Stuyvesant Town Goes Bust

The owners of NYC's Stuyvesant Town and Peter Cooper Village, which were purchased in 2006 in the largest real estate deal in U.S. history, have defaulted on their loans and are turning the properties over to creditors.

"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," Perrone said in an e-mailed statement. The group bought the complexes, which have about 25,000 tenants, in 2006 at the height of the real estate bubble in the nation's largest residential real estate deal. The record purchase price seemed outrageous to many real estate analysts, but the partnership believed it had a winning strategy: It would aggressively convert thousands of rent-regulated apartments occupied by middle-class families into luxury units that would fetch top dollar. But the tactic was a bust as the city's housing market cooled considerably. Ratings firms estimated the value of the 80-acre area had fallen to as little as $2 billion – far less than the outstanding loan balance. Apartment conversions happened much slower than expected, tenants fought back and a state court ruled that about $200 million in the partnership's new rent increases was improper.

The apartment complexes, which comprise over 11,000 units in 110 buildings, were built in the 1940's by MetLife for returning WWII veterans.