Tuesday, January 26, 2010

Stuy Town Blues Part 2

Last August I blogged about the growing debacle of Stuyvesant Town and Peter Cooper Village -- the housing developments on the Lower East Side that were sold to the real estate company Tishman Speyer in 2006.

This was the single biggest real estate deal in history, with Tishman Speyer paying over $5.4 billion for the 80 acre property.
Their goal was to shove out all of the middle class and rent-controlled tenants and replace them with rich NYU students and wealthier residents paying market rents. In order to make money on the deal, the new owners were going to have to evict more than 30% of the current residents and charge the new tenants close to $4000 a month. Needless to say, the real estate and economic bust of the last couple years blew that plan to hell. Plus the longtime tenents were rebelling at being evicted.

Tishman Speyer, apparently, was surprised by this. Wow.

Now the deal has gone bad -- really bad. Tishman Speyer is officially in default and they've turned over control of the properties to the creditors. Stuy Town and Peter Cooper now have a market value of less than $2 billion so this is a huge, huge financial disaster. Several investors, including some pension funds, have lost hundreds of millions.

It's a tale of greed and stupidity run amok. The smartest guys in the room proved to be the biggest morons of all. What a mess.

If there's any silver lining in this situation, it's that hopefully Stuyvesant Town and Peter Cooper residents will stop being evicted and remain in their homes. Hopefully they'll come out the winners.

And that will be a small victory for middle class NYC.

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