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.

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City exploring options to maintain affordability in Stuyvesant Town

Senator Chuck Schumer with other elected officials at a rally in Stuyvesant Town in 2010 (Photo by Sabina Mollot)

Senator Chuck Schumer with other elected officials at a rally in Stuyvesant Town in 2010 (Photo by Sabina Mollot)

By Sabina Mollot
One month after CWCapital’s beginning of the foreclosure process of Stuyvesant Town, city officials as well as U.S. Senator Charles Schumer have announced ways they were trying to help tenants in maintaining affordability.
One possibility is offering a tax exemption in which the owner would commit to a 40-year agreement for affordability. That possibility, first reported in the New York Times, could preserve as many as 6,000 apartments for families of four earning between $65,000 and $135,000 a year. This is just one option, however.
A city official confirmed today that there are other government programs that could be explored and there have been good faith discussions with CWCapital as well as Council Member Dan Garodnick in an effort to create more transparency going forward. CWCapital’s decision last week to take ownership of the property is being seen as an opportunity to take the time to explore options in maintaining affordability. More specifically, the idea is to avoid a repeat situation of the 2006 sale to Tishman Speyer when tenant affordability wasn’t even a factor. Because any transaction would be considered private, the city has some but not limitless sway on the outcome and currently, the administration is trying to gauge what tenants’ rents and income levels are to determine what their needs are.
Meanwhile, Fannie Mae and Freddie Mac, who provided crucial mortgage financing in the Tishman Speyer sale have committed to not financing a deal that would be “unacceptable to tenants and the city,” the Times quoted Schumer as saying.
In response, Mayor de Blasio called this a “positive step.”
In a written statement, he added, “We are aggressively using all the levers we have at our disposal to protect affordability at Stuy Town. Senator Schumer has been a forceful leader in pushing Fannie Mae and Freddie Mac to make sure the city and tenants have a better shot at shaping this outcome and protecting this community for middle class New Yorkers.”
The administration has also been quick to note, however, that while most buyers would require help from Fannie and Freddie for such a large transaction, there are others that could possibly make a deal without those agencies’ financing.
Still, the news of their cooperation has been greeted with enthusiasm by the Tenants Association, which still plans to hold a rally in front of City Hall on Friday at 10 a.m. The rally will be attended by elected officials, including Schumer.
Susan Steinberg, chair of the Stuyvesant Town-Peter Cooper Village Tenants Association, said the news left the TA “very encouraged. Our voices have been heard and our advocacy on behalf of STPCV tenants is bearing fruit. The need to maintain STPCV as a place where ‘families of moderate means might live in health, comfort and dignity’ is important to New York City, and beyond. Middle class affordability can’t become a thing of the past. We welcome the support and participation of our state and local electeds in helping us protect our homes.”
Garodnick, along with dozens of other local city, state and federal politicians had sent a letter to Fannie Mae, Freddie Mac, the Federal Housing Finance Agency and Housing and Urban Development (HID) on June 10 in an effort to get Fannie and Freddie to not invest in deals that put affordable housing at risk.
Today, he praised the commitment made by Fannie and Freddie.
“This commitment from Fannie and Freddie will help us cut off the oxygen to another predatory deal here,” said Garodnick.

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.

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.

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.