A group of investors in commercial-mortgage backed securities including Angelo Gordon & Co. and Winthrop Realty Trust sued a junior lender and other parties in New York State Supreme Court in December, alleging a “brazen scheme” to steal more than $60 million from bondholders.
Justice Melvin Schweitzer dismissed the lawsuit because the plaintiffs failed to comply with a clause in a pooling agreement that required them to notify a trustee before suing, according to a ruling dated July 26 and posted yesterday. The “no action” clause requires the holders of 25 percent of the participation interests of each class in the pact to notify the trustee of the pool before filing a lawsuit, he said.
The case involves the securitization of a $160 million mortgage loan on the JW Marriott Summerlin Hotel, Resort, Spa & Casino, a resort with more than 540 rooms on 55 acres about 15 minutes from the Las Vegas Strip, according to Schweitzer.
The loan was divided into a $150 million senior interest and a $10 million junior interest. The senior participation was pooled with 10 other mortgage loans and sold according to an agreement, according to Schweitzer’s ruling.
The original holder of the junior interest in the loan in February 2011 transferred it to Citadel Securities Trading LLC, which then transferred the interest to Galante Holdings Inc. for $10 million, Schweitzer’s ruling said.
The lenders sent the loan’s borrower, HotSpur Resorts Nevada Ltd., two maturity notices last year anticipating a default, yet the master servicer, KeyCorp Real Estate Capital Markets, reported last August that HotSpur intended to seek “suitable financing” and pay the loan in full by the maturity date of November 2011, according to Schweitzer’s ruling.
In September 2011, HotSpur notified Galante that it would be unable to make payment and Galante appointed TriMont Real Estate Advisors as special servicer to administer the loan and supervise any restructuring or remedies in connection with a default.
The loan went into default on Nov. 9, 2011, and Galante told TriMont and the master servicer that it was planning to buy the senior interest under an option in the pooling agreement, according to Schweitzer.
The plaintiffs told the trustee on Dec. 22 that they were opposing Galante’s efforts to close on the purchase of the senior interest. The trustee “refused to take immediate action” and the plaintiffs sued on Dec. 28.
The case is Cedarwoods CRE CDO II Ltd. v. Galante Holdings Inc., 11-653624, New York State Supreme Court in Manhattan (New York County).
To contact the reporter on this story: Chris Dolmetsch in New York at email@example.com