New York State Supreme Court Justice Richard B. Lowe III ruled Thursday that a group led by investor William Ackman could not foreclose on Peter Cooper Village and Stuyvesant Town, "potentially clearing the way for the senior creditors to take control," according to an article today at wsj.com by Lingling Wei.
The senior creditors, who hold the $3 billion first mortgage debt on the property, sued in New York state Supreme Court last month to block Mr. Ackman's group from foreclosing on the property. In his decision, Justice Lowe sided with these creditors, represented by CW Capital, that the first mortgage must be paid off before Ackman's venture, which holds some of the junior debt, could foreclose.
"The ruling," the article continued, "threatens to wipe out the $45 million the Ackman group spent in acquiring the junior debt. Mr. Ackman's firm, Pershing Square Capital Management, made a move for control of the complex earlier last month by teaming up with Winthrop Realty Trust. Together they snapped up $300 million of the complex's junior debt and launched a foreclosure proceeding."
A spokesman for Ackman's venture said it plans to appeal the decision, the article noted, adding that "The senior lenders have set a public auction for the 56-building complex for Oct. 4. Any buyer of the property through a foreclosure sale would have to pay about $100 million in transfer taxes."
The complex - developed after World War II as a bastion for the middle class - has been up for grabs since early this year when a group led by Tishman Speyer Properties, which bought the property for $5.4 billion in 2006, said it was giving it up to creditors.
A press release yesterday said that the joint venture between WinthropRealty Trust and Pershing Square Capital Management LP "strongly disagrees with the trial court's ruling and will appeal the decision to the New York appellate court and will seek to stay the Mortgage Lender's planned property foreclosure."
"If PSW [the name of the joint venture is unsuccessful on appeal, or if the mortgage lender is permitted to foreclose prior to a successful appeal, the value of PSW's investment in the mezzanine loans may be lost," it added.
In another development, Condo Recovery LLC, of which Gerald Guterman is a partner and which also includes investment bank Westwood Capital, plan to offer the tenants at the two large residential enclaves east of First Avenue between 14th and 23rd streets the chance to become owners, according to a Reuters article this week by Ilaina Jonas.
It quoted Mr. Guterman as declaring that "we believe 8,500 to 9,500 of units will buy if we have priced it correctly and provide the proper financing."
The enclaves have a total of 11,227 apartments in 56 buildings on 80 acres.
"Mr. Guterman, who has owned or managed more than 60,000 apartments during his more than 43 years in the business, has partners with appraiser Jonathan Miller to offer the apartments at an average that would be equal to their monthly rent," the article said.
"The Condo Recovery plan would price the apartments at an average of what rent-stabilized tenants pay as their monthly rent, or about $290 per square foot Guterman said. They would also guarantee a mortgage of 85 percent of the cost," the article noted, adding that "The plan would repay bondholders of the $3 billion mortgage over 18 to 24 months, Guterman said."
The senior creditors, who hold the $3 billion first mortgage debt on the property, sued in New York state Supreme Court last month to block Mr. Ackman's group from foreclosing on the property. In his decision, Justice Lowe sided with these creditors, represented by CW Capital, that the first mortgage must be paid off before Ackman's venture, which holds some of the junior debt, could foreclose.
"The ruling," the article continued, "threatens to wipe out the $45 million the Ackman group spent in acquiring the junior debt. Mr. Ackman's firm, Pershing Square Capital Management, made a move for control of the complex earlier last month by teaming up with Winthrop Realty Trust. Together they snapped up $300 million of the complex's junior debt and launched a foreclosure proceeding."
A spokesman for Ackman's venture said it plans to appeal the decision, the article noted, adding that "The senior lenders have set a public auction for the 56-building complex for Oct. 4. Any buyer of the property through a foreclosure sale would have to pay about $100 million in transfer taxes."
The complex - developed after World War II as a bastion for the middle class - has been up for grabs since early this year when a group led by Tishman Speyer Properties, which bought the property for $5.4 billion in 2006, said it was giving it up to creditors.
A press release yesterday said that the joint venture between WinthropRealty Trust and Pershing Square Capital Management LP "strongly disagrees with the trial court's ruling and will appeal the decision to the New York appellate court and will seek to stay the Mortgage Lender's planned property foreclosure."
"If PSW [the name of the joint venture is unsuccessful on appeal, or if the mortgage lender is permitted to foreclose prior to a successful appeal, the value of PSW's investment in the mezzanine loans may be lost," it added.
In another development, Condo Recovery LLC, of which Gerald Guterman is a partner and which also includes investment bank Westwood Capital, plan to offer the tenants at the two large residential enclaves east of First Avenue between 14th and 23rd streets the chance to become owners, according to a Reuters article this week by Ilaina Jonas.
It quoted Mr. Guterman as declaring that "we believe 8,500 to 9,500 of units will buy if we have priced it correctly and provide the proper financing."
The enclaves have a total of 11,227 apartments in 56 buildings on 80 acres.
"Mr. Guterman, who has owned or managed more than 60,000 apartments during his more than 43 years in the business, has partners with appraiser Jonathan Miller to offer the apartments at an average that would be equal to their monthly rent," the article said.
"The Condo Recovery plan would price the apartments at an average of what rent-stabilized tenants pay as their monthly rent, or about $290 per square foot Guterman said. They would also guarantee a mortgage of 85 percent of the cost," the article noted, adding that "The plan would repay bondholders of the $3 billion mortgage over 18 to 24 months, Guterman said."
Architecture Critic
Carter Horsley
Since 1997, Carter B. Horsley has been the editorial director of CityRealty. He began his journalistic career at The New York Times in 1961 where he spent 26 years as a reporter specializing in real estate & architectural news. In 1987, he became the architecture critic and real estate editor of The New York Post.
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