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\n Photo: Michael Appleton\/Mayoral Photography Office\n <\/p>\n
On his first day as mayor, Zohran Mamdani spent the afternoon at 85 Clarkson Avenue, a run-down rent-stabilized building in Prospect\u2013Lefferts Gardens. He was there to announce a trio of executive orders<\/a>, including one to revive the Mayor\u2019s Office to Protect Tenants, and the venue was a targeted choice: 85 Clarkson is owned by billionaire Joel Wiener, a fairly notorious landlord whose real-estate firm Pinnacle Group filed for bankruptcy last year and has 93 buildings currently set to be sold in a foreclosure auction. The sale of Pinnacle\u2019s portfolio \u2014\u00a0more than 5,000 apartments, the vast majority of them rent stabilized \u2014 has become something of an early test for the new mayor\u2019s ambitions around tenant protections and landlord accountability. A lot has happened in the two weeks since he took office: The mayor tried and failed to intervene in the sale; a potential buyer, another fairly notorious landlord called Summit Properties USA, won the auction on January 9, and, in a last-minute effort, the attorney general\u2019s office threw its weight behind the attempt to block the sale, which a judge will rule on on Thursday.<\/p>\n Let\u2019s get into it.<\/p>\n Joel Wiener comes from a real-estate family and was a relatively small-scale landlord through the \u201990s, with a business model Bloomberg described<\/a> as \u201cbuying rent-regulated, run-down properties that house many tenants behind on their rent.\u201d (The occasion for the Bloomberg piece was Wiener\u2019s ascendance, in 2017, to billionaire status.) All of that accelerated in the early 2000s, as Pinnacle\u2019s portfolio grew thanks to investment from a firm called Praedium Group. At its peak in 2006, Pinnacle owned 21,642 apartments<\/a> across the city, and its model was working: Renovations and evictions led to rent increases and sometimes took apartments out of stabilization entirely. (In one case, tenants of a two-bathroom apartment challenged a rent increase after being charged for what appeared to be five toilets, per a report from the New York Times.) Gentrification and a boom in real-estate speculation led to soaring values. (One Brooklyn Heights building Pinnacle bought in 2002 for $16.5 million was, by 2012, valued at $43 million.) Then came the 2019 rent laws, which took many tactics used by Pinnacle and other real-estate firms to raise rents and deregulate apartments off the table \u2014 the law imposed\u00a0limits on rent increases based on major capital improvements, no more so-called high-rent vacancy decontrol, no more automatic 20 percent vacancy increases.<\/p>\n In the years since, Pinnacle\u2019s buildings remained profitable, but the margins were modest compared to the debt it had accrued. In addition to its debts to its primary lender, Flagstar Bank, Pinnacle also has outstanding amounts on Israeli-issued bonds, putting its total debts somewhere closer to $1 billion, according to Bloomberg. Thus the bankruptcy. The auction of Pinnacle\u2019s portfolio was part of an agreement with Flagstar (formerly the New York Community Bank), which holds $564 million in debt on its buildings.<\/p>\n Summit Properties won the auction for Pinnacle\u2019s buildings with a bid of $451 million. Summit Properties USA is the American arm of an Israel-based real-estate-investment company that is managed by Zohar Levy. It\u2019s relatively new on the New York City residential scene. (It didn\u2019t get into the New York market until 2021.) Now, it owns more than 90 buildings with around 3,000 apartments. Purchasing Pinnacle\u2019s buildings would essentially double its portfolio. Part of the controversy around its bid for Pinnacle is the fact that it also has a bad record when it comes to its buildings: Summit has over 4,000 open housing-code violations.<\/p>\n In court filings, the attorney general\u2019s office wrote that Summit\u2019s open housing violations leaves it with \u201csignificant concerns<\/a>\u201d about the firm\u2019s capacity to maintain its current portfolio. This is more or less aligned with Mamdani\u2019s critique and that of the Union of Pinnacle Tenants, which has said it sees the sale as simply moving them from the hands of one bad landlord to another. (Jordan Barowitz, a spokesperson for Summit, wrote in a statement that \u201cSummit is ready to work with the City, HPD, and the residents to improve and preserve this much needed affordable housing. We have a plan to address the buildings\u2019 capital needs and cure the existing HPD violations.\u201d) Ken Fisher, a lawyer for Pinnacle, said that \u201cthe court-approved sales process was very thorough, and we are confident in the outcome.\u201d<\/p>\n As BisNow<\/a> and Gothamist<\/a> reported, Summit has ties to Jonathan Wiener, Joel Wiener\u2019s brother. Gothamist found that at least 53 Summit buildings have deeds or mortgage agreements signed by Jonathan Wiener, and another 26 are signed by executives at Chestnut Holdings, Wiener\u2019s company. The rest were signed by representatives from Denali Management, which manages Summit and Chestnut buildings. (Barowitz says there is no relationship \u201cbusiness or otherwise\u201d between Summit and Pinnacle and court documents submitted by the CEO of Summit on Thursday stated, \u201cNeither Jonathan Wiener nor Denali was involved in the Purchaser\u2019s bid for the Purchased Assets, and neither will have any involvement in the Purchaser\u2019s acquisition or management of the Purchased Assets.)<\/p>\n Big question! The lawyer Pinnacle tapped to oversee its bankruptcy process blamed<\/a> the 2019 rent laws and 2022 insurance hikes for the firm\u2019s hardships. But Flagstar alleges in court documents that Pinnacle did not use its rental income to pay its mortgages, instead paying its Israeli bondholders $12 million. This is just one of Flagstar\u2019s claims about Pinnacle \u2014\u00a0the bank also claims Pinnacle prioritized paying management fees to other Wiener-owned entities over its mortgage debts, per The Real Deal<\/a>.