Tenants of Stuyvesant Town-Peter Cooper Village, Manhattan’s largest apartment complex, are asking bondholders of the defaulted mortgage to pursue a sale of the property, bypassing the company working out the loan.
CWCapital Asset Management LLC, which has controlled the 11,000-unit complex since the mortgage went into default in 2010, is refusing to entertain offers that would result in a payoff for the debtholders it represents, according to a letter the Stuyvesant Town-Peter Cooper Village Tenants Association sent to residents. The group, which has been working with Toronto-based Brookfield Asset Management Inc. (BAM/A) on a plan to convert apartments into condominiums and pay off bondholders, said that CWCapital refuses to consider it.
“It has thus far been unwilling to work directly with us and to share the information necessary for us to formalize a bid in advance of opening up the property to a formal sale process,” the association wrote. “CWCapital’s overall response to our attempts to engage it has been to stall and delay.”
Tenants want to appeal directly to bondholders, as well as bond-rating companies and Fortress Investment Group LLC (FIG), CW’s parent company, according to the letter, released today.
Joe DePlasco, an outside spokesman for CW, declined to comment on the letter.
CWCapital, the so-called special servicer for the $3 billion senior loan, represents investors of the mortgage debt, and is advancing interest payments on the loan to them as it manages the property, according to data compiled by Bloomberg.
A sale of the complex has been held up as CWCapital negotiates a legal settlement to a 2007 lawsuit filed by tenants, which challenged how high lease rates could be set at the rent-stabilized property, according to servicer commentary data compiled by Bloomberg. The settlement will determine the legal rents that can be charged at more than 4,000 units, and will also determine how much in overcharges CWCapital must refund to current and previous tenants.
The value of the property in an eventual sale can’t be determined until an agreement is reached about what rents the owner can legally charge, according to servicer commentary.
“Litigation resolution, either through continued litigation or settlement, is a prerequisite to optimal capital recovery,” according to the servicer commentary, which said that a resolution is unlikely before 2014.
Bondholders have little sway over CW’s decision making, though the tenants’ move could increase political pressure on the servicer to negotiate, according to a note today by Richard Parkus and Andy Bernard, analysts with Morgan Stanley.
“The ability of bondholders to directly impact special servicer behavior is limited,” they wrote in their note.
The 80-acre (32-hectare) Stuyvesant Town and Peter Cooper Village spans from 14th Street to 23rd Street on Manhattan’s East Side. MetLife Inc. (MET) sold the complex in 2006 to Tishman Speyer Properties LP and its partner BlackRock Realty LP for $5.4 billion, a record for a New York commercial real estate deal at the time.
Tenants sued MetLife and Tishman Speyer in 2007, claiming the companies improperly forced at least one-fourth of the complex’s residents to pay market rents while the owners received more than $25 million in tax breaks.
In January 2010, Tishman Speyer and BlackRock missed a $16.1 million debt payment on the mortgage and said they would cede control of the complex to lenders after its value fell and they were prevented from raising rents.
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