THE New York apartment complex that proved an ill-fated investment for the Government of Singapore Investment Corporation (GIC) may face foreclosure after its owners defaulted on a debt payment last Friday.
Some of the debt holders are now demanding payment within 10 days from the owners of Stuyvesant Town and Peter Cooper Village in Manhattan – the first step towards foreclosure, according to a Bloomberg report yesterday.
GIC reportedly holds US$575 million (S$798 million) in mezzanine debt backed by the property and a further US$100 million in equity.
On Monday, the state investment company said it had ‘recognised the losses’ on its investment last year. GIC is also believed to have written down the value of the loan.
If a property is foreclosed and sold, senior debt holders – like the bank that issued the main mortgage for the property – have the right to be repaid first from the cash, followed by mezzanine debt holders and then equity owners.
When asked to confirm the latest developments and how they would affect GIC, a spokesman told The Straits Times: ‘We have nothing to add beyond our earlier response.’
Bloomberg’s report yesterday said a group of debt holders, led by Winthrop Realty Trust – which holds about US$300 million in senior mezzanine debt – issued a letter saying they intend to pursue ‘rights and remedies’ including a foreclosure sale.
The parties could act within 90 to 180 days, said two people familiar with the matter, according to Bloomberg.
The owners of the 11,200-unit apartment complex, an American venture led by property firm Tishman Speyer Properties and asset management firm Blackrock, missed a US$16.1 million payment on development last week.
They bought the property in 2006, at the height of the United States housing boom, for US$5.4 billion. To pay for this, they took out massive loans: a US$3 billion mortgage from Wachovia bank and US$1.4 billion in mezzanine debt from various companies, including GIC.
A former banker told The Straits Times yesterday that after a company has defaulted on its debt, the bank or debt holders can call an event of default and demand payment. If they do not receive payment, they can go to court and serve a writ to get summary judgment, after which the court will order payment.
But if there is still no payment forthcoming, then the lenders can apply to the court for foreclosure, said the ex-banker, who asked not to be named because he has retired.
He added that, usually, the main lenders, or senior debt holders, will have lent about 60 per cent of the property’s value. After they get that back following the foreclosure, and assuming the value of the property has fallen quite significantly by about 30 per cent to 40 per cent, there is not much left for mezzanine debt holders and equity owners.
Bloomberg’s report said Fitch Ratings valued the Stuyvesant Town and Peter Cooper Village at US$1.8 billion in October last year – a third of the original purchase price and just over half of the mortgage taken from Wachovia.
Source: Straits Times, 14 Jan 2010
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