Sunday, January 25, 2009

Peter Cooper Village Stuyvesant Town - Fitch's View

The rating agencies and journalists/bloggers continue to fail to do their homework. Peter Cooper Village/Stuyvesant Town (PCV/ST) was bought at the height of the market with more leverage than your average deal, and the likelihood of it failing is above 50% in my opinion. However, I have yet to see an article that correctly identifies the winners, losers, and timeline.

If it fails, the losers are:
  • Equity Investors (BlackRock and TishSpey)
  • $1.5 billion of Mezz debt holders - especially the bottom $200 million
Winners/Unaffected Parties:
  • Tenants - what is done is done, to this point. The tenants want the investors out. Heck, the tenants bid on actually buying the building (for more than the current senior note value, mind you).
  • Senior Mortgage holders (4 CMBS trusts) - The proforma appraisal had an LTV of 56%. Assuming that is wrong, you still have a lot wiggle room. I wouldn't want to own the B piece necessarily, but at the AAA level you are in an OK position - you have a back bid from the tenant group, even the misguided rating agencies (Moody's and Fitch) agree the servicer is likely to advance in full, and you have a slew of mezz lenders who are likely to take a stab at operating the property at a loss for some period of time.
  • The outstanding debt service reserve, according to the Fitch report being referenced, as of 1/15/09 is $127.5 million. That is consistent with my September 2008 analysis, here, indicating that they are drawing $10 - 11 million a month from the reserve. Again, $127.5, divided by $11 million, I get about 11.5 months of reserve remaining - I can't figure out where Fitch is getting their 6 month estimate, but I'm sure there is something I am missing.


Condo Makati said...

Wow! That’s a big amount of money lost for the investor. We have to do our surveying personally before investing into something, to avoid such case like this. Lesson learned to everyone.

boracay island Philippines said...

Thanks for the overall view. It’s a really big lost for the investor, in this world of marketing, selling and investing, there is always risk involve. You have to be wise and careful enough with your feasibility study before investing on something. Don not relies on bloggers survey and stuff because sometimes miscalculated sometimes happens.