Bond holders who own a $3 billion mortgage on Stuyvesant Town/Peter Cooper Village will be free to auction off the massive Manhattan apartment complex after a state judge on Thursday rejected an attempt by a junior debt holder to win control of the property.
New York State Supreme Court Justice Judge Richard Lowe III's ruling is a defeat for William Ackman's Pershing Square Capital, which had sought to take control of the complex, commonly referred to as StuyTown.
The ruling lifts a September 10 stay that prohibited CWCapital, which represents the bondholders, from completing a foreclosure auction now set for on October 4.
A sale would be the final chapter on the 2006 sale in which an investor group led by Tishman Speyer Properties bought the 56-building, 80-acre apartment complex, for $5.4 billion, and became the poster child of the U.S. commercial property boom.
Its failure less than three years later is emblematic of the commercial real estate bust. The property is valued at less than half the 2006 price.
Pershing Square Capital Management and Winthrop Realty Services, the Stuyvesant Town and Peter Cooper Village junior debt holders whose attempt to gain control of the massive residential complex through foreclosure was stymied yesterday by a New York State Supreme Court judge, aren't walking away without a fight. The joint venture officially announced plans last night to appeal the decision, which allowed the complex's senior lenders to proceed with their planned foreclosure auction early next month. In a statement, the venture said it "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 [Pershing Square and Winthrop are] unsuccessful on appeal, or if the mortgage lender is permitted to foreclosure prior to a successful appeal, the value of [the partners'] investment in the mezzanine loans may be lost." Pershing Square has invested roughly $36 million in the loans, while Winthrop has put in around $10.5 million, the companies said.