Judge sends lenders’ suit back to state court

Stuyvesant Town leasing office (Photo by Sabina Mollot)

Stuyvesant Town leasing office (Photo by Sabina Mollot)

By Sabina Mollot

A federal court judge has decided that the lawsuit against CWCapital by a group of junior lenders involved in Stuyvesant Town should be handled by a state court, as the lenders had been hoping.

It was on Monday when United States District Judge Alison Nathan remanded the litigation to the New York State court where it was originally filed.

In the decision, Nathan wrote that “this case invokes no comparable federal interest, scheme or agency. Rather it is a contract dispute between private parties, turning almost entirely on construction of a private contract, and failing to present any dispositive question of federal law.”

The lawsuit was filed last summer after CWCapital took ownership of Stuyvesant Town and Peter Cooper through a deed, rather than holding a planned foreclosure sale on mezzanine debt. A group of lenders represented by Centerbridge Partners had hoped for a chance to buy a key piece of the mezzanine or junior debt and accused CW of violating an intercreditor agreement. The deed-in-lieu of auction wipes out the value of the junior debt, they’d argued, allowing CW to reap an “unearned windfall” when the property is sold.

They also accused CW of inflating the interest it was owed to calculate the total senior debt at $4.4 billion.

However, in its arguments, the lenders said that even though they believe CW’s figures are wrong, they still stand to “reap windfall profits regardless of how the interest rate is calculated on the senior loan.”

Even when using CW’s “incorrect and vastly overstated senior loan payoff amount of $4.4 billion, the value of Stuy Town is still worth hundreds of millions of dollars more,” the lenders said.

News of the court action was first reported on Tuesday by Law360, a legal news service.

Michele de Milly, a spokesperson for Centerbridge, declined to comment on the latest court action. Brian Moriarty, a spokesperson for CWCapital, didn’t respond to a request for comment.

Last month, the total amount of debt as calculated by CW reached $4.7 billion, a figure announced at a Tenants Association meeting by Council Member Dan Garodnick. He explained the amount was due to interest and fees. It’s also the amount that was reportedly being prepared as a bid by CWCapital’s parent company, Fortress. The Tenants Association has since said it is still hoping for a tenant-led condo conversion with partner Brookfield.

Following the suit being remanded, Susan Steinberg, chair of the ST-PCV Tenants Association said it basically just means more waiting around for would-be buyers.

“The decision to remand the case back to state court means that if CWCapital is waiting to settle with Centerbridge et. al. before proceeding with plans to sell, it will have a longer wait,” said Steinberg. “Ultimately, so will would-be buyers, including the tenants here. Whether the remand is a good or a bad thing for either the plaintiffs or the defendants will depend on which judge the case comes before. We will stay tuned.”

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Cheating claims spark new lenders lawsuit

Stuyvesant Town leasing office (Photo by Sabina Mollot)

Stuyvesant Town leasing office (Photo by Sabina Mollot)

