Stuy-Town Tenants Aim to Ax the Middle Man

Residents of the huge complex accuse CW Capital of stonewalling their efforts to purchase the foreclosed property along with partner Brookfield, and appeal directly to debt-holders.

CW Capital Asset Management, is stone-walling the efforts of the Stuyvesant Town Peter Cooper Village Tenants Association and its partner Brookfield Asset Management to buy the sprawling property and convert the property so it can pay off its debt, according to a statement from the tenants association Tuesday morning.

The Tenants Association sent a letter to residents at the rent-regulated property, which runs from East 14th to East 23rd streets along the East River, on Tuesday. It stated that henceforth the group will seek to cut out the middleman—CW Capital, the special servicer that represents the bond holders in the foreclosed property—in favor of reaching out to the debt-holders directly. The reason is that CW Capital has not been responsive. City Councilman Dan Garodnick, a long-time resident of the complex, sent a similar letter to CW Capital.

“Despite having teamed up with word-class legal and financial advisors Paul Weiss, and Moelis & Company, and a highly credible capital partner, Brookfield Asset Management, and communicating in multiple ways with CW Capital, it consistently declines to engage with us,” said John Marsh, president of the Tenants Association, in a press statement. He added: “This is wrong and we believe that the bondholders, Wells Fargo in its role as Master Servicer of the commercial mortgage-backed securities] trusts, CW Capital’s parent company Fortress, and the relevant bond rating agencies will view this issue differently.”

CW Capital declined to comment.

According to the Tenants Association, CW Capital said it will not discuss future plans for the property until the ongoing litigation regarding rents is settled. Five years ago, tenants sued former owners, MetLife and a Tishman Speyer-led investor group, alleging that both companies illegally deregulated units while receiving tax benefits known as J-51s. In 2009, the court reversed an earlier decision and ruled in favor of the tenants. To date, its unclear how much rent is owed to tenants, but the Tenant Association accuses CW Capital of using the lawsuit “as a pretext for inaction,” adding the special servicer of profiting from the situation, as it has been collecting fees on the property since it took on the additional role of the property’s manager in August.

In June, a report by JPMorgan Securities revealed that the Tenant Association and Brookfield plan was the best chance of the bondholders getting back their money. Details of the plan were not outlined, but the plan calls for converting the rent-regulated complex to an affordable condominium and pledged that during the conversion no tenants would be evicted. In 2011, the property was valued at $3 billion.

The fate of Stuy-Town has been in limbo since late 2009 when the Tishman Speyer-led partnership, defaulted on its mortgage and then turned the property over to CW Capital, to work out the loan. The Tishman-led partnership bought the complex in 2006, paying a record $5.4 billion.

“After decades of peace in Stuyvesant Town and Peter Cooper Village, the last six years have brought conflict, upheaval, and instability,” wrote Mr. Garodnick in his letter to CW Capital. “While we cannot point fingers at CW Capital for creating the problem, we certainly can fault you for prolonging it.”

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