AIB gets chunk of Big Apple after $4.4bn default
Published 26/01/2010 | 05:00
ALLIED Irish Banks is set to become a reluctant and partial owner of New York's biggest apartment block after the collapse of one of the largest property deals in US history.
Banks including AIB will take over the apartment complex, which is home to about 25,000 people, after two major US property developers announced yesterday that they are walking away from the Stuyvesant Town and Peter Cooper Village.
Developers Tishman Speyer and co-developer BlackRock defaulted earlier this month on the $4.4bn (€3.1bn) of debt used to finance the purchase of the 11,200-apartment property.
"We make this decision as we feel a battle over the property or a contested bankruptcy proceeding is not in the long-term interest of the property, its residents, our partnership or the city," Tishman and BlackRock said in an emailed statement yesterday.
AIB is one of at least four banks jointly owed $1.5bn in secondary liens or so-called mezzanine debt. The banks, led by Winthrop Realty Trust, which holds about $300m of notes, wrote to Tishman Speyer warning that they would pursue "rights and remedies" including a forced sale.
AIB's loans, thought to be less than €50m, were granted by AIB Capital Market's US division which was, at that time, headed by AIB's current managing director Colm Doherty.
The other lenders include Hamburg-based mortgage lender Deutsche Genossenschafts-Hypothekenbank, US-based Hartford Financial Services Group and Singapore Investment Corp.
Singapore Investment Corp, the city state's equivalent to our National Pension Reserve Fund, booked losses on its investment earlier this month. The Church of England has written off its £40m investment.
The Singapore fund held $100m of equity and $575m in mezzanine debt. The development was bought with AIB's help back in 2006 just as the US property market was peaking.
The $5.4bn property is now valued at less than $2bn. AIB, which is in the process of transferring bad property loans to the National Asset Management Agency, declined to make any comment about its involvement in the New York deal.
The New York-based investors bought the 80-acre development with plans to remodel and raise the cost of rent-regulated units to market rates. Those plans hit a wall in October when the New York Court of Appeals in Albany ruled that increases on about 4,350 apartments were illegal.
Tishman only invested about $56m of its own money into the venture and that without a significant loan modification it would make sense to walk away from the properties."They never should have been able to borrow on those cash flows and expected future values," said Deutsche Bank analyst Richard Parkus.