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Stuy owners are liened on

By
Paul Tharp
Published Jan. 14, 2010, 5:00 a.m. ET

Stuyvesant Town and Peter Cooper Village were pushed closer to foreclosure after a group of lenders demanded owners Tishman Speyer and BlackRock pay a missed payment within 10 days or else.

Holders of $1.5 billion in secondary liens on the historic 80-acre apartment complex have sent a formal letter to Tishman and BlackRock warning that failing to pay could lead the debtholders to launch a foreclosure action and possible seizure of the original $3 billion mortgage the two firms took against the property.

The threat comes just days after Tishman and BlackRock missed a $16.1 million payment due last Friday.

StuyTown’s fate has hung in the balance since late October, when New York’s highest court nixed the owners’ effort to bring the complex’s regulated rents to market rates. Tishman, which contributed $112 million to the $5.4 billion purchase price, was counting on being able to raise rents in order to pay off its loan.

A spokesman for Tishman had no comment on the foreclosure letter, first reported yesterday by REIT Newshound.

Any takeover action of the entire bundle of both primary and secondary liens would involve lengthy legal proceedings of up to six months. The secondary lienholders, who are demanding the foreclosure action, have a legal right to seek total seizure of all debts as well as hold a sale of the debts to others.

Wachovia Bank holds the $3 billion mortgage. Last month, the bank tried unsuccessfully to get federal assistance to help remedy its debt crisis on at least half of the loan amount. The complex’s current market value has plunged to just $1.8 billion from its prior $5.6 billion value, leaving it deeply under water.

The foreclosure letter was sent by a group of secondary lienholders or so-called mezzanine debt, led by Winthrop Realty Trust, which holds about $300 million of notes. Others include a German mortgage bank, Deutsche Genossenschafts-Hypothekenbank, Hartford Financial Group and Allied Irish Bank.

Complicating the dispute, StuyTown’s debts were packaged with other commercial properties’ debt into securities, which were sold in the market and are currently held by Fannie Mae and Freddie Mae.

Meanwhile, the landlords have burned through most of their $590 million in reserves for running the complex and servicing its debts, leaving just $5.64 million as of December.[email protected]