NEW YORK • Amid the holiday season, SL Green Realty, New York City's largest commercial landlord, dropped a bombshell: It told real estate executives and city officials last week that it would file a lawsuit to block the imminent US$5.4 billion (S$7.6 billion) sale of Stuyvesant Town-Peter Cooper Village, Manhattan's largest apartment complex.
The very notion jolted executives at CWCapital Asset Management, the company selling the 11,232-unit complex on behalf of bondholders.
A lawsuit could upend a deal they had hoped would close the books on one of the biggest financial debacles of the debt-fuelled real estate boom in 2006.
SL Green's manoeuvre infuriated City Hall, which had publicly blessed the pending sale and was eager to declare another victory in its battle for affordable housing in an increasingly unaffordable city.
Blackstone Group, the buyer, wanted the deal done by Dec 31.
Both parties held their breaths as lawyers for buyer and seller alike scrambled to complete the documents and sign the contract. Last Friday, the record-breaking sale was completed without a lawsuit.
"Since taking over the complex, CWCapital has resolved four major litigations, doubled the cash flow and tripled the value of the asset," Mr Andrew MacArthur, a managing director, said in a statement. "We are very pleased that we achieved a full recovery, while simultaneously delivering long-term stability for the community."
But the deal did not close before SL Green was paid US$10 million to go away, according to three executives involved in the negotiations, who spoke on the condition of anonymity. A spokesman for SL Green declined to comment. CWCapital declined to discuss SL Green.
Stuyvesant Town-Peter Cooper Village has been a middle-class redoubt for nearly seven decades. Tishman Speyer Properties and Blackstone bought the property in 2006 for US$5.4 billion.
Tishman Speyer and BlackRock Realty Advisors lost the property to lenders three years later when they ran out of money. Their investors and lenders, including pension funds, the Church of England and the Government of Singapore, lost more than US$2 billion. Tenants were left in the lurch, and CWCapital took over management of the property.
Having stabilised the complex, CWCapital announced in October that it would sell the complex to Blackstone. The city worked out a deal, which it said would ensure that 5,000 apartments would remain affordable to construction workers, teachers, firefighters and small-business owners.
CWCapital did have to forge a settlement worth hundreds of millions of dollars with Centerbridge Partners, which had bought Singapore's bad loans at a steep discount and sued CWCapital over its fees.
"Unlike 2006, this deal made sense," said Mr Douglas Harmon, a broker with Eastdil Secured, who organised the Stuyvesant Town sale this year. "It's built to withstand the vagaries of the market."
Meanwhile, SL Green has been eager to build a 65-storey skyscraper north of Stuyvesant Town. But a real estate investor, Mr Andrew Penson, has challenged the project in court. Mr Penson's partners include CWCapital's parent company, Fortress Investment Group.
SL Green, which had lent and lost US$200 million on the 2006 Stuyvesant Town deal, saw an opening. A potential lawsuit at Stuyvesant Town could hurt both CWCapital and Fortress.
SL Green made clear last week that it would not file suit against the Stuyvesant Town sale if Mr Penson backed off , according to executives involved in the negotiations. That did not happen.
CWCapital believed that a court would dismiss the lawsuit, as it had several others. But fearing that the suit could delay the closing, the company offered SL Green what it considered a token amount of US$10 million.
NEW YORK TIMES