UNITED STATES- The Stuyvesant Town/Peter Cooper Village apartment complex in New York, which is backed financially by pension funds, is going through some financial stress.
Credit ratings agency Standard & Poor's has dropped ratings on 22 classes of bonds which are part of the $3bn (€2.19bn) portion of debt on that property.
The ratings firm made its move in part because the value of the property has dropped by 10% since the property was purchased in November 2006.
Moreover. The property's troubled situation is also reflected on the negative investment return of -13.1% the California State Teachers Retirement System (CalSTRS) saw on this investment in the second quarter of this year.
The pension fund made a $100m commitment to the purchase of the Peter Cooper Village property - owned through a 50/50 joint venture between BlackRock Realty and Tishman Speyer - in May 2007.
California Public Employees Retirement System (CalPERS) has even a bigger investment in Peter Cooper Village as it made a $500m commitment to the complex and had been advised at the time of its commitment it would see a 13.5% net IRR yield over a seven-year holding period.
One of the issues with the apartment complex is that the owners have run into more difficulty than expected with the conversion of the apartments from rent controlled units to a market rate situation.
BlackRock and Tishman Speyer paid $5.4bn for the property in 2006 but a total of $4.4bn in debt was placed on the property at that time, having syndicated investments from major pension funds and other sources of capital to fund the equity for the transaction.
Peter Cooper Village has 11,232 apartment units covering 80 acres in the lower side of Manhattan, New York City. The asset also has 117,000 s.f. (10.8696m2) of commercial space.
At the time the asset was acquired, the property was 98% occupied.