Judge Clears Way for Auction of Stuytown

A state Supreme Court judge has cleared the way for senior lenders of Stuyvesant Town and Peter Cooper Village to proceed with a foreclosure auction, marking an end to the first round of a legal fight over the massive complex on Manhattan's East Side.

CW Capital represents the creditors who hold the largest amount of debt on the property, a $3 billion mortgage. They've been planning to foreclose since early this summer but were challenged by prominent hedge fund owner William Ackman and his partner, a real estate management company called Winthrop Realty Trust. The two investors purchased $300 million in junior debt at a deep discount and had plans to take over the property themselves. A judge ruled they couldn't do that without paying off the mortgage first.

At least one real estate expert says he's not surprised by the ruling, given that CW's foreclosure of the senior loan was well underway, making Ackman look like an interloper. In his ruling, Judge Richard Lowe noted that CW Capital had spent nine months and millions of dollars working with borrowers to ensure a smooth transition. CW's foreclosure auction is set for October 4.

Lowe also wrote that public interest is served by maintaining stability in what's been called "the largest residential property in Manhattan, home to a significant portion of the city's moderate-income housing."

The Ackman partnership plans to appeal the judge's ruling.

In a written statement, City Councilman Daniel Garodnick, who advocates for tenants, says, "Regardless of any future appeals or continued legal wrangling, one thing is certain: The tenants' goals must be the foundation of any financial restructuring of this property."

Both CW Capital and the Ackman partnership have been courting tenants who are interested in purchasing their rental apartments for an affordable price. No one from Pershing Capital, the hedge fund owned by William Ackman, returned a call seeking comment.