Tishman’s StuyTown capitulation

Perhaps the most shocking thing about Tishman Speyer Properties’ decision to sign over its Peter Cooper Village and Stuyvesant Town apartment complex in Manhattan to creditors is that it comes this late in the real estate down cycle.

The acquisition of the property in 2006 was one of the largest of the real estate boom at $5.4 billion. The venture finally defaulted on its mortgage this month. The value of the complex is believed to have fallen to $2 billion or less.

In its post-mortem, the naked capitalism blog, noting the aggressive increases in rentals the buyers had projected, called the deal “a classic example of peak of cycle excess.”

Singing along with Frank Sinatra, it’s not hard to find real estate investors who believe Manhattan will never lose its price hype. Their faith has always been blessed by tenant-friendly rent-fixing and other socially redeeming characteristics that may have seemed like solid struts for the project back at the peak of the cycle.

Tishman and Co had hoped to increase rents on the complex’s apartments to higher, “market” levels, but New York’s highest court in October rejected that. Imagine the hubris that had to be involved. The rate of return, even distorted by rent control, would not have been hard to make sound like a no-brainer to bankers in 2006. According to Wikipedia, in 1947, rents ranged from $50 to $91 per month, while current rents range from $2,850 for a one-bedroom apartment to $7,000 for a five-bedroom unit.

Citi selling its jewels

Occidental Petroleum is buying Citi’s commodities trading unit Phibro for roughly its net asset value. How much that is, exactly, is hard to tell. Occidental said its net investment in Phibro is expected to be about $250 million.

The bigger figure, of course, is the $100 million associated with star trader Andrew Hall. His pay package has been the subject of much hand-wringing at Citi and in Washington.

Phibro’s management team, headed by Hall, and its employees will remain with the unit after the sale, expected to close by year-end. Citigroup shares were fractionally lower in morning trading on the New York Stock Exchange, while Occidental shares were up about 1 percent.

Mixed messages from Goldman’s first family?

FINANCE/TARPThis probably wasn’t what Lloyd Blankfein had in mind when he reportedly asked Goldman Sachs employees to cut back on conspicuous displays of consumption.

The New York Post, which screamed the news about Blankfein’s order to exercise restraint from its front page on Tuesday, reported on its Page Six gossip column Wednesday that his wife sent a rather different message at a charity event in the Hamptons last Saturday.

According to Page Six, Laura Blankfein and Susan Friedman, wife of Richard Friedman, a Goldman managing director,  “caused a huge scene” as they waited with lesser donors for the doors to open for a charity event for ovarian cancer research.

Activist investor alert: Fisher Communications

kima.jpgCould investors in Seattle-based Fisher Communications be getting a little restless? The small broadcasting company recently disclosed it had received an unsolicited takeover offer from an unnamed party, which it turned down saying it wasn’t in the best interests of its shareholders.

Soon after, FrontFour Capital, a large shareholder, made public a stiff letter it sent to the company, expressing disappointment at the board’s unwillingness to engage in talks with the potential buyer. FrontFour, a New York-based hedge fund, said Fisher shareholders have suffered a 30 percent loss in the value of their holdings, even as the company spent money on acquisitions that have added little value. Fisher shares are down 38 percent since their 52-week high of about $51.99 August.

FrontFour also threatened “potential courses of action,” such as calling a special shareholders’ meeting or running a proxy fight at next year’s annual meeting.

from Summit Notebook:

PequotVentures exec trumpets Big Apple advantage

lenihan.jpgPequotVentures, the venture capital arm of hedge fund Pequot Capital Management, has shut down its Silicon Valley office and now operates only out of New York. Managing general partner Lawrence Lenihan said the contrarian move made sense because the plethora of venture capital operators in Silicon Valley forced PequotVentures to compete on price.

That's not so true in New York, where there's less competition on the fund side but lots of promising media and finance businesses, he told the Reuters Hedge Fund and Private Equity Summit on Tuesday.

New York is also looking like increasingly fertile ground relative to Boston's once booming Route 128 corridor. Lenihan, who admits that as a New Yorker he may carry a certain bias, said that shuttle flights which once were packed with New York investors going to Boston to check out companies are now carrying many more Boston investors in the opposite direction.