By Sabina Mollot
Last week, CWCapital was sued by holders of Stuyvesant Town’s mezzanine debt who claimed that the new owner cheated them out of hundreds of millions of dollars.
The lawsuit, which was first reported by Bloomberg, is being led by Centerbridge Partners, which is representing six limited liability companies who are named as plaintiffs.
The suit follows a decision by CW last month to take title to Stuyvesant Town/Peter Cooper Village through a deed rather than hold a foreclosure sale that had been scheduled for June 13.
By doing this, Centerbridge accused CW of a “continuing pattern of misconduct” to keep control of the property and “reap an unjust windfall of $1 billion” that should go to lower level lenders, who’ve received nothing.
The report went on to say the lenders, in their complaint, called CWCapital’s takeover “executed on the flawed premise that the amount owed on the senior loan was greater than the value of the property.” CW represented that $4.4 billion was owed on the mortgage when the amount was really $3.45 billion, the lenders said.
A spokesperson for Centerbridge, Michele de Milly, said the lawsuit shouldn’t impact the tenants.
In an official statement, Centerbridge said, “We believe that Stuyvesant Town is and will continue to be a unique and extraordinarily important property, both for the City of New York and for the thousands of tenants who make it such a robust community. This legal matter is an inter-creditor dispute and we do not expect it to affect Stuyvesant Town or its residents. Funds affiliated with Centerbridge Partners, which have owned mezzanine loans of Stuyvesant Town and Peter Cooper Village, have been forced to commence this lawsuit because of the actions taken by CW Capital, in violation of an inter-creditor agreement.”
CWCapital, however, denied this and called the suit “without merit.”
“The assertions made in the lawsuit are utterly baseless and without merit,” spokesperson Brian Moriarty said. “The fact that the complaint centers on a deed in lieu transaction completed before the plaintiff acquired their position exposes the plaintiff’s specific intent to wrest a quick profit from ‘purchased litigation.’ Centerbridge acquired this position at a deep discount in hopes of reaping a windfall at the expense of the bondholders we represent and residents who deserve a timely resolution that will provide certainty and a path forward for the community.”
The litigation, which also names commercial-mortgage trusts set up by Wachovia Bank, may slow down a sale process. However, it shouldn’t stop the city from its current plan of trying to work with CW to maintain affordability at the property while satisfying the bondholders.
When CW canceled the foreclosure auction it also agreed to hold off on a sale for two months while working with the de Blasio administration along with local elected officials representing ST/PCV to come up with a plan. According to Council Member Dan Garodnick, this litigation doesn’t change that.
“This is largely a dispute between lenders and it does not affect our strategy,” he said. “The only question is whether this has the effect of slowing things down further, which is not at all clear at this moment.”
A New York Times story on June 11 had quoted Deputy Mayor Alicia Glen as saying a plan was being explored that would keep as many as 6,000 units in ST/PCV affordable in exchange for a tax exemption.
However, as of late June, Garodnick told Town & Village there aren’t yet any numbers figured out and city officials stressed that was just one possibility.
“The numbers that have been floated were hypothetical and not based on the substance of any negotiation,” Garodnick said.
Lenders Fannie Mae and Freddie Mac have already committed to not financing a deal that would be unacceptable to the tenants or the city.

CW Capital officially owner of ST/PCV

Stuyvesant Town leasing office (Photo by Sabina Mollot)

Stuyvesant Town leasing office (Photo by Sabina Mollot)

By Maria Rocha-Buschel

CW Capital formally took ownership of Stuyvesant Town and Peter Cooper Village in a move to prevent a “mysterious investor” from taking control of the property, the New York Times reported yesterday.

The paper noted that an unidentified company notified the loan servicer that has controlled Stuyvesant Town and Peter Cooper Village since 2010 that it would be exercising its right to buy a key loan on the property. As CW assumed this was the first step in the unknown company’s attempt to seize control of the complex and force bankruptcy, after which a new owner would then try to buy the property for a low price, the company moved to file the deed on Tuesday and finalized the deal in court on Thursday. As a result of the deal, CW Capital paid $117 million in taxes to the city and $19.8 million to the state.

In an official statement, CWCapital confirmed it had acquired title to Stuyvesant Town and Peter Cooper Village on Tuesday through a deed in lieu of a foreclosure, canceling the auction that was planned for June 13.

“CWCapital Asset Management (CWCAM) determined this action to be in the best interest of the certificate holders and provided the greatest stability for the community,” the company said. “This ‘deed-in-lieu’ will have no impact on residents or on property operations. CWCAM has previously said that it would begin to evaluate disposition alternatives in the latter half of 2014.  That estimate has not changed.”

Although the identity of the company is unknown, the Wall Street Journal noted that the Government of Singapore’s real estate investment arm, GIC, has held a part of the mezzanine debt for years and it would have been possible for more junior holders of the debt to make a move to control the property by buying the piece owned by CWCapital, which controlled the senior most portion of the debt. It is not clear if GIC still owns that piece of the debt.

City Council Member and Peter Cooper resident Dan Garodnick said he’s optimistic about the foreclosure’s cancellation.

“This eliminates the circus that could have unfolded at a mezzanine foreclosure sale,” he said. “It is the right next step that will give time for a more considered process that can protect not only the bondholders, but also the tenants and the city.”

As T&V reported on June 5, Garodnick and other local elected officials are drafting emergency housing legislation that will be introduced at the city and state level. The legislation was mentioned in an email from the ST-PCV Tenants Association sent on Tuesday as a response to the expected foreclosure, although the council member declined to discuss details. Since the news of CW’s court action, Garodnick said he still expects to move forward with the legislation.

State Senator Brad Hoylman, who is working with Garodnick on the legislation in addition to Assemblyman Brian Kavanagh, was also hopeful that the city would protect affordability in Stuyvesant Town.

