Stuyvesant Town-Peter Cooper Village

The troubled Allied Irish Bank (AIB) has been forced to take an 85 per cent write down on a US property investment debt.

The Irish bank is one of a group of debt holders which holds about $300 million in debt on an iconic 80-acre apartment complex in east Manhattan known as Stuyvesant Town-Peter Cooper Village.

In one of the biggest property collapses in American history, the developers of the project were eventually forced to hand the development back to lenders in January after efforts to restructure debt failed.

Winthrop Realty Trust, who originally led the project, told the press this week it had entered a partnership with Pershing Square Capital Management to buy the defaulted €300 million loans for €45 million – a discount of 85 per cent.

While it is not clear how much of the debt is held by AIB, the book value of the Irish bank’s stake has been estimated to be in the region of around $50 million, although this has not been confirmed by the bank. AIB declined to comment on the matter yesterday.

Built by insurance company Metropolitan Life with the help of government aid in the 1940's, the original objective was to provide affordable housing to workers and US war veterans.

In 2006, Metropolitan sold the complex to real estate company Tishman Speyer Properties and to asset management firm BlackRock for a record $5.4 billion.

Last October, Fitch Ratings valued the East Manhattan property – which comprises more than 11,000 apartments and 56 separate buildings – at $1.8 billion.

Tishman and BlackRock intended to fund the debt by refurbishing apartments and raising rents, but their plans were curbed by a falling rental market and the city’s strong rent-protection laws.

Last October, the New York Court of Appeals ruled that rent increases on some of the apartments in the complex were illegal.