Jan. 23 (Bloomberg) -- Tishman Speyer Properties LP and BlackRock Realty, owner of Manhattan’s largest apartment complex, are relying on a reserve fund to pay debt on the property and have only six months of money left before it runs out, Fitch Ratings said in a report.

The fund for the Stuyvesant Town and Peter Cooper Village apartments has declined to $127.7 million as of Jan. 15, from $400 million when it was established. Property cash flow is not expected to improve from 2008 based on the borrower’s restated budget for 2009, the ratings company said.

‘Although the property’s performance remains consistent, the cash flow generated from the property continues to require significant reserves to cover debt service obligations,” Fitch analysts Sue Ann Butera and Adam Fox in New York said.

Tishman Speyer and BlackRock paid $5.4 billion for the properties in 2006 with plans to convert rent-regulated units to market rates. A $3 billion loan to finance the acquisition was bundled with commercial mortgages and sold as bonds. Fitch, Standard & Poor’s and Moody’s Investors Service began to downgrade the commercial mortgage bonds in September because the owners were unable to convert as many units as planned.

Tishman Speyer spokesman Bud Perrone had no immediate comment.

‘Depleted Fund’

A general reserve fund for the property has also been “completely depleted,” the Fitch analysts said today.

The owners of the 80-acre, 11,200-unit complex have been facing higher costs to shift units to market price and less income than forecast from remaining rent-stabilized apartments. Overall expenses have also been higher than anticipated, Standard & Poor’s said in a report last year.

MetLife Inc., the largest U.S. life insurer, built Stuyvesant Town and Peter Cooper Village in the 1940s with city assistance. The property, which runs from 14th to 23rd streets on the East Side, housed returning World War II veterans. About 25,000 people live there today.

When MetLife sold the property in 2006, it estimated residents of 1,600 apartments would move out, die or have their rents reach the $2,000 deregulation threshold by the close of 2008, letting the landlord raise rents by any amount the market would bear. As of October, Tishman had only deregulated about 1,000 apartments, according to S&P, 38 percent fewer than MetLife estimated was possible.

To contact the reporters on this story: Sarah Mulholland in New York at smulholland3@bloomberg.net; Peter Woodifield in Edinburgh at pwoodifield@bloomberg.net.

Last Updated: January 23, 2009 12:49 EST