CWCapital Asset Management LLC, which represents senior debt holders of Stuyvesant Town-Peter Cooper Village, may be poised to take the title to Manhattan’s biggest apartment complex at a foreclosure sale next week.
CWCapital has been taking steps since February in anticipation of controlling the property, home to about 25,000 residents. The company may bid up to the $3.67 billion that lenders are owed on the defaulted mortgage without having to commit any money, known as a credit bid. Unless a third party is willing to pay more for the complex, which Fitch Ratings valued at $1.8 billion in January, then CWCapital would take the title.
“We can credit bid up to the full amount of what we are owed,” said Greg Cross, the lawyer representing CWCapital in the foreclosure. He declined to say whether the company would bid the price that high or accept a lower offer.
Bill Ackman’s Pershing Square Capital Management LP and Winthrop Realty Trust, which own $300 million of debt on the property, this week lost a bid to stop the Oct. 4 sale. Ackman and Winthrop CEO Michael Ashner met with representatives of CWCapital today, according to two people briefed on the matter. The meeting ended without an agreement, said one of the people, who asked not to be named because the talks are private.
CWCapital hired Rose Associates Inc., the complex’s former manager, in February to advise on a transition. CWCapital said in court papers that it spent “millions” since then on preparation plans that include updating the computer system that governs rent, maintenance records and the private security force; reviewing contracts with at least 89 vendors; and recruiting new management to work on-site.
Current owner Tishman Speyer Properties LP resigned as manager of the buildings on Sept. 23, according to court papers filed that day by CWCapital. Tishman agreed to stay on an “as- needed basis” but has refused to manage the property once title is transferred to a new owner. Sixteen members of Tishman’s Stuyvesant Town-Peter Cooper Village management staff — including positions equivalent to chief executive officer, and chief operating officer — will leave when Tishman does.
“Many have in fact already transitioned off the property in expectation of a late September transition of the property to senior lenders,” according to an affidavit by Andrew MacArthur, a CWCapital vice president, filed on Sept. 23.
Should CW take control of Stuyvesant Town-Peter Cooper Village next week, it will hire Rose Associates as the manager, putting the group in charge of collecting rents and maintaining the property while CW owns it, Cross said.
CW would need to pay city and state transfer taxes of 3.025 percent of the bid price if it takes the title, according to Joshua Stein, principal of Joshua Stein PLLC, a New York-based independent commercial real estate law practice that isn’t involved in the case.
CW would also need to pay a second transfer tax when it eventually sells the property, Stein said.
“Their position could be that we just want to acquire this damn thing,” Stein said of CWCapital. “Lets just buy it in, we’ll pay the transfer tax, and we’ll hope that the incremental value of holding and waiting will exceed the incremental cost of paying a second transfer tax.”
CW could avoid the double transfer taxes by negotiating a deal with a buyer ahead of the auction, and then selling the $3.67 billion mortgage to that acquirer moments before the foreclosure sale, Stein said. That buyer would still need to pay one transfer tax.
Assigning the Mortgage
“The new owner of the mortgage then takes control of the foreclosure process” and can credit bid the $3.67 billion, Stein said. Assigning a mortgage to another party doesn’t incur a transfer tax, he said.
CW could also make arrangements with likely bidders ahead of the auction to assure that they attend the sale and make an offer, Stein said.
Developer Gerald Guterman, who is seeking to acquire the property and convert it to co-ops, said Sept. 16 that his team at Condo Recovery LLC would like to have the mortgage assigned to them by CW ahead of the auction. He declined to say in a Sept. 29 interview if he was pursuing that option, bidding at the sale or trying to buy the property at a later date from CW.
“We have three options and we’re considering all of those options right now,” he said.