Church's exit leaves Manhattan tenants in limbo

Published 02nd Feb 2010

When the Church of England walked away from a £40 million investment in a Manhattan apartment complex last week, it simply wrote off the entire amount, promising that “lessons would be learned”.

But many of the tenants of the 11,000 apartments are still dealing with the fall-out. Left in limbo as a new buyer is sought for the buildings, they have serious concerns about who will maintain the complex while they wait.

Just how the Church of England became involved with the Stuyvesant Town and Peter Cooper Village, overlooking the East river, is something of a mystery.

Tishman Speyer, the US property group, bought the complex in 2006 at the peak of the property boom for a record price tag of $5.4 billion, planning to replace its low-income residents in rent-stabilised apartments with more affluent ones paying higher rents.

At the invitation of Tishman, the Church Commissioners, managers of the Church of England’s investments, put £40 million into the scheme June 2007.

Tishman could not have approached the Church at a better time. In 2007 the Commissioners were in the process of establishing a dedicated team specialising in “sourcing and managing indirectly-held real estate investments both in the UK and overseas”.

The Commissioners had been joined in January 2007 by John Wythe, an international property expert working with the British asset-management firm PRUPIM, whose Christian beliefs drove him to offer his services to the Commissioners.

Mr Wythe sat on the Commission’s Asset Management Committee, chaired by Andreas Whittam Smith, former editor of The Independent and head of the Commissioners, which took the decision to invest in Stuyvesant Town.

It is not clear how Tishman’s aim of turning the complex’s rent-stabilised units into luxury apartments fits in with the Church's ethical investment policy. The Church Commissioners’ defence is that this was “established practice”.

Unfortunately for Tishman and the Church, it was not established for long. A court ruling last year blocked the owners from raising the rents, leaving them unable to meet the mortgage payments on a property that by then was deeply in negative equity.

The Church Commissioners insist that they undertook detailed due diligence in conjunction with a number of external professional advisers before investing with Tishman, but will not say who these experts were. The Commissioners' annual accounts for 2007 list Savills and DTZ Debenham Tie Leung as “strategic property advisers”.

The Commissioners also stated that they “would not necessarily exclude any of the firms involved in this transaction from being considered to provide advice in future”.

Tishman Speyer and its main partner in the deal, BlackRock, say they did not walk away from Stuyvesant Town lightly, adding that they negotiated for weeks “in good faith” with their lenders. Ultimately, however, they felt that turning over the properties to the lenders “in an orderly manner” would be the best option for everybody, including the tenants.

Six major investors and developers, including the tycoon Donald Trump, are reported to be interested in buying or managing the complex, which is now valued at around $2 billion.

The tenants too have said they would be interested in putting together a bid. Alvin Doyle, President of the Stuyvesant Town-Peter Cooper Tenants Association, has said: “We’d like to try to control our community, if we can."

Source: ' Times '

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