In an order released Thursday, Aug 19, Justice Richard Lowe of the New York State Supreme Court in Manhattan halted a planned Aug 25 auction on the equity in the owner of the property, which houses 25,000 people. He set a Sept 2 hearing on the matter.
The proceedings escalate a high-stakes battle for the iconic property that pits William Ackman, one of the nation's best-known hedge fund investors, against senior creditors represented by two of the largest US lenders: Bank of America Corp (BofA) and US Bancorp.
A joint venture created by Ackman's Pershing Square Capital Management LP and Boston-based Winthrop Realty Trust had sought the foreclosure auction on the equity after buying a US$300 million junior loan for just US$45 million, or 15 cents on the dollar.
That loan is secured by shares in the property's owner, not the property itself. Pershing owns 77.5% of the venture, PSW NYC LLC, while Winthrop owns 22.5%.
CWCapital Asset Management LLC, a special servicer overseeing the property after underlying mortgages went into default, is foreclosing on the property, and had planned an auction in the second half of September, court documents show.
BofA and US Bancorp, acting as trustees for senior lenders, had sought to block the foreclosure on the equity, saying a US$3.66 billion foreclosure judgment on the property that they obtained in June should be paid off first.
"We remain confident in our right to acquire control of the property owner while preserving the first mortgage lender's collateral" and ensuring "long-term stability and affordability" for tenants, the PSW NYC joint venture said in a statement after Lowe issued his order.
Originally built by MetLife Inc for returning World War II veterans and middle class New Yorkers, Stuyvesant Town and Peter Cooper Village house residents in 11,227 apartments spread over 56 buildings, and sit on 80 acres overlooking the East River in New York City.
The complexes were sold in 2006 to an entity created by a group led by Tishman Speyer Properties for US$5.4 billion, but the borrowers defaulted on their loans in January.
According to the banks' Aug 18 complaint, the joint venture's foreclosure plan violates an inter-creditor agreement by letting junior creditors get paid before more senior creditors, including holders of a US$3 billion first mortgage.
"The future of this iconic enclave in the Borough of Manhattan is in imminent jeopardy," the complaint said.
The senior mortgage has been packaged into commercial mortgage-backed securities, whose holders included Fannie Mae and Freddie Mac.
"Everyone associated with the property assumes that it is currently worth far less than the US$3.66 billion that is owed to the senior lenders," lawyers for CWCapital said in a court filing. They estimated the property's worth at "more than US$2 billion." — Reuters
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