Iconic apartment complexes Peter Cooper Village and Stuyvesant Town are costing Tishman Speyer Chairman Jerry Speyer a lot more than he expected.
As predicted by The Post last month, Tishman and its partners are blowing through a pot of cash set aside two years ago to help the project start making money after the company paid billions for the massive apartment complex.
As a result, rating agency Standard & Poor’s put three debt deals tied to the project’s massive $3 billion mortgage on “watch” for a possible downgrade unless the developer gets a sudden cash infusion.
The implications of a downgrade are unclear, but it could trigger covenants on the Stuy Town loan, which could increase Tishman’s borrowing costs among other problems, people say.
Tishman is expected to ask its deal partners, including bond manager BlackRock, to pony up more cash in coming weeks to deter S&P from moving forward with a downgrade, people said.
In a statement, a spokesman for Tishman Speyer said, “We have great confidence in this asset and we fully anticipate our partnership will fund more capital into the project, as necessary.”
Tishman Speyer plunked down a whopping $5.4 billion for the Manhattan apartment complexes in 2006 with an eye toward converting rent-stabilized complex into a thriving hot spot for higher-income, market-rate renters – something its previous owner, MetLife, failed to accomplish.
This was before the housing bust, and even then the magnitude of the project raised eyebrows.
Since that time, some of those concerns have panned out. Tishman Speyer has faced mounting legal bills associated with flipping rent-stabilized units to market rent. And it has been burning through cash on renovations, including planting 10,000 trees.
The cash reserve – a whopping $650 million – quelled nerves and had been touted as the cushion supporting the project until it could generate its own cash.
Cobbled together at the start of the deal, the reserve covers expenses such as renovations and interest payments.
Now, just two years later, Tishman and partners are left with just $200 million in the reserve, according to S&P. Of $400 million set aside to pay interest on the loan, for example, just $165.7 million remains, according to the rating agency.
“The current reserve balances are significantly below Standard & Poor’s expectations, and our preliminary analysis indicates [they]. . .[will] be completely depleted” before the 80.4-acre piece of real estate earns enough to pay off its debt, S&P said in the report.
This stumble increases the risk the loan will be sent to an agency that will be paid to watch over it and make sure payments made on time, S&P said.