It’s been less than a week since hedge fund heavyweight Bill Ackman emerged with an ambitious plan to take over Manhattan’s sprawling Stuyvesant Town-Peter Cooper Village apartment complex and already there is a legal battle.
Yesterday, Ackman and his partner in a real-estate venture were sued by holders of the first $3 billion mortgage on the property. The lenders, represented by special mortgage servicer CW Capital, are asking the New York State Supreme Court to block Ackman’s efforts to take control of the property next week unless they are paid the $3.66 billion owed to them, including interest.
If Ackman and his team aren’t stopped, creditors’ ability to recover their money will be “imperiled” and the property and its 25,000 residents “thrown into disarray,” attorneys for CW Capital said in court papers.
The mortgage holders also took umbrage at the fact that Ackman’s lawyers called their request to be paid in full “ludicrous,” according to the suit.
“Your statements [about being repaid] are, as you must know, ludicrous,” Ackman’s team told them on Aug. 11. “You are entitled to no such assurances in any event.”
Last week, Ackman announced that his hedge fund, Pershing Square Capital Management, had teamed up with real-estate developer Winthrop Realty Trust to buy a $300 million key slice of StuyTown’s $1.4 billion second mortgage, which is in default, for $45 million, or just 15 cents on the dollar.
The partners are planning to use their debt position to take control of the entity that is responsible for the $3 billion first mortgage by foreclosing on the property on Aug. 25. In their suit, the lenders are moving to preemptively block Ackman and Winthrop from pushing it into bankruptcy.
Ackman’s plan calls for a massive co-op conversion that he said would allow tenants to buy their apartments, although he hasn’t provided details on the pricing.
“We are fully confident that the court will uphold our rights as creditors as we aim to provide permanent affordable housing options to the residents of Stuyvesant Town and Peter Cooper Village,” Michael Ashner, Winthrop’s CEO said in a statement.