The Real Deal New York

Stuy Town lenders sue CWCapital over alleged $1B “windfall”

Lawsuit claims the firm raked in the money by inflating the value of the complex's mortgage
July 03, 2014 02:20PM

Lenders for Stuyvesant Town and Peter Cooper Village are suing CWCapital Asset Management over what they allege was a flawed takeover of the 11,000-unit housing complex, which valued the property at $4.4 billion.

Last month, CWCapital, which manages the property on behalf of bondholders, took title to the property exercising a deed in lieu of foreclosure. The junior lenders allege that CWCapital took over the property “on the flawed premise that the amount owed on the senior loan was greater than the value of the property,” according to a complaint obtained by Bloomberg News.

The lenders say the amount owed on the mortgage was $3.45 billion, not $4.4 billion as CWCapital claimed.

Had Stuyvesant Town been sold at market value, the lenders claim in the complaint, more than one billion dollars would have been left over to repay junior investors.

The lenders further allege that CWCapital engaged in “a continuing pattern of misconduct designed” to maintain control of Stuyvesant Town and “reap an unjust windfall” of $1 billion, according to Bloomberg News.

Fortress Investment Group, which owns CWCapital, announced in May it was preparing a $4.7 billion offer for the complex. [Bloomberg News]Tom DiChristopher