“The 25,000 resident population of Stuy Town-Peter Cooper is larger than many cities in New York,” Senator Hoylman said. “Imagine the response if, say, Kingston or Glens Falls or were being sold off to real estate investors! We can’t make the same mistake twice by sitting idly by as thousands of homes are being sold out from under middle-class tenants. I’m encouraged by the City Administration’s stated goal  of ‘using every tool at its disposal’ on a solution that protects affordability at Stuy Town-Peter Cooper. This is a critical test of our will and ability to change direction and make preservation of affordable housing a priority.”

Although the auction for next Friday has been cancelled, the ST-PCV Tenants Association is still planning to hold a rally in front of City Hall that day because they are continuing to fight to acquire the property with Brookfield Asset Management.

“A tenant-led purchase is the only defense against a predatory equity takeover,” the TA said in an email blast to neighbors on Thursday after the news broke that CW Capital had taken ownership of the site. “We could be sold to the highest bidder or even to CW’s parent company, Fortress Investment Group. That’s why our rally for June 13 is as important as ever.”

Pols planning housing ‘emergency legislation’

Council Member Dan Garodnick (second to left) with Assembly Member Brian Kavanagh and State Senator Brad Hoylman pictured at a January meeting of the ST-PCV Tenants Association meeting, with (far left0 TA attorney Tim Collins

Council Member Dan Garodnick (second to left) with Assembly Member Brian Kavanagh and State Senator Brad Hoylman pictured at a January meeting of the ST-PCV Tenants Association meeting, with (far left) TA attorney Tim Collins (Photo by Sabina Mollot)

UPDATE: Since this story ran in the June 5 issue of Town & Village, CWCapital moved to formally take ownership of ST/PCV, a story in the New York Times reported. According to Council Member Dan Garodnick, he still expects to move ahead with the emergency legislation.

By Sabina Mollot
In response to the upcoming foreclosure sale of some of the Stuyvesant Town debt, local elected officials are drafting emergency legislation to help protect the stability of the community and others like it.
However, it’s unclear what that legislation would do or if it would impact the foreclosure process in any way.
The legislation was mention in an email sent by the ST-PCV Tenants Association to neighbors on Tuesday afternoon, in response to being asked what the association was doing about the foreclosure.
Along with scheduling a rally on the day of the sale, Friday, June 13 at 10 a.m., in front of City Hall, the email mentioned that the TA had approached the mayor as well as the attorney general to ask for help. Additionally, the TA noted, “State Senator Brad Hoylman, Assemblyman Brian Kavanagh, and Councilman Garodnick are working on an emergency package of legislation to be introduced at both the city and state level to help protect the long-term stability of communities such as ours.”
When asked for details on the legislation, Garodnick said he couldn’t provide any yet.
However, he said, “We are contemplating a variety of options. Hopefully we’ll have more soon. I can’t say much more than that at the moment.”
He also said that he’d been in touch with the mayor’s office about the impending foreclosure. “My sense is that they are looking at ways to be helpful,” Garodnick said.
The mayor’s office hasn’t responded to T&V’s numerous requests for comment on the subject of the Stuyvesant Town foreclosure.
Last week, Garodnick announced the formation of the Coalition Against Predatory Equity, which is aimed at keeping affordable housing from turning into overleveraged housing.
Garodnick, who’s also an attorney, added that the only parties with the power to stop or delay the foreclosure are those “in the capital stack.”
The TA said in the Tuesday email it wasn’t sure if one of the debt holders would attempt to stall the process or if CWCapital would attempt to continue to shut the TA out of the process. CW has still declined to talk business about the TA’s hope for a condo conversion plan. The company has also declined to discuss a bid reportedly being prepared by its parent company Fortress, of $4.7 billion.
“Ultimately, we can control only what we can control,” the TA said. “But we can continue to make sure our voices are heard and try in a thoughtful, aggressive, substantive way to affect what happens when CW forecloses — not just for ourselves but for those who aspire to live here in the future.”
The Tenants Association, along with asking tenants to show up for the rally, is seeking volunteers to flier buildings.
The TA is also offering bus rides to City Hall. Those who want to reserve a seat are asked to register online.

Letters to the editor, May 29

Cartoon by Jim Meadows

Cartoon by Jim Meadows

Time to stand up against predatory equity

On Friday, June 13, after CWCapital forecloses on the mezzanine (junior) debt for Stuyvesant Town and Peter Cooper Village, there is a very real threat that Fortress, the parent company of CWCapital, could use a questionable contract clause to instantly become the owner of our two complexes.

