Mortgage holders for Stuyvesant Town and Peter Cooper Village demanded payment from the landlords within 10 days, a step toward foreclosing on New York's largest apartment complex, two people familiar with the matter said.

A group led by Winthrop Realty Trust, which holds about $300 million of senior mezzanine debt, said in a letter that it intends to pursue "rights and remedies" including a foreclosure sale, according to the correspondence.

The parties could act within 90 to 180 days, the people said.

"The sharks are circling in the waters," said New York City Councilman Daniel Garodnick, a Peter Cooper Village resident as well as its council representative. "This is a point of great concern."

The landlords, Tishman Speyer Properties LP and BlackRock Inc., both of New York, missed a $16.1 million payment on the apartments last week.

Their plans to cover the debt by raising rents were thwarted Oct. 22 when the state's highest court ruled in favor of tenants who claimed some increases were illegal.

Tishman Speyer and BlackRock paid $5.4 billion for Stuyvesant Town and Peter Cooper's 11,200 apartments in 2006.

In October, Fitch Inc. valued the property at $1.8 billion.

New York City Housing Preservation and Development Commissioner Rafael Cestero said Jan. 8 that the city's "overriding concern" was to keep rents within reach of "the hard-working middle-class families of New York."

Local officials must make good on that pledge, Garodnick said.

The city should consider providing tax-exempt financing or other assistance, he said.

Bud Perrone, a spokesman for Tishman Speyer, declined to comment Tuesday.

Tishman Speyer and BlackRock each invested $112.5 million in Stuyvesant Town out of total equity financing of $1.9 billion. They took out a $3 billion mortgage from Wachovia Corp. and $1.4 billion of mezzanine debt.

The mortgage was securitized. The biggest bondholders are Fannie Mae and Freddie Mac.

Other investors include Government of Singapore Investment Corp., manager of more than $100 billion of the city-state's foreign reserves.

It reported losses from its investment Tuesday.

General reserves of $190 million on Stuyvesant Town and Peter Cooper are depleted. A debt service reserve of $400 million, which Tishman Speyer had used for payments, dwindled to $5.64 million as of December, according to the credit rating company Realpoint LP.

Subscribe Now

Access to authoritative analysis and perspective and our data-driven report series.

14-Day Free Trial

No credit card required. Complete access to articles, breaking news and industry data.