Jerry and Rob Speyer’s record-setting $5.4 billion purchase of Stuyvesant Town and Cooper Village has become a money vacuum, as the high cost of debt service and relatively low rent income is expected to eat away a remaining $127.7 million in cash reserves in about six months.
The new figures come from Fitch Ratings, which today released an analysis on debt associated with the property.
When the reserve is completely eroded, Tishman Speyer, who partnered with Blackrock in the fall 2006 purchase of the 11,227-apartment complex, would need to put in more cash or potentially face default on its loans.
The situation faced by the Speyers is not all that unlike the mortgage crisis affecting smaller homeowners nationwide, as lenders gave billions to the powerful landlords who set what are now viewed as unreasonably optimistic expectations on rent increases. Key to the Speyers’ strategy has also been vacating rent-stabilized apartments and charging market-rate rents, though destabilization has not happened as quickly as once hoped.
The Fitch report said that 2009 should be no better than 2008:
Property cash flow is not expected improve from 2008 based on the borrowers restated budget for 2009. As a result, according to Fitch’s calculations and the 2009 budget, the borrower has approximately six months of reserves remaining to cover the trust portion of the total debt on the property.
The Speyers have said they are willing to put more cash in the deal if necessary, but just how much the notoriously tight-lipped family has available to contribute is unclear.