From a Doorman to Dorm Rooms

The near default by developers of a housing complex in Manhattan’s Harlem neighborhood is making some investors wonder about the fate of a similar — but much bigger — residential project in New York City.

Spooked about a potential default by the owners of the rent-controlled Riverton Apartments in Harlem, investors are focusing on a $5.4 billion deal — one of the biggest real-estate transactions ever — Tishman Speyer Properties struck in 2006 that also depends on the conversion of regulated rentals to market rentals.

Tishman Speyer needs to make about $16.6 million in monthly interest payments on the $3 billion mortgage it used to buy the property, while the sprawling complex — called Peter Cooper Village and Stuyvesant Town — in midtown Manhattan, currently is generating some $9 million in income every month, according to Citigroup Inc. research, The $7.6 million debt-service shortfall is being covered by an “interest reserve” that was established upon the closing of the deal. The reserve, totaling $400 million at closing, can service the debt until 2011 or so.

Darrell Wheeler, global head of securitized strategy at Citigroup, noted that the cash flow from the Tishman complex is “gradually improving.” despite the risks associated with rental conversions.



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