<\/p>\n As you can imagine, tenants are unhappy. They say Pinnacle let their homes fall into disrepair and that Summit will just be more of the same. They want a say in who gets to buy their buildings. \u201cThe 93 buildings subject to Pinnacle\u2019s bankruptcy are tenants\u2019 homes and tenants have been organizing to get a say in a process that is effectively built to exclude them,\u201d Tracy Rosenthal, an organizer with the Union of Pinnacle Tenants, said. Jackie Waddy, who has lived at Pinnacle-owned 546 West 50th Street for almost 50 years, says that the building\u2019s roof leaks and they have issues with mold: \u201cThe whole place needs to be renovated.\u201d But if the judge does approve the sale to Summit at a Thursday hearing, Waddy says the tenants will \u201cput pressure on them to make them responsible\u201d for the repairs.<\/p>\n The city submitted its objection to the sale in early January, requesting a 30-day extension to \u201cevaluate sufficiently the proposed sale to Summit, to explore any potential alternatives, and to discuss with the interested parties a path forward that will benefit all constituencies.\u201d The filing argued that the city should have a say given that it\u2019s a \u201csubstantial creditor,\u201d since Pinnacle owes $12.7 million in fines and violations.<\/p>\n The judge denied the delay and the auction proceeded as planned. \u201cWe are assessing all of our options as the case moves forward \u2014 both in the bankruptcy proceedings and through other city tools \u2014 but our goals have not changed,\u201d Leila Bozorg, Mamdani\u2019s deputy mayor for housing, said<\/a> in a statement afterward. If the sale does go through, the administration can still use its enforcement powers to make sure any new owner corrects open violations and adheres to rent-stabilization laws.<\/p>\n On January 12, the attorney general\u2019s office sent in an objection<\/a> to the courts, writing that \u201cSummit\u2019s track record in its current portfolio indicates that it has no capacity to adequately oversee a management company and a sale will result in these properties falling into disrepair.\u201d The AG\u2019s office argues that the city should be given the opportunity to come up with a more suitable buyer and if not, then the courts should \u201crequire Summit to provide a much more detailed explanation about how it intends to reverse its history of purchasing buildings that accrue high levels of violations.\u201d<\/p>\n For a few reasons: Pinnacle is one of the largest rent-stabilized landlords in the city. Pinnacle tenants, who have formed one of the city\u2019s largest cross-borough tenant unions, have also been trying to make the fate of their buildings a front-page story. The mayor, for his part, signaled the issue\u2019s importance to him by making it a day-one priority. Whatever direction it goes, the outcome of this fight might be a bellwether for similar foreclosures. Other cases are certainly coming down the line \u2014\u00a0as Jay Martin, executive vice-president of the New York Apartment Association, a group representing rent-stabilized landlords, put it<\/a> in October, \u201cThere are thousands of loans that were underwritten under the premise that certain units in the buildings would be deregulated at certain rent thresholds, and therefore they\u2019d be able to pay back these loans under those terms, and now they\u2019re no longer able to do that.\u201d<\/p>\n How this all works out is a significant test for Mamdani: A rent freeze can go only so far, since the wider rent-stabilized system in the city is under stress \u2014\u00a0the buildings are old, and investment has been uneven, with some properties in serious, sometimes quite intentional disrepair. Mamdani\u2019s administration needs an answer to the question of how to keep rents affordable while also maintaining and \u2014\u00a0in many cases \u2014\u00a0vastly improving the conditions inside the buildings themselves. Landlords claim this is like trying to get blood from a stone, but we actually know very little about most of their portfolios and overall finances. (And that\u2019s on purpose<\/a>.) Mamdani\u2019s head of the Mayor\u2019s Office to Protect Tenants, Cea Weaver, has written<\/a> that \u201cthe crux of the problem\u201d was the frenzy of private investment that led to a \u201cfever-dream of real estate speculation that fueled the rent-stabilized market from 1994 to 2019.\u201d If Summit ultimately takes over the Pinnacle portfolio, how will the Mamdani administration enforce its thousands of open housing violations? If a judge somehow stops the sale, what would an alternative buyer or ownership model even look like?<\/p>\n \u201cIt\u2019s not going to be that the city politically decides, Hey, we should socialize housing,\u201d Sam Stein of the Community Service Society said. \u201cIt\u2019s going to be that the landlord can\u2019t do it anymore and instead of giving a different landlord a chance to do an even worse job, the city is going to have to push it in a different direction.\u201d That could look like a lot of things \u2014\u00a0the city could funnel the buildings through Neighborhood Restore, a nonprofit HDFC, or the NYCHA preservation trust, or even through some form of tenant ownership, strategies that have been utilized at a smaller scale. But it\u2019s all pretty unclear at this point.<\/p>\n There is a confirmation hearing on Thursday, during which the judge will approve or deny the sale to Summit. The mayor\u2019s office, Pinnacle tenants, and landlords across the city will certainly be watching.<\/p>\n Sign Up for the Curbed Newsletter<\/p>\n A daily mix of stories about cities, city life, and our always evolving neighborhoods and skylines.<\/p>\n Vox Media, LLC Terms and Privacy Notice<\/p>\n