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Pershing Loses Bid to Stop Stuyvesant Foreclosure

Pershing Square Capital Management LP and Winthrop Realty Trust lost their bid to halt a planned foreclosure sale next week of the Stuyvesant Town-Peter Cooper Village apartment complex in Manhattan.

A New York state appeals court rejected a request by Pershing and Winthrop for a stay of the Oct. 4 foreclosure planned by the property’s senior debt holders. The court didn’t give a reason for its ruling in its one-page order today.

Although the foreclosure can go forward, Pershing and Winthrop will continue to pursue their appeal of a lower court ruling blocking their effort to take control of the 11,000-unit apartment complex, said Edward Weisfelner, an attorney for Pershing and Winthrop, in a phone interview today.

“The senior lenders are going to be exposed to whatever damages we suffer,” he said. “We still remain convinced we will prevail on appeal.”

Greg Cross, an attorney for CWCapital Asset Management LLC, the special servicer for the senior mortgage on the property, said in a phone interview that the ruling “reaffirmed” a lower-court decision preventing Pershing and Winthrop from proceeding with their own foreclosure.

“We’re moving forward with our foreclosure on the fourth,” Cross said.

Pershing and Winthrop, both junior debt holders, asked the appeals court to stop the foreclosure by senior lenders. The move came after a lower-court judge issued a preliminary injunction on Sept. 16 blocking Pershing and Winthrop from foreclosing on the property unless they first paid senior creditors the $3.67 billion that they are owed.

‘Complete Loss’

Pershing and Winthrop said in court papers they would suffer “a complete loss” of their investment if the appeals court didn’t stay the foreclosure by senior lenders while their appeal is considered.

Tishman Speyer Properties LP and BlackRock Inc. bought Stuyvesant Town-Peter Cooper Village, Manhattan’s biggest apartment complex, for $5.4 billion in 2006, a record New York commercial real estate deal at the time. They stopped payments on the mortgage loan in January after the development’s value sank and rents didn’t rise as fast as anticipated.

In June, a federal judge in New York approved a foreclosure of the property by senior lenders.

Senior creditors sued Pershing and Winthrop in New York state court in August, arguing an agreement between the two groups of creditors prohibited Pershing and Winthrop from taking control of the property by foreclosing on the entities that own it.

Pershing and Winthrop disagree, arguing they have the right to foreclose on their collateral, which is separate from the lenders’ collateral. Pershing and Winthrop’s investment is backed by equity interests in the borrowers of the mortgage. Senior lenders are secured by the actual property.

The case is Bank of America NA v. PSW NYC LLC, 10-651293, New York State Supreme Court, Appellate Division, First Department (Manhattan).

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