What happens on that day will affect us all. It could be Tishman Speyer redux. The financial press is speculating, full of scenarios providing detailed financial road maps to our demise.

Fortress is seeking to bid $4.7 billion for a property valued at $3.2 billion. Possibly adding nearly 50 percent more debt to the property in ​yet another overleveraged buyout will lead to problems for every one of us. These problems will assuredly be worse than what we have faced since 2006.

A show of our strength starts at 10 a.m. on June 13, when members of our community will assemble at City Hall to demonstrate our backing of the elected representatives who right now are working to try to save us from a predatory takeover. Let’s show Mayor de Blasio that we are a community worth saving, and show the hedge funds and real estate moguls that we are a community to be reckoned with. It’s worth making a serious effort to swell the group that will be bused to City Hall and back.
The two core groups that make up our community must stay united.

The first group — the young families and responsible singles and couples — I like to call the “New Stabilizers.”

The New Stabilizers have held on, many by their fingernails, so they can convert their high rents into more affordable long-term equity as apartment owners. Members of this group are the most vulnerable to losing their homes via exorbitant rent increases. The point will come when large numbers of New Stabilizers will be driven from a community that has suited their needs. More instability for everyone.

It’s heartbreaking that New Stabilizers will have to uproot their children from our fantastic local schools that I and others here got the opportunity to go to. These parents will have the painful task of explaining to their kids why they have to make new friends as they are forced to find another home. For this group, a takeover by anyone other than the tenants is their tipping point.

The second group — long-term traditionally rent-stabilized tenants — has a target on their backs too. They’re not as easy to hit, but a predatory owner will try, using the same tactics so ferociously applied by Tishman Speyer to challenge the legality of tenants’ stabilized status. Demolition of buildings is also a possible — and perfectly lawful — means for eviction. Tearing down our aging structures and “developing” our green spaces with shiny new towers is one sure way to pay down the debt.

For all of us, a tenant-led purchase is the only defense against a new predatory landlord. If you’re a long-term rent-stabilized tenant, you’ll be able to stay in your home and enjoy the same rent-stabilized protections you’ve always had with neighbors as your owners rather than hedge funds or dynastic New York real estate families.

For all of us, a new predatory landlord means more bad leasing policies that expand the number of “converted” apartments, which create higher concentrations of roommates in dorm-like occupancy, accompanied by more of the inevitable noise and bad neighbor behavior.

Churn, transients and predatory speculation are the problems. The answers are the young stabilizing families and responsible couples and singles vesting in their community and standing shoulder to shoulder with their longer-term neighbors who may wish to remain as renters living peacefully in their homes.

We all share the desire for our children and our neighbors’ children to grow up in the same safe, unique, extraordinary city setting many longer-term tenants have had. We need to carry on that tradition.

If ever there was a time to be vocal and visible, that time is now. If we just accept what might happen on June 13, we and our children will have to face the consequences.

Don’t let Friday, June 13, be the final chapter. Join us and fill the steps of City Hall to show the world we are organized and that we are a community, not a commodity. For more information about the rally and to RSVP for transportation, visit http://stpcvta.org/june13 or call (866) 290-9036.

John H. Marsh III,
President,
Stuyvesant Town-
Peter Cooper Village
Tenants Association​

Answers on local effects of climate change

To the Editor:

I’d like to bring to the attention of our neighbors who were affected by Hurricane Sandy but who may still be questioning whether climate change is happening due to human continued use of fossil fuels like coal, oil and natural gas (methane) that the Sierra Club has some answers.

Their monthly meetings take place in the Seafarers & International House located at 123 East 15th Street on the northeast corner of Irving Place on the third Wednesday of the month. On May 21, I attended the third in their sustainability series called “Photovoltaics.” To my surprise and delight the first speaker was Chris Neidl recently back from India and at work again with Solar One. Chris was followed by Marlene Brown from the New Mexico Department of Energy. Both speakers answered many questions from the packed audience about solar energy for New York City.

Many of us remember how when Hurricane Sandy hit, the Solar One building in Stuyvesant Cove Park was the only place in our neighborhood that had electricity due to solar energy stored in its generator and people were coming to power their cell phones and medical apparatus. Solar One staff and volunteers brought solar panels and apparatus to the hard hit areas of the Rockaways and other coastal areas of NYC to help out.

