NEW YORK CITY-A foreclosure auction on Peter Cooper Village andStuyvesant Town that was to be held Monday won’t happen until atleast the middle of next week. The new date for the auction, to beheld under the direction of court-appointed referee MelanieCyganowski, is Wednesday, Oct. 13, according to documents filedMonday at US District Court in Manhattan. No explanation for thepostponement was offered in court papers.

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When the auction takes place, it will be under the auspices ofthe senior debt holders, rather than the partnership that bought$300 million of senior mezzanine debt on the 80-acre multifamilycomplex for $45 million this past August. Known as PSW NYC LLC, thepartnership of William Ackman’s Pershing Square Capital Managementand Winthrop Realty Trust attempted to foreclose on the mezz debt,but suffered a series of judicial setbacks culminating in anAppellate Division court’s refusal last week to stay the seniordebt holders’ plans.

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Prior to Monday’s postponement, Bloomberg and other mediaoutlets had suggested that CWCapital was getting ready to taketitle, assuming the absence of any bidders willing to pay more thanthe $3-billion face value of the mortgage. However, publishedreports on Monday said that CWCapital Asset Management, which isrepresenting Bank of America and other senior mortgage holders, hadmet with PSW this past Friday and was working toward a settlementwith the partnership.

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Citing unnamed sources, the Wall Street Journal andCrain’s New York Business both reported that CWCapital isnegotiating a buyout of the mezz debt from PSW. One possiblereason, the published reports suggested, is that buying the mezzdebt could lessen the transfer and mortgage taxes on the11,227-unit complex—estimated to be as high as $200 million—perhapsby putting the property into bankruptcy.

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A spokeswoman for CWCapital responded to GlobeSt.com’s requestfor comment with a prepared statement confirming that the auctionhas been rescheduled to Oct. 13. “This brief delay will not impactthe transition of property management or the stability of theproperty,” according to the statement.

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“Upon taking control of the property, CWCAM will appoint RoseAssociates, Inc., who has been acting in the capacity of transitionconsultant since February 2010, as property manager,” according tothe statement. “Until that time, Tishman Speyer will continue asmanager of the property. CWCAM remains committed to the continuedstability and smooth transition” of the complex.

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Tishman Speyer and BlackRock Realty led a group of investorsthat bought Stuy-Town from MetLife in 2006 for $5.4 billion. A planto convert rent-stabilized apartment units at the complex intomarket-rate housing played out more slowly than was anticipated.Further, the state Court of Appeals in October 2009 ruled thatStuy-Town’s owners had illegally decontrolled rent-stabilizedapartments while also receiving J-51 tax benefits to performrenovations.

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Two weeks after the high court’s ruling, the $3-billion mortgagewas transferred into special servicing. Two months later, thecomplex’s ownership defaulted on the debt, and lenders beganforeclosure proceedings in mid-February.

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Paul Bubny

Paul Bubny is managing editor of Real Estate Forum and GlobeSt.com. He has been reporting on business since 1988 and on commercial real estate since 2007. He is based at ALM Real Estate Media Group's offices in New York City.