Duo To Snatch Control Of Financially Troubled 110-Building, NYC Housing Complex For $45M? 11,000-Unit Property Sold For $5.4B In 2006

In New York City, Crain's New York Business reports:

• If all goes according to plan, next Thursday a new partnership led by hedge fund honcho William Ackman will buy Manhattan's largest housing complex—the 110-building Stuyvesant Town / Peter Cooper Village—paying as little as $45 million in a foreclosure auction. Incredible as such a scenario may seem, real estate experts say that it—or something like it—could well come to pass.

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• In a surprising development, Mr. Ackman announced last week that his hedge fund, Pershing Square Capital Management, had been tapped by Winthrop Realty Trust, one of Stuy Town's creditors, to help it take control of the 80-acre complex. Acting in concert, the duo quietly paid $45 million—15 cents on the dollar—to scoop up a $300 million mezzanine loan, a key slice of the complex's debt that stands between the owner's equity and the first mortgage.(1)

• Mr. Ackman also scheduled an auction for Aug. 25, when he plans to foreclose on the property and take control of Stuy Town. If he succeeds, he intends to assume the complex's nearly $4.5 billion in debts and quickly begin a voluntary, noneviction co-op conversion on the rental property to generate cash to pay off its loans.

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• [Mr.] Ackman appears to have a key advantage. If the foreclosure auction is held, he can open with a bid of $300 million, the face value of his mezzanine debt. Other bidders will have to pony up $300 million in cash for a property now estimated to be worth a mere $1.8 billion. In addition, the first notice of the auction appeared in the papers on Aug. 8, giving bidders little time to get their act together.

For the story, see Upstart roils Stuy Town battle (Fledgling duo may get complex for as little as $45 million in foreclosure).

Go here for other posts on the Stuyvesant Town / Peter Cooper Village fiasco in NYC.

(1) According to the story, several recent deals suggest that the partner's chosen route to ownership may work, such as one involving the 60-story John Hancock Tower in Boston, which was bought by a partnership that had snapped up the mezzanine debt and put the property into foreclosure. At the auction, the partnership won the tower with a bid of $20 million and an agreement to take on its $640 million first mortgage, the story states. The story also cites the W Union Square Hotel, 100 Church St. and several other properties in New York City that have also been successfully foreclosed on by their mezzanine lenders. “This trend will continue as more troubled assets hit the fan,” says Edward Hunter, chair of the real estate practice group at law firm Lowenstein Sandler.