents during the term of the interim agreement and any extension of it.
While any rent is better than none when it comes to boosting NOI, the long-term impact of stabilizing what vacant portions of the community remain is expected to be negligible. “The rent helps out, but when someone has defaulted on commercial real estate, it is unlikely the lender is ever going to be made whole,” says Bill Hoffman, president and CEO of San Diego-based Trigild, a receivership/trustee, management, and disposition firm operating approximately $3.5 billion in mostly multifamily receivership assets. “In this kind of market, more often than not the property is worth less than the debt, so there is no real recovery for the lender, and once a receiver appointed, the asset is not going back to the borrower. We’ve done about 1,500 to 2,000 of these, and the borrower is just too far gone by the time they start missing mortgage payments.”
Hoffman says it remains uncertain what entity involved in the Stuyvesant Town/Peter Cooper Village deal might have applied for TALF funds, but offers that it might signify that the special servicer has identified a purchaser for the property. “I don’t think either the borrower or the lender would be someone seeking TALF relief. That is typically going to come from a prospective buyer,” he says. Representatives for Needham, Mass.-based CWCapital—appointed special servicer of the $3 billion Stuy Town mortgage last November—did not return requests for comment or clarification.
Incidentally, the $1.5 billion sought from the New York Federal Reserves is identical to the amount provided in the initial 2006 deal by mezzanine lenders, who were wiped out in the transaction.