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Thursday, March 28, 2024 | Back issues
Courthouse News Service Courthouse News Service

Billion-Dollar Fight Over NY’s Stuyvesant Town

MANHATTAN (CN) - A real estate investment firm tried to "reap an unjust windfall" and "wrongfully seize control of one of New York City's most unique real estate developments, Stuyvesant Town and Peter Cooper Village," lenders claim in court.

Six limited liability companies sued Bethesda, Md.-based firm CW Capital and dozens of other known and unknown defendants, in New York County Supreme Court.

Built before World War II, Stuyvesant Town and Peter Cooper Village are known to residents as "Stuy Town," and comprised of dozens of red brick buildings east of Gramercy Park that hold more than 11,000 apartments.

In 2006, Stuy Town was acquired for $5.4 billion through a "multi-tiered structure made up of 12 levels of debt," the complaint states.

According to the 50-page lawsuit, this was subdivided between a "senior loan" that constituted a mortgage on the property, and the other 11 levels of mezzanine debt referred to as junior loans.

The next year, the parties entered into an agreement with contractual protections ensuring that "senior lender does not receive a windfall at the expense of the junior lenders," the complaint states.

CW Capital "violated those fundamental protections to obtain and protect an inappropriate billion-dollar windfall," the lenders say.

"Despite the fact that Stuy Town is believed to be worth approximately $5 billion, CWC - simultaneously acting for the borrowers, the senior lender and the nominees - orchestrated a purported deed in lieu of foreclosure to further CWC's own interests," the complaint states, abbreviating CW Capital.

"The deed in lieu of foreclosure was executed on the flawed premise that the amount owed on the Senior Loan was greater than the value of the property. While CWC represented that $4.4 billion was owed on the mortgage, in fact, the correct mortgage amount owed is approximately $3.45 billion, almost one billion dollars less."

If sold at market value, Stuy Town "would have fetched a price high enough that more than one billion dollars would have been left over the correct mortgage amount to repay the junior lenders whose loans remain wholly unpaid," the complaint states.

The junior lenders seeks damages for breach of contract, unjust enrichment, tortious interference, lender misconduct and breach of faith and fair dealing.

They want the court to impose a constructive trust over Stuy Town and damages "believed to be up to one billion dollars or more."

They are represented by Michael Carlinsky, with Quinn Emanuel Urquhart & Sullivan.

A spokesman for the defendants called the complaint "utterly baseless and without merit."

"The fact that the complaint centers on a deed in lieu transaction completed before the plaintiff acquired their position exposes the plaintiff's specific intent to wrest a quick profit from 'purchased litigation,'" spokesman Joe DePlasco said in an email. "Centerbridge acquired this position at a deep discount in hopes of reaping a windfall at the expense of the bondholders we represent and residents who deserve a timely resolution that will provide certainty and a path forward for the community."

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