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CMBS Holders Allege ‘Brazen Scheme’ to Steal $60 Million

A group of commercial-mortgage backed securities investors including Angelo Gordon & Co. and Winthrop Realty Trust sued a junior lender and other parties, alleging a “brazen scheme,” to steal more than $60 million from bondholders, according to a New York court filing.

The investors, three collateralized debt obligations and TCG Holdings I LLC, hold pieces of a $1.26 billion deal sold by Credit Suisse Group AG in 2007, Royal Bank of Scotland Group Plc analysts led by Richard Hill wrote in a report today. They are seeking to block Galante Holdings Inc. from purchasing a $150 million loan on the J.W. Marriott Summerlin Hotel, Resort, Spa and Casino in Las Vegas for less than $85 million, according to the court filing.

“This action seeks to stop in its tracks the brazen scheme of a junior lender who here attempts to steal more than $60 million in value from a group of senior lenders,” according to the complaint filed yesterday in New York State Supreme Court in Manhattan. “Galante’s bid to seize control of the mortgage loan and abscond with more than $60 million in value, as well as with critical control rights, fails for numerous reasons.”

Special Servicer

The suit names TriMont Real Estate Advisors as the so-called special servicer. Special servicers, firms that handle troubled property loans packaged into securities, have the option to buy defaulted loans provided the value is deemed fair. According to the complaint, Galante, which owns $10 million in junior obligations against the property, “conspired” with the servicer to purchase the debt for less than it’s worth, the RBS analysts wrote.

“The lawsuit highlights how complicated the fair-value-purchase option can be,” Hill, who is based in Stamford, Connecticut, said in a telephone interview.

A message left for Atlanta-based TriMont wasn’t returned.

“The case was just filed, and at this point we think the allegations speak for themselves and don’t want to make any additional comment,” said Allan Krinsman, senior counsel at Angelo Gordon, the investment firm that manages one of the CDOs.

Galante acquired the junior debt from Citadel Securities Trading LLC on Feb. 9, and then “hand picked” TriMont as the special servicer, according to the complaint. The servicer didn’t make an attempt to work out the loan, nor did it hire a broker to market the debt in order to determine its true value, the plaintiffs alleged.

‘Not an Affiliate’

Douglas Rohrer, a principal at advisory firm Aberdeen Realty Holdings Ltd., was named as a defendant in the suit, along with Aberdeen. Rohrer has worked for, owns, or has formed several of the defendants including Aberdeen, Citadel and Galante, according to the filing.

“Aberdeen is not an affiliate of Galante and is not a principal in the transaction despite what others may say,” Rohrer said in a telephone interview. Aberdeen “has no authority to enter into this transaction or make decisions with regard to this transaction.”

Rohrer was employed at Citadel from July 2010 to August of this year, according to records from the Financial Industry Regulatory Authority. Katie Spring, a spokeswoman for Citadel, declined to comment.

While Rohrer claims no affiliation with the principals of this transaction, he’s been connected with the debt since he originated the mortgage as a lender at Credit Suisse, according to Michael Ashner, chairman and chief executive officer of Winthrop.

“We are not known for taking these abuses lightly,” Ashner said in a telephone interview.

The 54.6-acre Las Vegas hotel consists of 548 guest rooms and a full-service casino, according to the complaint.

The case is Cedarwoods CRE CDO II Ltd. v. Galante Holdings Inc., 11-653624, New York State Supreme Court in Manhattan (New York County).

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