Tishman Speyer Properties is in a pickle. After making the biggest real estate deal ever when it purchased Peter Cooper Village and Stuyvesant Town in Manhattan, the company took out bonds to cover the cost of 5.4 billion dollars.

However in the meantime the property values have dropped 10 percent on the two landmark communities and efforts to gentrify the communities and reduce the amount of rent controlled apartments faces tough community opposition.

The net result, less potential earnings and the companies reserve funds have been being spent forcing Standard & Poor to cut the bond ratings.

So now Tishman Speyer is caught in a pickle. They are facing higher costs on their bonds and have an impaired cash position so investments in Peter Cooper and Stuy Town will have to be cut back.

Was this New York’s greatest real estate boondoggle? MetLife is looking very smart right now getting this price and getting out of a Manhattan real estate market that is heading south.

And there was an immediate reaction in the real estate world: Tishman Speyer Properties, which controls Rockefeller Center, the Chrysler Building and scores of other properties, abruptly pulled out of a deal to buy the former Mobil Building, a 1.6 million-square-foot tower on 42nd Street, near Grand Central Terminal, for $400 million, two executives involved in the transaction said.

Commercial properties are not the only ones facing problems. On Friday, Standard & Poor’s dropped its rating on the bonds used in Tishman’s $5.4 billion purchase of the Stuyvesant Town and Peter Cooper Village apartment complexes in 2006, the biggest real estate deal in modern history. Standard & Poor’s said it cut the rating, in part, because of an estimated 10 percent decline in the properties’ value and the rapid depletion of reserve funds.

The rating reduction shows the growing nervousness of lenders and investors about such deals, which have often involved aggressive — critics say unrealistic — projections of future income. via  NYTimes.com.

Related posts:

1. The Peter Cooper – Stuyvesant Town Blunder Soon To Be A Bankruptcy?
2. Calpers May Fire BlackRock as an Advisor After StuyTown Debacle
3. BlackRock Still Profitable Even With Poor Commercial Market
4. 90 Billion In Commercial Foreclosures – REITS and Vultures Racing In
5. Poor Treasury Sales May Indicate Mortgage Rates Going Up