Pershing Loses Stuyvesant Town Appeal

Story updated with comments from Pershing.

NEW YORK (TheStreet) -- Pershing Square Capital Management has confirmed the hedge fund and Winthrop Realty Trust(FUR) have lost a bid that would have stopped the foreclosure sale of the Stuyvesant Town-Peter Cooper Village apartment complex in Manhattan.

CWCapital, a representative for bondholders on the $3 billion mortgage that includes Bank of America(BAC)and trustee U.S. Bancorp(USB) can now sell Stuyvesant Town and Peter Cooper Village in a foreclosure auction on October 4. The foreclosure sale includes 56 buildings on 80 acres on the east side of lower Manhattan.

Pershing Square said in a press release that they intend to pursue claims that the lenders have "interfered" with the hedge fund's efforts to foreclose on equity interests that serve as collateral for Pershing's $300 million of mezzanine loans.

"Unfortunately, this decision may have the effect of precluding the ability of PSW and the tenants at Peter Cooper Village and Stuyvesant Town from participating in the restructuring of the ownership of the property and implementing a permanent affordable housing solution."

In 2006, MetLife (MET) sold Stuyvesant to Tishman Speyer Properties and BlackRock(BLK) Realty for $5.4 billion. Aspirations to update the buildings and increase rents turned sour for the buyers as the commerical real estate market and housing market took a turn for the worse. "The judge interpreted the contract, but there are broader clarifications that need to be made. What happens to the tenants is still unclear," Henry Owsley, CEO of Gordian Group said. "Who ever ends up buying that property could face tension from the tenents, the state and even the city could weigh in too and change the rent rules further."

Owsley added that essentially Pershing Square and other junior lenders may not lose their money because they invested after the problems started and have obtained a, "pretty good claim against MetLife."

--Written by Maria Woehr in New York.

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