The future of Manhattan’s iconic multifamily complex Stuyvesant Town and Peter Cooper Village will not be made for several more weeks, after a New York Supreme Court judge today refused to immediately rule on whether a mezzanine foreclosure of the property was legal.
State Supreme Court Justice Richard Lowe in Manhattan played host to a packed court room as CWCapital Asset Management, Bank of America, Pershing Square Capital Management and Winthrop Realty Trust battled it out over which party had the right to control Stuy Town’s foreclose process.
At stake, is the 56-building, 11,000-unit apartment complex spread over 80-acres of the East Side in Manhattan.
A joint venture between Pershing Square and Winthrop, known as PSW, launched mezzanine foreclosure proceedings against Stuy Town last month, shortly after acquiring the three most senior mezzanine loans for $45 million or 15 cents on the dollar from Winthrop.
The move though has outraged special servicer CWCapital and Bank of America, trustees for the mortgage holders, which argued that the complex’s $3.66 billion first mortgage had to be repaid before any foreclosure could take place.
Gregory Cross, attorney at law firm Venable, representing CWCapital Asset Management
CWCapital fears PSW will throw Stuy Town into bankruptcy protection following any foreclosure, supposedly to force a restructuring of the senior loan. 
You don’t need a road map, you don’t need a chart and you don’t need to be an English major to understand what that one paragraph [in the intercreditor agreement] means.
However, CWCapital told Justice Lowe it was also in the midst of foreclosing against Stuy Town, following default by owners Tishman Speyer and BlackRock. The servicer had planned to auction off the property by the end of September, Gregory Cross, attorney at law firm Venable, said.
During Thursday's hearing, both sides accused each other of trying to prevent them from driving the “bus” that was foreclosure.
Cross told the court there could be no mistaking Stuy Town’s intercreditor agreement, signed when Tishman and BlackRock acquired the property in 2006 for $5.4 billion, that called for the first mortgage to be repaid prior to any foreclosure by junior lenders. “You don’t need a road map, you don’t need a chart and you don’t need to be an English major to understand what that one paragraph [in the intercreditor agreement] means.”
PSW’s counsellor Edward Weisfelner, of Brown Rudnick
He said following default, “the senior lender drives the bus”. He said it wasn’t for junior lenders to reach over and grab the steering wheel and “crash the bus”. I’m wiped out, gone, kicked to the curb of the proverbial bus.
PSW’s counsellor Edward Weisfelner, of Brown Rudnick, hit back just as graphically insisting any foreclosure by senior lenders would wipe out junior creditors. “I’m wiped out, gone, kicked to the curb of the proverbial bus”. He then warned that a senior lender foreclosure would “squeeze [Stuy Town] dry as quickly as [they] can” in order to get the maximum amount of value from any liquidation.
The war of words failed to impress Justice Lowe. Throughout the attorneys’ speeches, the judge repeatedly shouted for the lawyers to get on with their case. “Tell me what it says,” he shouted at one instance.
Both parties are expected to file notices of their intention to hold foreclosure auctions tomorrow, however Justice Lowe warned no auction would take place without his ruling, which he said would be made “sooner” than 30 September.
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