NEW YORK CITY-Lawyers for both senior lenders and mezzanine debt holders on Peter Cooper Village and Stuyvesant Town argued their positions before a Manhattan state Supreme Court judge Thursday, but left the courthouse without a decision one way or the other. Justice Richard B. Lowe III said he would rule later this month, according to published reports, on whether a joint venture of Pershing Square Capital Management and Winthrop Realty Trust may go ahead with its plan to foreclose on the 11,227-unit apartment complex on the basis of controlling $300 million of mezz debt.

The JV, PSW NYC LLC, bought the mezz debt last month for $45 million, or 15 cents on the dollar, and planned an August 25 foreclosure auction. That plan ran afoul of the senior mortgage holders, who had foreclosure plans of their own after the complex’s ownership defaulted on the $3-billion mortgage at the beginning of this year. CWCapital, which represented the lenders, filed suit to block PSW’s sale.

Bloomberg reported on the courtroom exchange of arguments before Lowe. “It’s all about a race to foreclose on the collateral,” Edward Weisfelner, a Brown Rudnick partner representing PSW, reportedly told the judge. “If they foreclose before I foreclose, then I’m gone, out of the money, kicked to the curb.”

Representing senior lenders led by Bank of America, attorney Gregory Cross of Venable LLP reportedly told Lowe, “The senior lender drives the bus.” Junior lenders, he added, “don’t reach over the seat and throw the senior lender from the bus and crash the bus.” He argued that PSW would first have to pay the debt on the mortgage—which now stands at $3.66 billion, including interest, fees and taxes—before they could foreclose.

Last month, a “Dealbook” column in the New York Times outlined the plan Pershing Square CEO William Ackman has for Stuy-Town. “Success will depend not only on the health of the real estate market in New York City, but also on Mr. Ackman’s ability to convince creditors, tenants and the city government that he is looking out for their best interests while trying to make a profit,” according to the Times. Ackman’s plan for Stuy-Town “boils down to what would effectively be the largest co-op conversion in history.”

In a video interview with Bloomberg outside the Manhattan courthouse before Thursday’s hearing, Ackman likened the Stuy-Town scenario to General Growth Properties, in which Pershing Square has been a major investor as the mall owner seeks to emerge from bankruptcy. GGP and Stuy-Town represent “slightly different constituencies, but you have a complex which is overlevered, yet is still worth meaningfully more than the debt.”

The success of the PSW plan would entail cooperation from Stuy-Town’s residents, and the Stuyvesant Town-Peter Cooper Village Tenants Association said in a web posting Wednesday that CWCapital had sent a letter to the association’s advisors expressing its support for the group’s goals. “The tenants are not going away—our goals have to be satisfied in order for any plan to work,” said association president Al Doyle. “Getting CW Capital to recognize that is a serious step forward.”