Well – the biggest foreclose in the history of foreclosures in not being called a foreclosure because the debtors have decided to hand the property over to the creditors without any legal battles. Wisely, I think. The Stuyvesant Town and Peter Cooper Village in Manhattan, which includes 110 buildings, 11,000 apartments and over 25,000 tenants was purchased in 2006 for the then-staggering sum of $5.4 billion by Tishman Speyer Properties and BlackRock Realty with the intention of evicting the rent-regulated tenants, turning the empty apartments into luxury developments and make a substantial fortune in the process.
Enter one credit crisis stage left, combine this with several lawsuits, including a class action suit against the original owners, Metlife by the sitting tenants and voila! – the biggest foreclosure in the history of foreclosures. Entertainingly – three of the biggest creditors include the Florida State Board of Administration, which had invested $250 million; and the 2 largest California government pension funds – the California Public Employees’ Retirement System and the California State Teachers Retirement System, with $600 million invested between them.
One has to question the ethics of three government-owned institutions being allowed to gamble money on the ability to evict legal tenants from a property and I would have to say in this case – it serves them right.
Exactly how much money they will lose is hard to say – for all I know, the Fed will just print another $5 billion and hand it over in paper sacks, but it is estimated that the complex is now worth less than $2 billion.
{ 4 comments… read them below or add one }
LOL, when I saw the New York Times article this morning, I knew that this post was coming!
I couldn’t agree with you more about the morality (or rather lack thereof) of the State funds trying to make money off the back of controlled rent tenants.
Kudos to the developpers who convinced so many institutionalized funds to risk so much money on such a giant and risky (even then) scheme.
If anything, they must be quite persuasive (not to mention broke by now).
LOL – Of course. I am not sure who is broke – because I imagine the legal fees were pretty high.
This is leg-breaking money – or worse.
I notice the trucker’s union and teamsters were not invested though. 
Hello Mark and all,
I stand corrected, Tishman and black rock will not go broke over this.
http://www.nytimes.com/2010/01/26/nyregion/26stuy.html?hp
They only invested about $ 112M each of their own money and the sheer size of Tishman allows them to survive, if only with a somewhat tarnished reputation.
The Church of England however, stands to lose $ 90M, which is even worse than pension funds. I don’t see how the church could justify investing in something so risky and potentially “immoral” for capital gain.
MetLife is the only clear winner, having sold at peak.
It is true that landlors in NYC have been spontaneously offering rent reduction in order to keep tenants whose leases were up for renewal, which is exactly the opposite of what the scheme was relying about.
I do not think that landlords offering rent reduction would happen in a million years here in France!!!
Now I think the worst fallout will be on the Manhattan real estate market that didn’t need this.
The glut of new property with negative equity in the heart of Manhattan that represents Stu and Cooper village should create a long term overall decrease in value for medium priced Manhattan appartments.
O well, it’s still better than Spain, Vegas or Dubai…
The Church of England had a hand in this? Wow – Now I am not impressed – I had not heard that. Still – as you say – it is not as bad as Dubai. I am still waiting for the fallout from Dubai. The French, German, British and US banks all deny having major interests in Dubai. So – exactly who lent them the money?