Sale Lends Hope to Manhattan Tenants in Limbo

Tenants of Stuyvesant Town and Peter Cooper Village will gather for a foreclosure auction on Monday in the hope of ending months of uncertainty about the fate of their sprawling Manhattan complex.

White Packert | Photographer's Choice | Getty Images

Since owner Tishman Speyer defaulted on the 11,200-unit complex in January, residents have been in limbo, awaiting the emergence of another landlord.

Creditors and potential bidders have been wrangling for control of the landmark buildings since the default.

Tishman Speyer bought Stuyvesant Town at the height of the housing market boom in 2006 for $5.4 billion, with the intention of upgrading it and raising rents. The property’s value is now estimated at about $1.8 billion, according to Fitch.

Potential bidders will face an uphill challenge as CW Capital, the special servicer for lenders with the first right of repayment, can pursue a “credit bid” of up to $3.67 billion to take ownership of Stuyvesant Town. It can do so without having to spend any additional money, giving it a distinct advantage.

“Typically, the senior lender does prevail at the sale because it does not have to come up with cash,” said James Schwartz, a real estate partner with Mitchell Silberberg & Knupp.

The auction itself was in limbo until last week when an appellate court denied a request by Pershing Square Capital Management and Winthrop Realty Trust (PSW) to block the foreclosure sale and pursue its own equity foreclosure of Stuyvesant Town. The group, which last month invested $45 million to acquire $300 million in mezzanine loans secured by the property, is still appealing against that ruling.

“Unfortunately, this decision may have the effect of precluding the ability of PSW and the tenants at Peter Cooper Village and Stuyvesant Town from participating in the restructuring of the ownership of the property and implementing a permanent affordable housing solution,” PSW said.

Residents of the complex, which houses about 25,000 people, have struggled to find a viable partner for their own bid. They hope the units can be converted to co-ops or condominiums, giving residents the option to buy or continue as rent-stabilized tenants.

“We’re pleased that CW Capital has already expressed support for the goals that the tenants association has set out,” said Dan Garodnick, a New York City councilman and Peter Cooper Village resident. “Should they take title, we will pursue working together with them.”