On Wednesday, June 11, Solar One will celebrate its 10th anniversary with a boat trip from the East 23rd Street pier at 6 p.m. followed by a picnic supper and dancing under a big tent at the Cove until 10 p.m.  For more information and other events go to http://www.solar1.org.

The last in the Sierra Club Spring series takes place on Wednesday, June 18 on President Obama’s climate action plan with the Judith Enck, Head of Region 2 EPA (NY, NJ and Puerto Rico) as the speaker. There have been many ideas suggested for how hard hit coastal areas like ours can be protected from future storms. This would be a good time to ask our questions and hopefully get some answers. Doors open at 6:30 p.m. for socializing and refreshments. Programs start at 7 p.m. $10 suggested donation; $3 for students.

Who knows? Maybe it’s a dream, but perhaps sometime in the future Stuyvesant Town could become an Eco Village and resilient.

Joy Garland, ST

 

Stuyvesant Town-Peter Cooper Village Tenants Association will rally on day of foreclosure sale

ST-PCV Tenants Association President John Marsh, pictured in May, 2013 with local elected officials and tenants, protests a mid-lease increase. (Photo by Sabina Mollot)

ST-PCV Tenants Association President John Marsh, pictured in May, 2013 with local elected officials and tenants, protests a mid-lease increase. (Photo by Sabina Mollot)

By Sabina Mollot
Following reports that Stuyvesant Town/Peter Cooper Village’s special debt servicer, CWCapital’s own parent company, Fortress, intends to bid on the property on the day of a foreclosure sale, the ST-PCV Tenants Association has organized a rally to protest the way business is being quietly conducted.
Because the Fortress bid has been reported to be $4.7 billion, according to Bloomberg, TA President John Marsh said at that price, the pressure to make a profit is likely to create a repeat scenario of the Tishman Speyer purchase with its business plan of evicting tenants paying lower rents.
“Right this instant we all need to start talking about what we are going to do about Fortress and the other sharks circling us,” TA President John Marsh told neighbors on Facebook. “The writing is on the wall. It’s about to happen again. Tishman Speyer redux. The financial press is speculating, full of scenarios providing detailed financial road maps to our demise.
Another issue is the debate over whether a purchase by Fortress is a conflict of interest, which Susan Steinberg, chair of the Tenants Association, said is difficult to answer without looking at a contract that’s confidential.
“So nobody can read the clauses, and I think that would have been very helpful if some attorneys would have been able to take a look at it,” she said.
“To me,” Steinberg added, “it looks like insider trading. That’s my perception. But without having access to a basic document, it’s really hard to make a judgment call.”
She also said she thought it was disingenuous of the special servicer to refuse to talk business with the TA, after initially saying the company just wanted to wait until the “Roberts v. Tishman Speyer” negotiations were concluded. “They were stringing us along,” said Steinberg.
The Tenants Association announced its own intention to bid, with partner Brookfield Asset Management, in 2011. The TA/Brookfield bid has never had a dollar amount attached to it and that has not changed. However, the TA has stressed that the bondholders would be made whole.
A spokesperson for CWCapital has previously declined to comment on the reported Fortress bid and was not immediately available for comment on the upcoming rally.
The purpose of the rally, the TA said, is to show any potential owner the political might of the tenants.
“It’s to let them know if they think we’re going to sit down and let them roll over us, they’re wrong,” said Steinberg. “If they think we can’t create trouble for them, they’re wrong. We expect the elected officials to continue to support us.”
Marsh added, “We need a responsible owner, who takes the long view and not just someone looking to make a quick buck, getting in and getting out.”
On May 13, CWCapital announced it would begin foreclosure proceedings on a chunk of the mezzanine debt that’s reportedly worth $300 million and set a sale for June 13. By doing so it will be able to take over the property, at least temporarily.
The TA’s rally will begin that day, a Friday at 10 a.m. on the steps on City Hall. Local elected officials are expected to attend and the TA is asking tenants to show up as well.

