Church of England defends disastrous £40m Manhattan property deal
The Church of England has defended the disastrous decision to invest £40m in a New York housing scheme that led to accusations of wrongfully raising rents and a multi-million pound loss for the Church’s pension fund.
By Jonathan Russell
Published: 12:29AM GMT 20 Feb 2010
In an interview with property magazine Estates Gazette just a month after the Church of England wrote of its £40m investment in the project Joseph Cannon, chief surveyor, said that while the episode was “painful” much of the criticism levelled at the Church was undeserved.
“The loss of our investment in Stuyvesant Town is very unpleasant and clearly not something we would ever have wished for. But painful as it has been, we have been able to absorb it and it has not knocked us off strategic course in any way,” he said.
In 2006, the Church of England’s pension fund invested £40m in the $5.4bn (then £2.9bn) Tishman Speyer and BlackRock led purchase of the Stuyvesant Town and Peter Cooper Village in Manhattan. The debt-fuelled purchase was made at the height of the property boom and set a new record for the largest single property transaction in the world.
However the investment ran into problems when Tishman failed in its attempts to put up rents on the 56 apartment blocks, an attempt that led to accusations the consortium was robbing Manhattan of one of its few pockets of lower rent housing.
“Part of the manager’s strategy, along with many other New York landlords, was simply over time to upgrade the property,” explained Mr Cannon. “We saw it very differently from what we would classify as ‘affordable housing’ here in the UK.”
However the US courts ruled that the property manager, effectively the consortium led by Tishman, had wrongfully raised rents on more than 3,000 of the rent-regulated apartments. That and plummeting property values led to the consortium struggling to keep up interest payment on the investment and handing the keys back to its bankers in January this year.
Although not as serious, the investment has drawn parallels with the Church of England’s doomed entry into the US property market in the 1980s. That foray cost the Church £800m through write offs to both UK and US assets. However ,Mr Cannon said the parallels did not match up as in the 80s the losses were as a result of a speculative development programme rather than standing investments.