Heat’s On Tishman

Pressure continues to build on Tishman Speyer Chairman Jerry Speyer to turn around the iconic apartment complexes Peter Cooper Village and Stuyvesant Town.

Moody’s Investors Service slapped lower ratings on several bonds tied to the 80.4 acre plot of land last week.

The rating agency said it’s concerned Tishman Speyer is having trouble converting the largely rent-stabilized complex into a hot spot for high-income earners willing to pay market-rate rents.

The pace of converting rent-stabilized apartments to market rents is slower than expected “and operating costs are higher than expected,” said Mike Gerdes with Moody’s.

“And as a result, there is a significant amount of downgrade pressure on bonds from these types of loans,” he added.

Even two years ago, at the height of the real-estate boom, Tishman Speyer raised eyebrows with the $5.6 billion deal to buy the massive apartment complex that extends from First Avenue eastward, between 14th and 23rd streets.

Critics called the price tag too aggressive.

Now that the economy has turned down, and the credit markets have ground to a halt, that sentiment is being tested.

As reported by The Post last month, Tishman Speyer has blown through $450 million of its $650 million in cash reserves, which it set aside two years ago to pay for things like renovations and interest on the massive $3 billion mortgage loan.

At this pace, the reserves “will be depleted by the end of the third quarter of 2009,” Moody’s warned in a note accompanying the downgrade.

Moody’s souring stance follows a similar move by Standard & Poor’s, which also moved to downgrade debt tied to Stuy Town loans.

In addition to criticizing the company’s cash management, the rating agency also blasted the high price tag that Tishman paid for the property, saying the property’s value “has declined 10 percent since issuance.”

In other words, if Tishman moved to sell today, it might not get what it paid.

Tishman is expected to ask its deal partners, including money manager BlackRock Inc., to pony up more cash to pump up reserves.

And although Tishman has $200 million left in reserve, the company could also wait until next year when lending conditions might improve, said one expert.

“At that time they will have to figure out what they want to do with the loan,” this person said, suggesting Tishman’s other options in the future will be to refinance if conditions allow or – in the worst-case scenario – foreclose.

“We have great confidence in this asset and we fully anticipate our partnership will fund more capital into the project, as necessary,” Tishman officials said in a statement.



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