The legal spat between Bill Ackman’s hedge fund Pershing Square Capital Management and special servicer CWCapital over the $5.3 billion sale of Stuyvesant Town-Peter Cooper Village is going into the next round.
In a letter supporting its motion to dismiss Pershing Square and Winthrop Realty Trust’s $500 million lawsuit, CWCapital’s attorneys called the suit “offensive,” “entirely out of bounds” and “glaring with legal deficiencies.” CWCapital also filed a motion on Thursday to recover its legal costs and “impose sanctions” on the plaintiffs and their attorney, Stephen Meister of Meister, Seelig and Fein.
Meister, in turn, dismissed the accusations. “(CWCapital’s attorney) Greg Cross admits every single allegation of my complaint and I believe not only is his motion entirely frivolous but I believe we will prevail,” he told The Real Deal.
In their suit, Pershing and Winthrop Realty Trust claimed they got bilked out of a fat profit when the special servicer foreclosed on Stuyvesant Town-Peter Cooper Village and then sold it for $5.3 billion. Back in 2010, the plaintiffs bought a portion of Stuy Town’s defaulted mezzanine debt, with the intention of foreclosing on the property. CWCapital, which controlled Stuy Town through its role as special servicer of its debtors, got the courts to block a foreclosure. Pershing and Winthrop eventually sold their share of the mezzanine debt to CWC in October 2010.
In December 2015, CWCapital sold Stuy Town to the Blackstone Group and Ivanhoe Cambridge for $5.3 billion. Pershing and Ackman subsequently sued CWC, claiming that the sale was only possible because CWCapital did exactly what it blocked them from doing in 2010: effectively foreclosing on the property.
In their reply to the complaint, CWCapital’s attorneys argue the suit is baseless because the plaintiffs gave up all potential claims against CWC when they sold their share of the mezzanine debt in 2010. The court “can and should dismiss this case merely by holding PSW [Pershing Square and Winthrop] to the unequivocal and lucrative bargain that it made six years ago,” the letter reads.
The plaintiffs, in turn, argue that by foreclosing on the property’s mezzanine debt CWCapital violated an intercreditor agreement it explicitly pledged to abide by under its deal with Pershing and Winthrop.
The sale of Stuy Town, the biggest trade in New York City since the property last changed hands in 2006, has involved lots of legal drama. As the closing of the deal approached, SL Green Realty threatened to file a lawsuit that would block or delay the sale. The deal, valued at over $5.3 billion, ended up going through as planned, but not before CWCapital reportedly paid SL Green $10 million to walk away.