NEW YORK - CWCapital, which has moved to foreclose on the sprawling New Yock City apartment complex of Stuyvesant Town/Peter Cooper Village, may itself be sold.

In another twist for the huge real estate failure, Canadian pension fund advisor Caisse de depot et placement du Quebec has decided to sell its controlling interest in CWCapital, the special servicer on the property, according to Commercial Mortgage Alert.

CWCapital said only that it is looking for a new investor, when asked by Reuters for comment.

It certainly introduces an additional piece to an already complex situation, Alex Rubin, managing director of Moelis & Co, the financial advisors hired by the Stuyvesant Town/Peter Cooper Village Tenants Association.

The development comes as the tenants association prepares to put together an offer that would allow tenants to either stay as renters or buy their apartments.

The association's lawyers and financial advisors have said that they have received unsolicited calls from investors who want to partner with it.

Rubin was among the politicians, lawyers, investment bankers and tenants association representatives who on Saturday briefed more than 1,100 residents on plans being formulated by the tenants association to buy the complex in lower Manhattan.

A sale to tenants association could happened within three to six months, William Derrough, Moelis' managing director, told the residents.

With 25,000 residents and 11,200 apartments, the crowd represented more than one in 25 tenants of middle-class complex.

CW is having the property appraised. Real estate experts have estimated the property is worth around $2 billion.

As the special servicer, CW oversees the interests of the owners of commercial mortgage-backed securities (CMBS), which are backed by pools of mortgages.

When a consortium led by private equity firm Tishman Speyer bought the two complexes in 2006 for more than $5.4 billion, about $3 billion of mortgages were securitized into CMBS.

In January, after Tishman Speyer defaulted on its loan payments, the mortgages were transferred to special servicing.

Tishman also used $1.9 billion of equity, whose investors included U.S. pension fund Calpers, as well as $1.4 billion of mezzanine financing. Those investors include Gramercy Capital Corp and Winthrop Realty Trust.

Tishman Speyer had planned to use a reserve fund of more than $600 million to pay the interest as it evicted tenants and converted rent-regulated apartment into more expensive market-rate apartments. It also planned to build newer apartments and possibly sell them as condominiums.

But the plan collapsed with the U.S. real estate market and a court decision that said it was illegal to convert the apartments to market rate.

The complex was originally built as a haven for the middle class and its owners had taken advantage of tax breaks used to encourage affordable housing.

On Feb. 16, CW filed to foreclose on the property. If the process is completed to a sale, it could very well be put into the hands of CW, wiping out equity and mezzanine investors.

CWCapital would then sell it, trying to recoup as much money for the CMBS investors, who include Fannie Mae and Freddie Mac. They collectively bought about $2 billion worth of the bonds.

Hedge fund Appaloosa Investment LP, which owns about $750 million of the CMBS bonds that are junior to the bonds owned by Fannie and Freddie, has filed a motion to be heard in court. It wants CW to put the complex into bankruptcy. That would save about $200 million in taxes and help it recoup some of its investments, it said in court filings.

But a bankruptcy would likely draw out any sale process as it would invite the equity and mezzanine players to play a role in court, said Meredith Kane, a partner of law firm Paul, Weiss, Rifkind, Wharton & Garrison LLP, which represents the tenants.

Once a foreclosure is completed, CWCapital has said to us it desires to do a deal for the ultimate disposition of the property that is driven by the tenants, Kane said.

One interested investor said that any sale would have to include a tenant partnership, partly because of the political implications.

But tenants who buy their units may not become rich.

Beware of plans that promise that you're going to buy your apartment for $100,000 and sell it for a windfall, said New York City Council member Daniel Garodnick, a Peter Cooper Village resident. Greed or the perception of greed will kill all of our efforts, he said.

The case is Bank of America, N.A. et al v. PCV ST Owner LP et al, U.S. District Court, Southern District of New York, No. 10-01178. (Reporting by Ilaina Jonas; Editing by Tim Dobbyn)

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