Activist investor Bill Ackman, who has swooped in on corporate giants like Wendy's and McDonald's to make money by forcing quick profit boosts, revealed this week that he already has his fingers in the sticky multi-billion-dollar fiasco that is the Stuyvesant Town housing complex. Purchased in 2006 for $5.6 billion, the massive development is now valued at something closer to $2 billion, and is facing foreclosure. His Pershing Square Capital Management quietly bought up $300 million in mezzanine debt (at a price of about $45 million — 15 cents on the dollar), a particular slice of the complex's $1.4 billion second mortgage that puts Ackman in a position to force a foreclosure on Tishman Speyer, which still operates Stuy Town and is responsible for paying the $3 billion first mortgage. This would put Ackman in the driver's seat when dealing with other lenders — a position he hopes to use to push a co-op conversion for the massive 11,250-apartment complex. "The value of the property as a co-op is much higher than the value of the property as a rental," he told the Journal.
Ackman's planned August 25 foreclosure will bring lenders face-to-face with at least $1 billion in losses, he says, something that could be avoided with a co-op conversion. But of course it's not so simple — he'll have to contend with other interested buyers like billionaire Wilbur Ross, developer Richard LeFrak, and hedge-funder David Tepper, the Journal reports. And the tenants association has been putting together their own bid, hoping to make a partial co-op conversion, while maintaining many of the apartments at their rent-stabilized rates. Says City Councilman Dan Garodnick, a resident of the complex himself: "Addressing the tenants' needs is the only route to success." And maintaining the hydrangeas. Seriously, they were spectacular this year.