Appaloosa Management, an investment fund headed by David Tepper, filed papers yesterday in United States District Court in Manhattan challenging the recent decision of CW Capital Management to foreclose on the owners of Stuyvesant Town and Peter Cooper Village, the housing enclaves on the east side of First Avenue between 14th and 23rd Streets.
The enclaves were acquired for about $5.4 billion in 2006 by Tishman Speyer Properties and BlackRock Realty and they defaulted last month on a $3 billion mortgage and turned the properties over to CW Capital.
In its papers, Appalooss claimed that CW Capital acted "irrationally and imprudently" in moving ahead with foreclosure, which, it maintained, could result in $200 million in transfer taxes.
In an article in today's edition of The New York Times Charles V. Bagli wrote that "Appaloosa said that CW Capital should have pushed the owners to go into bankruptcy court, thereby avoiding those taxes."
Late last year, the New York State Court of Appeals ruled that the owners had improperly converted 4,400 of the 11,000 apartments in the enclaves to market rates and Appaloosa's paper said it was unclear whether debt holders would be liable for more than $200 million in rent rebates.
Although rents at Stuyvesant Town and Peter Cooper Village only covered about two-thirds of the debt service on the $3 billion mortgage, Tishman Speyer and BlackRock had planned on increasing profits by converting rent stabilized apartments to market rates. But their plan failed, and the property is now worth an estimated $1.8 billion.
According to the article, "Appaloosa made a profit of about $7 billion last year, including $2.5 billion for Mr. Tepper." "His firm has been recently focused on buying debt at a steep discount that is backed by loans on properties like Stuyvesant Town, although he said he had first acquired some of the Stuyvesant Town debt in 2008. The more money that debt holders get for the property in a resale, the bigger his profit. Mr. Tepper said his interests were not "at odds" with those of tenants. 'We recognize the fact that at some point, there needs to be some degree of rent controlled apartments there,' he said."
The enclaves were acquired for about $5.4 billion in 2006 by Tishman Speyer Properties and BlackRock Realty and they defaulted last month on a $3 billion mortgage and turned the properties over to CW Capital.
In its papers, Appalooss claimed that CW Capital acted "irrationally and imprudently" in moving ahead with foreclosure, which, it maintained, could result in $200 million in transfer taxes.
In an article in today's edition of The New York Times Charles V. Bagli wrote that "Appaloosa said that CW Capital should have pushed the owners to go into bankruptcy court, thereby avoiding those taxes."
Late last year, the New York State Court of Appeals ruled that the owners had improperly converted 4,400 of the 11,000 apartments in the enclaves to market rates and Appaloosa's paper said it was unclear whether debt holders would be liable for more than $200 million in rent rebates.
Although rents at Stuyvesant Town and Peter Cooper Village only covered about two-thirds of the debt service on the $3 billion mortgage, Tishman Speyer and BlackRock had planned on increasing profits by converting rent stabilized apartments to market rates. But their plan failed, and the property is now worth an estimated $1.8 billion.
According to the article, "Appaloosa made a profit of about $7 billion last year, including $2.5 billion for Mr. Tepper." "His firm has been recently focused on buying debt at a steep discount that is backed by loans on properties like Stuyvesant Town, although he said he had first acquired some of the Stuyvesant Town debt in 2008. The more money that debt holders get for the property in a resale, the bigger his profit. Mr. Tepper said his interests were not "at odds" with those of tenants. 'We recognize the fact that at some point, there needs to be some degree of rent controlled apartments there,' he 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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