A joint venture of Pershing Square Capital Management L.P., and Winthrop Realty Trust have acquired the $300 million face amount of Stuyvesant Town Mezzanine Loans 1, 2 and 3 for $45 million and William A. Ackman, CEO of Pershing said today that the venture shares "the Tenants' Association objective to complete a non-eviction, affordable, co-op conversion" of Stuyvesant Town and Peter Cooper Village.

The mezzanine loans represent the senior most mezzanine loan interests in the property and they and the $3 billion first mortgage loan secured by the property are in default.

The joint venture is owned 77.5 percent by Pershing Square and 22.5 percent by Winthrop.

Mr. Ackman's statement said that a conversion "will require the restructuring of the property's first mortgage debt," adding that "our recent experience leading the successful restructuring and recapitalization of General Growth Properties, the largest real estate restructuring ever made, should prove valuade as we work to accomplish this critically important goal."

Peter Cooper Village/Stuyvesant Town is an 11,227-unit apartment complex consisting of 56 buildings on 80 acres on the east side of First Avenue from 14th to 23rd Streets.

Michael L. Ashner, Winthrop's CEO stated: "Through this acquisition, Winthrop and Pershing Square will be working to resolve the future of Peter Cooper Village/Stuyvesant Town. We are looking forward to working with the Tenants Association, community leaders, creditors and other interested parties to ensure that our investment and our approach to recapitalizing Peter Cooper Village/Stuyvesant Town will bring long-term stability to the property and its residents. We understand the importance of this property in providing housing for moderate income New Yorkers. Among our goals is the continued supply of affordable housing for its residents for years to come."

The joint venture has initiated foreclosure on the equity interests in the property's owner, a partnership controlled by Tishman Speyer, which, when consummated will make the joint venture the 100% controlling owner of the property.

"The move is bold, if unexpected," according to an article today at Elliot Brown at observer.com: "Given that they hold mezzanine debt, which is less senior than the $3 billion mortgage, the two firms would need to first foreclose on the Tishman Speyer partnership (which has been eager to leave the property since it defaulted early in the year), and then work out a deal with the mortgage holders. Adding to the mess, the holders of the first mortgage (which was securitized and is controlled by CW Capital) are advanced in foreclosure proceedings and are likely only a month or two away from gaining full control from Tishman Speyer."

"As for the tenants - who have been putting together their own bid in talks with CW Capital - they seem to open to talk," the article continued, adding that "in a statement, Councilman Dan Garodnick, who lives in Peter Cooper Village, said 'Satisfying the tenants' goals is the only way for creditors to achieve value in this transaction.'"

Stuyvesant Town/Peter Cooper Village was the single largest property transaction ever when MetLife sold it in 2006 for $5.4 billion to the Tishman Speyer partnership, which subsequently defaulted when its plans to charge market-rate rents on vacated apartments was ruled against in the courts.

An article at nytimes.com by Charles V. Bagli said that "the bondholders who have a $3 billion first mortgage on the property may oppose Winthrop and Pershing's attempt to take control based on their relatively small $45 million investment."

At the same time, the article continued, "several other entities, including Colony Capital, Westwood Capital and two of the city's major real estate families - the LeFraks and the Dursts - have expressed interest in buying the complexes, according to real estate executives familiar with the property."