Will wide media coverage of Peter Cooper Village/Stuy Town make CMBS losses more likely?

November 2, 2009

By Malay Bansal

Wide media coverage of the Peter Cooper Village & Stuy Town loan might make a CMBS loss on that loan more likely.

Media has widely reported that the value of Peter Cooper Village/Stuy Town properties, which were purchased for $5.4 Bn in Nov 2006, is now estimated to be less than $2 Bn. Normally the low estimates do not matter. What really matters is the highest bid or the price one – just one – buyer is willing to pay. Valuation of properties like this is not totally a science, and it is entirely possible for one buyer to put a higher valuation on it than others based on their view of possible upside. However, in this case, such a wide dissemination and knowledge of the $1.8 to $1.9 current valuation numbers, might make it difficult for someone to put a higher valuation on it, even if they otherwise might have done so. With reserves running out, special servicer may not be too keen on taking over the properties.  That will make it more likely that they will end up accepting losses on the $3 Bn senior loan, included in five different CMBS deals, and modifying it for whoever emerges as the owner going forward.

Note: This article was published on Seeking Alpha, and is based on my comments originally reported a week earlier by Housing Wire.

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