CW Capital Asset Management is reportedly considering buying $300 million of mezzanine debt secured against New York's Stuyvesant Town residential complex.
According to Bloomberg, the special servicer is in talks with mezzanine holders Pershing Square Capital Management and REIT Winthrop Realty Trust to buy the senior mezzanine loans, possibly to make the foreclosure of the 11,227-unit complex as clean as possible.
The two sides went to New York's state Supreme Court in August over who had the right to foreclose on the 80-acre multifamily complex.
CWCapital represents the senior mortgage holders for Stuy Town, as the complex is known, and insisted the $3.67 billion first mortgage had to be repaid in full before any foreclosure proceedings could take place.
Pershing Square and Winthrop (PSW) rejected that, telling Supreme Court Justice Richard Lowe it had the right to foreclose on the equity interests of Stuy Town, pledged as collateral at the time of the original deal in 2006, when Tishman Speyer and BlackRock Realty acquired the complex for $5.4 billion.
Justice Lowe ruled in favour of CWCapital saying the intercreditor agreement for the deal was “ambiguous” in requiring PSW to “cure all senior loan defaults” in full before foreclosure.
However PSW immediately appealed the ruling opening the doors for further litigation. Buying the mezzanine debt would avoid legal wrangling and allow for a cleaner foreclosure process.
Bloomberg cited sources familiar with the matter as saying PSW would consider selling the mezzanine debt stake for at least $45 million.
A foreclosure auction planned by CWCapital for 4 October was postponed, Bloomberg added.