Four investors in Stuyvesant Town Peter Cooper Village located in New York City are suing CWCapital and Wells Fargo, looking to prevent CWC from reaping an alleged “windfall” of more than $560 million from the $5.3-billion sale of the property to the Blackstone Group and Ivanhoe Cambridge. The plaintiffs are investors in the CMBS securities that financed the prior owner’s acquisition of the property from MetLife Insurance Company in 2006. The buyer, Tishmam Speyer, defaulted on the loan underlying the CMBS securities owned by the plaintiffs in 2010.
According to the lawsuit, CWCapital reportedly believes it can collect up to $566 million upon the sale and payoff of the defaulted CMBS loan, largely due to a contractual clause in the CMBS trust servicing agreement that entitles the firm to 3% of the property’s debt because the sales price is much greater than the $3-billion mortgage.
The four plaintiffs are suing to prevent CWCapital from receiving that money, arguing it should go to the investors instead. “Under the relevant contracts, those specific funds are required to be deposited into segregated accounts and used to offset losses suffered by Plaintiffs and other investors in the commercial mortgage backed securities (“CMBS”) trusts that hold the senior loan secured by the real estate,” the complaint reads. In other words, the profits from the Stuyvesant Town Peter Cooper Village loan payoff should go to offset losses on other loans contained in the CMBS pool.
“It will be interesting to see how this saga turns out,” commented Michael D. Sneden, Executive Vice President at ValueXpress. “CWCapital did an extraordinary job in recovering 100% of the principal balance of the loan, which at some point was $2 billion under water. It deserves to be paid for the recovery effort.”