Stuyvesant Town and Peter Cooper Village Complexes are in Foreclosure Trouble

Stuyvesant Town and Peter Cooper village complexes are in trouble. One hedge fund entity has taken over a major share of their debts and is now trying to take over control. This step will create snarls in an already complex financial and political set up involving the biggest apartment units in Manhattan. 25,000 tenants are apprehensive about their fate in the future.
Tishman Speyer Properties and BlackRock Realty purchased the two – Stuyvesant Town and Peter Cooper Village for a hefty sum of $5.4 billion. But when the owners started to lag behind on their mortgage payments they decided to hand over the estates to the lenders.

A hedge fund of New Jersey, Appaloosa Management is headed by David Tepper. Papers have been filed last Tuesday (23rd February) by it in the USA District Court throwing a challenge to the firm that oversees the two spacious complexes overlooking East River. The suit was filed representing the lenders. It was stated that the firm had “irrationally and imprudently” been following a path that would cause hundreds of millions of loss for the debt holders.

Appaloosa intervened objecting to a decision taken by the firm – CW Capital Management to foreclose on the owners of the two estates. The argument was that a foreclosure would involve a cost of nearly $200 million for transferring of taxes. Appaloosa said that if CW Capital had pushed the borrowers into bankruptcy the need for paying those taxes would not have arisen.
Appaloosa has wanted the permission of the court to intervene in this issue. It has also stated that CW Capital being both the servicer of the mortgage and a major debt holder has “irreconcilable conflicts of interest.”

The company headed by Tepper has taken over control of $750 million of mortgages worth $3 billion. Speaking at an interview he said that he required CW Capital to discharge its fiduciary responsibilities to the debt holders so that the value of the property is maximized. He also noted the surprise of his firm at the abrupt decision of CW Capital to foreclose. Referring to CW Capital Tepper said, “We’re actually wanting them to do what they’re supposed to do. We’re trying to uphold our rights.”

Last year Appaloosa noted a profit of $7 billion – it being inclusive of Tepper’s $2.5 billion. Tepper said that his interests were not at cross purposes with those of the tenants. He said, “We recognize the fact at some point there needs to be some degree of rent-controlled apartments there.”