Investors behind three CDOs – Cedarwoods CRE CDO III, Concord Real Estate CDO 2006-1 and Resource Real Estate Funding CDO 2006-1 – filed a lawsuit this week to block a junior lender from exercising the fair value purchase option on the $150 million defaulted loan secured by JW Marriott Las Vegas Resort & Spa securitized in CSMC 2007-TFLA, according to a New York court filing.
The lawsuit alleges that the junior lender, Galante Holdings, has conspired with various parties to purchase the loan for less than $85 million.
Galante's bid to seize control of the mortgage loan and "abscond" with more than $60 million in value, as well as with critical control rights, fails for numerous reasons according to the filing.
In a research report today, Royal Bank of Scotland analysts explained that Galante acquired the $10 million junior participation on Feb. 9 from Citadel Securities Trading for a purchase price equal to the $10 million outstanding balance, plus accrued interest.
Key Bank Real Estate Capital, the master servicer of the loan, approved Galante’s acquisition of the junior debt.
On Sept. 29 Galante appointed TriMont Real Estate Advisors as special servicer. The suit alleges that Trimont subsequently ignored the standards regularly used by special servicers in servicing loans that have experienced a default due to maturity and alleges that Trimont did nothing by way of servicing the loan.
The filing states that the special servicer made no effort to restructure, forbear or work out the loan with the borrower, market the loan or hire a broker in consideration of selling the loan at its true market value, foreclose on the property, or consider whether allowing Galante to close at an arbitrary price would yield the best result for all holders of the loan.
Instead, TriMont had PKF Consulting USA appraise the property on Oct. 7 at nearly a 40% decline from the par value of the loan and TriMont subsequently provided notice that the fair value of the senior loan was $84.5 million, the RBS report stated.