Hearing set to unravel latest bid to gain control over Stuyvesant Town.
Bank of America and Bancorp, part of a group of trustees overseeing the $3 billion securitized senior mortgage, filed suit in state Supreme Court last week to prevent Pershing Square and Winthrop Realty Trust from a scheduled takeover of the complex on August 25.
Led by its chief executive, hedge fund manager William Ackman, Pershing in recent weeks reportedly spent $45 million to buy loans tied to the property, consolidating ownership of a $300 million layer of senior mezzanine debt with Winthrop, which was an existing creditor at the property. The pair had scheduled to foreclose with a plan to convert the complex into a co-op that would allow tenants to buy their apartments and, for those who preferred to continue to rent, continue to do so affordably.
Bank of America and Bancorp, acting as proxies for the special servicer CW Capital, which itself has begun proceedings to foreclose on the property, charge in their lawsuit that Pershing and Winthrop must pay down the property's over $3 billion in senior debt in order to take control according to an inter-creditor agreement that dictates the actions the property's legion of lenders can take.
According to a lawyer familiar with the 11,000 unit complex, which was bought near the top of the real estate market in 2006 for a record $5.4 billion by an investment group led by Tishman Speyer, there are 11 mezzanine lenders with loans against the property.
The complex has since fallen significantly in value due to the deterioration of the real estate market amid the recession and a court ruling against Tishman Speyer and former owner MetLife that limits the amount of rent the complex can charge.
Foreclosing on the complex would allow CW Capital and the bondholders of the senior mortgage, which itself has been diced up into various positions of seniority, to capture what value remains for themselves. There has been speculation that once Pershing and Winthrop foreclose on Tishman Speyer, the pair would thrust the complex into bankruptcy rather than take on its huge mortgage, a situation that could allow the junior creditors more bargaining power to try to extract value from the property.
Not all of the bondholders of the senior mortgage have agreed with CW Capital's goal to foreclose. Earlier in the year, the hedge fund Appaloosa, led by its manager David Tepper, sued to block CW from proceeding based on the rationale that it made more sense to enter bankruptcy to avoid having to pay the nearly $200 million in transfer taxes that would be triggered by foreclosure, money that could otherwise be going to property's lenders. Tepper was unsuccessful in his suit.
A hearing scheduled for September 2 will determine whether Pershing and Winthrop can proceed with their foreclosure.
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|Comment:||Hearing set to unravel latest bid to gain control over Stuyvesant Town.|
|Publication:||Real Estate Weekly|
|Date:||Aug 25, 2010|
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