For the full story, see the March issue of Distressed Assets Investor.

NEW YORK CITY-By now the tale of the failed Stuyvesant Town/Peter Cooper Village deal is well known. Bought for a record $5.4 billion in 2006 by a JV of Tishman Speyer and BlackRock Realty, the 110-building, 11,200-plus-unit residential property is one of Manhattan's premier residential complexes.

Yet the economy and legal challenges threw a kink into the buyers' plan to bring the complex's units from stabilized to market rates. As a result, the property's cash flow remained too low to cover debt-service obligations. By year-end 2009, the Tishman-BlackRock JV had not only gone through its $400-million debt-service reserve but also a nearly $200-million general reserve.

What was to be the final blow came when the New York State appeals court ruled that the JV and its predecessors had improperly deregulated and raised rents on thousands of units at the complex. Not only was the further conversion of more units halted, but the court also found that the tenants were due some $215 million in rent rebates.