ST-PCV Tenants Association still in, despite reported Fortress bid

ST-PCV Tenants Association President John Marsh speaking at a Tenants Association meeting on Saturday, with Assemblyman Brian Kavanagh, Comptroller Scott Stringer, State Senator Brad Hoylman and Council Member Dan Garodnick (Photo by Sabina Mollot)

ST-PCV Tenants Association President John Marsh speaking at a Tenants Association meeting on Saturday, with Assemblyman Brian Kavanagh, Comptroller Scott Stringer, State Senator Brad Hoylman and Council Member Dan Garodnick (Photo by Sabina Mollot)

On Thursday morning, the Stuyvesant Town-Peter Cooper Village Tenants Association announced that it was still interested in buying, and hoped that now that foreclosure proceedings have begun, CWCapital would be ready to talk business.
In an email sent out to neighbors (also available online) Tenants Association President John Marsh said, “We want to make certain that the young families just now trying to put down roots here, can carry on that tradition and that no tenant will ever again be at the mercy of a predatory landlord. The TA-Brookfield plan would deliver full recovery to the primary bondholders. Now that CW can no longer claim the place is not for sale, we hope they will take our offer seriously.”
CWCapital has so far kept its tradition of not saying anything about selling the place, other than a brief statement on Tuesday to announce the foreclosure on the property’s mezzanine debt and a sale scheduled for June 13.
Marsh also said in the email, “CWCapital will become the owner of the property on June 13, at least temporarily. Subsequently, they could hold an auction similar to what we saw in 2006, when Tishman Speyer bought the property.”
A report by Businessweek has said CW parent company Fortress was preparing a bid of $4.7 billion.
While he was running for mayor, Bill de Blasio promised he would keep ST/PCV affordable. Council Member Dan Garodnick has said he learned that a tenant-led bid would have the support of the city’s housing commissioner, Vicki Been, and the deputy mayor for economic development, Alicia Glen. In an official statement, Glen said, “Stuy Town and Peter Cooper Village are critical bulwarks of affordability for middle class families. Our housing plan emphasizes preservation, and with so many affordable units at risk in these developments, the stakes are too high to be hands-off. We are in active discussions with the lenders, Councilman Dan Garodnick and tenants in the hopes of reaching a joint approach.”

 

Editorial: Tenants still kept in the dark about the future

Tenants protest outside the leasing office this time lasy year. Their signs, along with the Tenants Association logo, read: ST-PCV A communiy. Not a commodity. (Photo by Sabina Mollot)

Tenants protest outside the leasing office this time last year. Their signs, along with the Tenants Association logo, read: ST-PCV A community. Not a commodity.
(Photo by Sabina Mollot)

On Tuesday, CWCapital dropped the bombshell that it would be foreclosing on Stuyvesant Town’s mezzanine debt and that there would be a sale in one month. A possible bidder who’s since emerged is CW’s own parent company, Fortress, at a rumored offer of $4.7 billion.
Since neither Fortress or CW have been willing to comment on this, it’s still not official or a done deal by any means.
However, when one considers the Stuy Town special servicer’s history of communicating on this issue, rumors wind up being the most reliable thing this community’s got to go on.
As of T&V’s Wednesday press time, even a developer who’s been eager to bid on the property, Gerald Guterman, now has doubts due to the high price. Because even if tenants are eventually given the opportunity to buy, how many current residents would actually be able to afford to?
As of Tuesday, the Tenants Association maintained that it is interested, with partner Brookfield, of owning, and no longer seeing the community get passed around like meat.
But again, there’s the issue of the pricetag. Speculation of what ST/PCV could be worth is what led to the most infamous real estate flop ever, with Tishman Speyer losing its investors’ billions. Is the place really worth $4.7 billion, even in a recovering market? And if a bidder thinks so, how many more (in many cases perfectly legal) efforts will be made to price out tenants in unrenovated apartments paying lower rents? Or even gouge those already paying higher rents? There’s always more “improvements” that could be made on the tenants’ dime permanently.
The new mayor made a campaign trail promise to protect ST/PCV and other places like it from the circling of real estate buzzards like the ones who wrongly thought a complex built for the middle class was the goose that laid golden eggs in 2006. Now it is time to see if he meant it.

