ACK! Can Pershing Get Its Money Back on Stuy Town Gambit?
Matt Chaban Sept. 29, 2010, 4:52 p.m.
No sooner did Bill Ackman storm Stuyvesant Town than he has been swept away, like a tree in a Brooklyn tornado.
Yesterday, the appellate division of the State Supreme Court ruled that Ackman’s Stuy Town gamble–buy up $45 million worth of mezzanine dept and then try and foreclose on the property ahead of the senior bondholders–had no standing to forestall Monday’s auction of the massive East Side apartment complex. But will Bill Ackman still be able to realize a windfall on his and Winthrop Realty’s investment? The Post thinks he might:
Although Ackman won’t be able to stop the foreclosure by senior lenders, he can still fight in court to recoup the full value of his $300 million in debt plus his potential profits from the lost deal.
The business press remains more skeptical. From Bloomberg:
“I don’t view this as being an extremely strong hand right now for Ackman,” said Mark Edelstein, chair of the real estate finance and distressed property practice at New York law firm Morrison & Foerster LLP. “But I never count Mr. Ackman out.”
“As a mezzanine lender, your main event consists of making sure there’s enough value in the asset to exceed the first mortgage,” [Joshua Stein, principal of Joshua Stein PLLC, a New York-based independent commercial real estate law practice that isn’t involved in the case] said. “If that doesn’t happen, you’re ultimately supposed to get stuck. That’s the risk you own.”
And a riotous line from Reuters:
“We’re going to go ahead on Monday,” said Greg Cross, attorney for CWCapital, the bondholders’ representative. “They had no more ability to enjoin our foreclosure than the Red Sox have to stop the Yankees from signing free agents.”
Ackman may have lost, but he’s made a potential winner of Stuy Town residents. His arrival forced CW’s hand and ginned up interest from others in the project, which could lead to another bidding war for the property or simply more favorable terms for Stuy Towners, should a co-op or condo conversion become a reality.