The ‘Poster Child of Excess’

NEW YORK CITY—The top three “Worst Deals” of the past 10 years were, according to respondents of a Globest.com survey, all multi-billion dollar sales transactions on properties in Manhattan.

Running away with the dubious victory in this category is the Tishman Speyer/Blackrock joint venture purchase of Stuyvesant Town-Peter Cooper Village in 2006 for $5.4 billion. Tishman Speyer/Blackrock gave up control of the property earlier this year after missing debt payments. The survey of real estate executives was conducted as part of the 10^th anniversary of commercial real estate website Globest.com.

The latest news on the ill-fated deal is that several scheduled auctions on the Stuyvesant Town-Peter Cooper Village property were postponed, including several dates last month. According to Globest.com, CWCapital Asset Management is now focused on “ensuring a stable transition of the property and maximizing recovery of the $3.7 billion owed to the trust which it represents.”

Late last month CWCAM reached an agreement with PSW NYC LLC, a joint venture of Pershing Square Capital Management and Winthrop Realty Trust, whereby a CWCAM affiliate has acquired the junior debt previously controlled by PSW. The affiliate paid $45 million, the same amount that PSW had put toward acquiring $300 million of mezzanine debt at a discount, thus settling any remaining litigation between the two sides. The agreement paves the way for a co-op conversion or any number of other options on the 11,227-unit complex.

CWCAM has recently appointed Rose Associates as property manager for Stuyvesant Town. Rose had been working since last February as a transition consultant for PCV/ST LLP, the group which bought the sprawling rental complex for $5.4 billion in 2006 and defaulted on $3 billion in debt at the beginning of this year. Prior to selling the sprawling apartment complex, original owner MetLife had also hired Rose as a consultant.

The Tishman Speyer/Blackrock deal came in at number one with 63% of respondents voting for it. Coming in at number two was Macklowe Properties’ $1.4-billion purchase of the General Motors Building in New York City in 2003 with 36% of the vote, followed by Macklowe’s approximately $7-billion acquisition of a portfolio of Manhattan properties owned by EOP in 2007, which finished with 33% of the vote.

Survey respondents were not shy with their reactions to these mega transactions that have since turned sour. Of Tishman Speyer/Blackrock’s purchase of Stuyvesant Town-Peter Cooper Village, one respondent stated the deal was an “example of forgetting about fundamentals and putting money on pro-formas.” Another real estate executive, who selected the third place finisher—Macklowe’s purchase of EOP’s Manhattan portfolio—as the top “Worst Deal,” stated it was “the poster child of excess.”

Other finishers in the top 10 were: Broadway Partners’ reported $1.3-billion purchase of the John Hancock Tower in Boston in 2006 (No. 4); General Growth Properties’ Rouse Co. acquisition (No. 5); Treasure Island Hotel & Casino deal in Las Vegas (No. 6); the Resorts Casino Hotel deal in Atlantic City (No. 7); Boston Properties’ purchase of the GM Building in New York City (No. 8); the Canyon Ranch deal in Miami (No. 9) and the Watergate Hotel deal in Washington D.C. (No. 10).

Tomorrow: Look for the results of the Globest.com survey "Savvy Politicos."