Stuyvesant Town Debt May Be Cut If Rent Law Changes

Tishman Speyer Properties LP and BlackRock Realty’s $3 billion in loans used to buy Manhattan’s largest apartment complex may be downgraded by Fitch Ratings if the New York state legislature changes rent regulation laws.

A measure pending at the state capitol calls for delaying price increases on rent-stabilized apartments. That would hamper Tishman Speyer’s ability to pay investors who bought debt on the Stuyvesant Town-Peter Cooper Village complex, Fitch said.

Landlords can’t currently take an apartment out of the city’s rent-stabilization program until small annual rent increases push monthly rates higher than $2,000. The new legislation would raise the destabilization threshold to $2,700. Tishman bought Stuyvesant Town planning to convert its rent- stabilized apartments to market price.

“Passage of this legislation would make it far more difficult for property owners in question to achieve their business plans,” Fitch Managing Director Eric Rothfeld said in a statement today on Business Wire. “The increased threshold could delay conversion of stabilized units to market rents for approximately eight years.”

$5.4 Billion Purchase

Tishman Speyer spokesman Robert Lawson said company Managing Director Rob Speyer declined to comment.

Tishman Speyer and Blackrock bought the 80-acre, 11,200-unit Stuyvesant Town-Peter Cooper complex for $5.4 billion in 2006 using $3 billion in loans. The loans were bundled with other commercial mortgages and sold in five debt offerings, according to Bloomberg data.

The companies banked on converting 1,600 rent stabilized units to market price. That proved more costly than expected, and as of late last year 38 percent fewer apartments had been converted than predicted, according to a Standard & Poor’s report in September.

In addition to raising the rent threshold to take apartments out of the stabilization program, legislation pending in the New York state Capitol also would raise income limits for rent stabilized tenants to $250,000 from the current $175,000.

Seven other loans backed by revenue from apartment complexes are also at risk of downgrade should the new rent proposals become law, Fitch said.

They include: A $375 million loan secured by the Belnord, a luxury apartment building on the Upper West Side and a $170 million loan backed by the Parkoff Eastside Portfolio, consisting of six Upper East Side apartment buildings.



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