Property crash puts Church cash at risk

$5.4bn Manhattan project on verge of collapse as developer's finances dry up

The Church of England conceded yesterday that its involvement in a controversial New York property deal now on the verge of default has left it at risk of losses that some estimates put at tens of millions of pounds.

The church will not confirm the extent of its potential liability, sustained in one of the largest and most contentious development deals in New York. That investment has since been brought low by, amongst other things, over-inflated expectations and wretched timing.

In the boom times of 2006, the church was one of several institutions to invest in a high-profile $5.4bn (£3.3bn) deal, headed by property giant Tishman Speyer, to purchase the huge Peter Cooper and Stuyvesant Town complexes, with over 11,000 apartments, on Manhattan's East Side.

Tishman is reported to be within weeks, or at most a few months, of running out of cash to service its debt, almost certainly spelling foreclosure. The church may lose as much as $70m , according to The Wall Street Journal.

"Even God Losing Money on Stuy Town," noted the headline writers at Curbed.com, an irreverent New York real estate blog.

The church restricted itself last night to acknowledging its involvement. A spokesman said: "I can confirm that we are invested in this fund as part of a well diversified domestic and global indirect property portfolio but have not increased that investment.

"The Commissioners [who oversee church property] manage a long-term fund, so we will continue to work with our portfolio managers." Not everyone will weep for those with burned fingers. The two communities had for years stood as a last Manhattan bastion for working folk like nurses, teachers, and firemen, who are largely priced out of the rest of the island.

The arrival of Tishman threatened to end all that. They planned to reduce the numbers of apartments covered by regulations that kept monthly rents artificially low, renovate, and re-rent them at market rates.

"It changed things absolutely," says Phil Metviner, 48, who was born in the apartment in which he lives today. "They changed the character of the place. And the character has always been about the people." Mr Metviner is not worried that the place in which he resides could fall into foreclosure.

"This is a valuable piece of property. Someone will snap it up at a bargain." Bargain indeed. While Tishman Speyer paid a record $5.4bn for it in 2006, it is reportedly valued today at about $2.1bn.

The sequence of unhappy events is baffling to another lifelong resident, Merryl-Beth Mehlman, 61. "What I don't get is how the brain trust behind all of this let this happen," she said. "The whole thing is very upsetting."

She was also born in the complex and raised her own children in it. Asked for her views on Tishman Speyer, she offers three words. The first is "greedy"; the other two, combined, are unprintable.