CWCapital foreclosing on Stuy Town debt

Stuyvesant Town leasing office (Photo by Sabina Mollot)

Stuyvesant Town leasing office (Photo by Sabina Mollot)

By Sabina Mollot
After years of remaining silent on its plans for putting Stuyvesant Town/Peter Cooper Village up for sale, CWCapital made a move on Tuesday to foreclose on the property’s mezzanine debt and then it was reported that Fortress, CW’s parent company, was preparing a $4.7 billion bid.
Neither Fortress or CWCapital would comment on that report, but in a brief written statement, the special servicer of the property, which also manages a chunk of the mezzanine or junior debt, said that a sale was scheduled to take place on June 13.
The company went on to say the action “will have no impact on our residents or on property operations.”
In response to the news, which was first reported in the New York Times, ST-PCV Tenants Association Chair Susan Steinberg said she was tired of seeing the community being treated “like a football.”
“Everything that went into building a unique residential complex for the middle class has been upended in the interest of the bottom line,” she said. “We are being punted towards a goal that isn’t ours.” She added that it was time to have tenants own the place. But that was before hearing about the potential Fortress bid.
The Tenants Association had partnered with Brookfield Asset Management in 2011 in the hopes of buying the complex and going condo. CWCapital had declined to negotiate though saying no business could be discussed until “Roberts v. Tishman Speyer” was settled. But after the settlement, there was still no chatter about bidding or a conversion.
Council Member Dan Garodnick said anyone could bid in the foreclosure, but CWCapital itself could be the winning bidder, using its unique position as debt servicer.
“They could bid billions of dollars without writing a check,” he said, “Because they are owed money here.”
He added that the move to foreclose on the mezz debt wasn’t really a surprise, since technically the property’s already been in foreclosure for years.
“It just hasn’t been formalized because there hasn’t been any action to foreclose on the lenders,” said Garodnick. Ultimately, he said what matters is that tenants’ rights are preserved.
In an official statement, the Council member also said the great bidding war of ‘06, in which potential owners were wrongly led to believe the sky was the limit on what they could charge for rents, shouldn’t be repeated.
“We cannot allow an overheated auction with wild expectations that puts a target on the back of rent-stabilized tenants.” he said. “We have seen that movie before. Tenants, and the City of New York, cannot afford to let that happen again.”
That view was shared by Assemblyman Brian Kavanagh, who said any developer with eyes on this particular prize needs to know that “This is a community that will stand up for itself.” He also said he hoped the real estate industry will have learned from Tishman Speyer’s mistakes of unrealistic expectations and disregard for the Rent Stabilization Law.
“They shouldn’t bank on being able to remove any of the tenants,” said Kavanagh. The “Roberts v. Tishman Speyer” class action suit will keep ST/PCV stabilized until the J-51 tax abatement expires in 2020. On the other hand, with one-bedroom apartments in Stuy Town going for rents that start at close to $3,000, many of the newer residents of the community still consider themselves stabilized in name only.
Developer Richard LeFrak, who bid on the property in 2006, is possibly interested in doing so again, according to the Times piece. Another developer, Gerald Guterman, who’s openly expressed a desire to turn ST/PCV co-op, said that now he’s not sure what he wants to do.
Noting that the announcement by CW only gives potential bidders a month lead time, he quipped, “Fortress makes an offer today. You think it’s because they own CW and they’re not giving outsiders the opportunity? How do you have time to (plan) unless you are familiar with what’s going on?”
As for the reported bid amount, Guterman said he isn’t sure how that sale price could make it possible for current tenants to buy if given the option. He also wasn’t sure if the price is worth it considering all the students and others living in apartments converted with pressurized walls.
“It’s still a number where I could do it but I’m not sure I want to,” he said.
Meanwhile, last August, while still a candidate for mayor, Bill de Blasio penned an op-ed for this newspaper, saying the city should make sure ST/PCV remains affordable.
“While Peter Cooper Village-Stuyvesant Town is privately owned, the city has an obligation to keep its homes affordable for hardworking New Yorkers and their families,” he said. “PCV/ST was created through the power of the city and its use of eminent domain – therefore, it’s the responsibility of the city to ensure that these homes and other affordability housing are never beyond the reach of middle class New Yorkers.”
A spokesperson for the mayor did not respond to a request for comment on this story, but Garodnick said he learned that a tenant-led bid would have the support of the city’s housing commissioner, Vicki Been, and the deputy mayor for economic development, Alicia Glen.
News of the imminent sale comes on the heels of a settlement over five MCIs between CWCapital and the Tenants Association and word that “Roberts v. Tishman Speyer” tenants will finally be paid the money they’re owed by CW.
With Tishman having paid a record-breaking price of $5.4 billion, along with $1.4 billion in mezzanine debt, there was $3 billion in senior debt (the lenders of which are represented by CW) and $1 billion in equity.