I always wondered what really went wrong with the $5.4 billion Stuyvesant Town/Peter Cooper Village deal done at the peak of the most recent real estate cycle. I’ve also been wondering what has happened to this project after that pivotal moment when BlackRock and Tishman Speyer finally decided to give back the keys to the lenders. Of course, the end of the story is still largely unwritten. CWCapital, the special servicer on the massive and complex loan package that financed the deal, is still laboring over how the final chapter ultimately unfolds.
I knew, of course, that a good portion of the project had been subject to rent controls of some kind. I knew breathtaking prices had been paid with a huge debt burden, all underwritten on a dizzying number of assumptions that just about all had to come true in order for the deal to pan out. But the actual tale — as portrayed by New York Times reporter Charles V. Bagli in his latest book, Other People’s Money — is absolutely spellbinding. (I couldn’t put it down, and read the whole thing on the flight back from Frankfurt last week. Thanks, Ted Leary, for sharing this one with me.)
Those of you in the business will recognize many of the lead players in the story — Larry Fink, Fred Lieblich, Dale Gruen, Robert Mertz, Bob and Jerry Speyer, Richard Mack, Lee Neibart, Jeff Barclay, Steve Furnary, Nori Gerardo Lietz, Ted Eliopoulos, Mike DiRè, and Chris Ailman, to name just a few.
But how the deal gets done, the forces driving all the players, and the rewards and penalties associated with the deal in the end point to the very essence of what went wrong with the entire financial system during these heady times and, perhaps, what still needs to be fixed. An absolute must-read.
The book also sheds some light on a critical problem that still need to be addressed in most of our major cities — particularly in light of the continued urbanization trend worldwide. And by that I mean the provision of affordable workforce housing for the middle classes, many of whom still work but no longer can afford to live in these cities.
Geoffrey Dohrmann is president and CEO of Institutional Real Estate, Inc.
