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Manhattan’s Stuy Town Project Heads Back to Lenders

Real estate developer ""Tishman Speyer"":http://www.tishmanspeyer.com and money manager ""BlackRock, Inc."":http://www.blackrock.com said Monday that they are returning the Stuyvesant Town/Peter Cooper Village complexes to creditors.

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The decision comes just weeks after Tishman Speyer and BlackRock withheld their $16.1 million payment from senior mezzanine debt holders. At the time, the two companies said it was a strategic move to try and force the special servicer to restructure the debt.

""We have spent the last few weeks negotiating in good faith to restructure the debt and ownership of Stuyvesant Town/Peter Cooper Village,"" the venture partners said in a statement Monday. ""Over the last few days, however, it has become clear to us through this process that the only viable alternative to bankruptcy would be to transfer control and operation of the property, in an orderly manner, to the lenders and their representatives.""

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The ""Stuyvesant Town/Peter Cooper project"":http://www.stuytown.com overlooking the East River in Manhattan was once hailed as the biggest residential real estate deal ever. Tishman and BlackRock purchased the complexes from MetLife in 2006 at the height of the market for $5.4 billion.

But _Forbes_ explained that the venture ran into trouble after the value of the housing project, where many of the apartments are rent-stabilized, plummeted in 2008 and 2009. Last year, Tishman and BlackRock tried to raise the rent on some units, but in October, the New York Supreme Court ruled in favor of the tenants and said the rent increases were illegal.

Lenders for the project include the California Public Employees' Retirement System, the Church of England, and the Florida State Board of Administration.

_Forbes_ says there is a possibility the 11,000-apartment, 80-acre property will fall into foreclosure.

The decision by Tishman and BlackRock to forfeit the largest apartment complex in Manhattan is the latest in a string of so-called ""strategic defaults"" by investors. Last month, ""Morgan Stanley"":http://blogs.wsj.com/developments/2009/12/17/walk-away-news-morgan-stanley-gives-properties-back-to-the-lender/ returned five San Francisco office buildings to its lender, two years after acquiring the real estate, in order to ""get out of the loan obligation,"" the company said. In early January, ""Sunstone Hotel Investors Inc."":http://online.wsj.com/article/SB10001424052748704130904574644642387557618.html stopped making payments on a $246 million mortgage in order to return 11 U.S. hotels to Massachusetts Mutual Life Insurance Co.

According to a _Bloomberg_ report, New York developer Richard LeFrak and partners including investor Wilbur Ross have expressed interest in managing Stuyvesant Town/Peter Cooper Village and may also invest in the property.

About Author: Carrie Bay

Carrie Bay is a freelance writer for DS News and its sister publication MReport. She served as online editor for DSNews.com from 2008 through 2011. Prior to joining DS News and the Five Star organization, she managed public relations, marketing, and media relations initiatives for several B2B companies in the financial services, technology, and telecommunications industries. She also wrote for retail and nonprofit organizations upon graduating from Texas A&M University with degrees in journalism and English.
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