ALLIED IRISH Bank is one of a group of investors exposed to millions of dollars of debt after the owners of one of America’s best-known property developments handed over control of the property to creditors.
The owners of the 80-acre apartment complex in east Manhattan known as Stuyvesant Town-Peter Cooper Village said yesterday they will transfer the property to lenders after efforts to restructure debt failed.
The move comes after a group of debt holders led by Winthrop Realty Trust – which includes AIB, German bank Deutsche Genossenschafts-Hypothekenbank and US financial services company Hartford Financial Services – sent a letter to the owners this month demanding payment and threatening foreclosure after they missed a $16.1 million (€11.4 million) debt payment on January 8th.
It is understood the group of creditors of which AIB is a part holds about $300 million in senior mezzanine debt. AIB declined to comment on the bank’s involvement in the case. While AIB has a retail presence in the US through its 23.5 per cent stake in MT Bank, it also offers investment services in the US through its AIB Capital Markets division.
The development is one of the largest, most iconic housing complexes in New York. Built in the 1940s for second World War veterans by insurance company Metropolitan Life with the help of government aid, the objective was to provide affordable housing to workers.
In 2006, Metropolitan sold the complex to real estate company Tishman Speyer Properties and asset management firm BlackRock for a record $5.4 billion.
Last October, Fitch Ratings valued the property – which comprises over 11,000 apartments – at $1.8 billion. Tishman Speyer and BlackRock financed the purchase through a $3 billion mortgage from Wachovia Bank and $1.4 billion of mezzanine debt.
Tishman and BlackRock also contributed $112 million each to the price. Much of the debt was repackaged and sold on as securities, most of which are now held by nationalised US mortgage lenders Fannie Mae and Freddie Mac.
Tishman and BlackRock intended to fund the debt by refurbishing apartments and raising rents, but their plans were curbed by a falling rental market and the city’s strong rent protection laws. Last October, the New York Court of Appeals ruled that rent increases on some of the apartments in the complex were illegal.
Tishman Speyer is one of the largest commercial real estate companies in the US. Among the properties it owns are the Rockefeller Centre and the Chrysler building in New York.
