Nov. 7 (Bloomberg) -- The $3 billion loan backed by Stuyvesant Town-Peter Cooper Village in Manhattan was transferred to a special servicer at the request of Tishman Speyer Properties Inc. and Blackrock Realty, Fitch Ratings said.

CW Capital will work on a possible loan modification, Fitch said in an e-mail yesterday. Servicers are used when a loan is in or near default and needs to be reviewed. The loan was transferred after sponsors Tishman Speyer and Blackrock requested “relief,” Fitch said, without providing details.

“Fitch expected the transfer of the loan to special servicing as cash flow generated by the property remains insufficient to service the debt,” the ratings company said in the statement. “Debt service reserves are expected to be depleted by the end of December.”

Tishman Speyer and its partners are moving toward a default on the debt on Manhattan’s largest apartment complex, which they purchased for $5.4 billion three years ago. Fitch downgraded its ratings on the loan last month and a New York court ruled the owners illegally raised rents on thousands of tenants.

Bud Perrone, a Tishman spokesman, didn’t immediately respond to a phone message left for comment yesterday after business hours.

A $3 billion loan to finance the acquisition was bundled with commercial mortgages and sold as bonds. The property now has a market value of about $1.89 billion, down 65 percent from the appraised value at the time the loan was securitized in November 2006, according to data from Deutsche Bank.

MetLife Sold

The group bought the 80-acre, 11,200-unit developments from insurer MetLife Inc. in 2006, near the top of the U.S. property market, with plans to remodel and raise the cost of rent- regulated units to market rates. Soon after, the global credit crisis and the recession hit, constraining the group’s ability to raise rents. Expenses to convert units were also higher than anticipated, Standard & Poor’s said in a report in October 2008.

The New York Court of Appeals in Albany said last month that the rent increases on about 4,350 apartments at the Stuyvesant Town-Peter Cooper Village complex violated the law because the development was built with city assistance and the owners received tax breaks.

“Fitch believes there will be many factors involved in the workout and ultimate recovery of the loan, including a possible modification, potential legislative changes to rent stabilization laws, commitment of the loan sponsors, the remaining seven-year term of the loan, and the low loan per unit ($267,213),” the ratings company said in its statement.

To contact the reporter on this story: Alan Mirabella in New York at amirabella@bloomberg.net.

Last Updated: November 7, 2009 00:01 EST