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ZeroHedge: The “Peak Bubble” Deal Is Back: Stuy Town To Be Sold Again

Be prepared for the next great transfer of wealth. Buy physical silver and storable food.

Stuyvesant Town, Manhattan's largest 'rental community', is back on the block as Bloomberg reports Fortress is preparing a $4.7bn bid for the apartmenet complex whose last 'failed' deal came to epitomize the lax lending based on unrealistic projections of future income that fueled the real estate bubble. Tishman Speyer and BlackRock purchased the 11,000-unit complex for $5.4 billion in 2006 – a record at the time – helped by a $3bn senior loan which was sliced-and-diced to investors (and then defaulted upon). But, as one analyst notes, "Stuytown has certainly come a long way since the depths of the crisis,” and Fortress' $4.7bn reflects a "resurgence in pricing." No bubble here at all as they hope rent-stabilized tenants will flip enabling all that fresh cash-flow for yet another yield-chasing investment idea based on the belief that real-estate prices (and rents) never go down (ever)… or potential buyers might remember "too many people have had too many unpleasant surprises at this location."

 

The "market" is sending signals…

“The Manhattan apartment market has never been stronger,” said Dave Bragg, an analyst at Green Street Advisors Inc., a Newport Beach, California-based real estate research firm. The company estimates that Manhattan apartment asset values are about 9 percent above the 2007 peak.

And so Fortress is jumping in…

Fortress Investment Group LLC is preparing a bid to buy Stuyvesant Town-Peter Cooper Village, the Manhattan apartment complex whose future has been in limbo since its owners defaulted on a $3 billion mortgage four years ago, according to a person familiar with the plans.

The New York-based private-equity firm is seeking financing for an offer valued at about $4.7 billion, said the person, who asked not to be identified because the discussions are private.

Stuytown has certainly come a long way since the depths of the crisis,” said Ben Thypin, director for market analysis at real estate research firm Real Capital Analytics Inc. The $4.7 billion value considered by Fortress “reflects that resurgence in pricing.

A long way indeed…

Tishman Speyer and BlackRock purchased the 11,000-unit complex for $5.4 billion in 2006, a record for a New York commercial property at the time. The $3 billion senior loan that financed the transaction was carved up and bundled into commercial-mortgage bonds that also contained debt tied to offices, hotels and shopping centers.

 

 

Tishman Speyer, which based its acquisition on plans to raise the cost of rent-regulated units to market rates and evict illegal occupants, defaulted after tenant litigation blocked that effort and the apartment market crumbled following the global financial crisis. The deal came to epitomize the lax lending based on unrealistic projections of future income that fueled the real estate bubble.

But prices are accelerating

Stuyvesant Town was appraised at $3.4 billion in September, according to Barclays Plc, up from about $2.8 billion when CWCapital took it over. Barclays estimated in a May 2 report that the property could fetch $4 billion to $4.3 billion in a sale, which would result in zero losses to bondholders.

And now Fortress is set to bid $4.7bn…

“There used to be a saying, if you’re a restaurant you don’t want to open up in a place where other restaurants went out of business,” Stein said in a telephone interview. “All these bidders who otherwise might be very interested may say, ‘you know what? Too many people have had too many unpleasant surprises at this location.’”

It would appear that we have once again reached peak credit, peak real estate bubble, and peak extraploated exuberance all over again.

Source: Bloomberg




via zerohedge