The crisis has not been kind to either the empire or the reputation of property developer Tishman Speyer.
In August, the Wall Street Journal reported a partnership led by Tishman had been hurt by the downturn in office property, and was in “default on debt tied to one of the largest office portfolios in the Washington area”:
…the partnership has violated lender’s covenants. Tishman also must find a way to refinance the debt when it comes due in 2011, something that analysts say could be a struggle.
And on Wednesday, the New York Times reported Jerry and Rob Speyer and partner BlackRock Realty were facing default on a Manhattan complex.
Former reporter Rob Speyer is the heir apparent to the Tishman Speyer throne, currently held by his father Jerry.
The Speyers and BlackRock paid $5.4bn for a “quiet middle-class redoubt near the East River”, hailed in 2006 as “the biggest American real estate deal of all time” (read: the top of the market). The property involved: 110 red brick apartment buildings at Stuyvesant Town and Peter Cooper Village.
As of September 2009, the father-son team and the asset manager have “nearly exhausted an additional $890 million set aside for apartment renovations, landscaping and interest payments.”
The Stuyvesant Town deal has also hurt Florida’s pension fund, which lost $250m on its equity stake, according to Bloomberg:
“We are carrying that investment at zero because the market softened dramatically,” Ash Williams, executive director of the State Board of Administration, which oversees $121.9 billion of pension and other assets, told a meeting in Tallahassee…
Nor are the rating agencies impressed, according to Bloomberg:
Fitch Ratings on Aug. 28 cut its ratings on $3 billion of mortgage-backed securities used by Tishman and Blackrock for the Cooper-Stuyvesant purchase because the partnership will deplete a $400 million reserve fund for debt service by the end of the year.
But office portfolios and East River Manhattan complexes have not been the only thorns in Tishman’s side. The developer was also part of the Archstone-Smith deal – a multibillion dollar REIT-acquisition undertaken with Lehman Brothers. Archstone, according to some analysts, was a major contributor to Lehman’s demise.
As Breaking Views put it last October (hyperlinks ours):
…the May 2007 deal was representative of the concentrated risks Lehman had taken in the property market. These in turn sparked questions from investors about the way Lehman valued many of its assets and whether the firm had sufficient capital against potential write-downs. Archstone-Smith soured early, and was a leading indicator of the problems to come in CRW and on the Street:
As the WSJ reported in August 2007 (emphasis FT Alphaville’s):
Wall Street’s deal-making machine hit a bump when a joint venture of Tishman Speyer Properties and Lehman Brothers Holdings Inc. said it would delay the completion of its $15.2 billion acquisition of apartment-owning titan Archstone-Smith Trust from later this month to early October.
…
While analysts said they expected a deal to go through, the delay brings its own risks. And it also suggests that the financiers of this deal, including Lehman, are looking for fresh financing sources to minimize their own risk.
Archstone-Smith presaged the fall of Lehman. What fresh hell does Stuyvesant Town portend?
Related links:
Commercial real estate watch – FT Alphaville
US commercial and residential real estate datapoints still dismal – FT Alphaville
If you’re not yet worried about CRE, what are you waiting on? – FT Alphaville
“CMBS is still a mess” – FT Alphaville