The Real Deal New York

Pinnacle portfolios pulled from broker site

April 13, 2009 02:05PM
By Adam Pincus

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Real estate owner and manager Pinnacle Group has been shedding rent-stabilized multi-family buildings in New York City in recent months but in the past few weeks, three of its Bronx portfolios that had been listed for sale were yanked off a broker’s Web site after housing advocates began a quiet campaign challenging the amount of debt on the buildings.

The three portfolios — 2254 Cedar Avenue, 2985 and 2995 Botanical Square and 1121 through 1175 Morrison Avenue — were listed individually by Massey Knakal Realty Services for between $9.5 million and $22.5 million each, as much as 19 percent below the purchase prices Pinnacle and equity partner Hudson Realty Capital paid in June 2008 for the properties, city records show.

Even with the discounts, housing advocates said the first mortgages held by New York Community Bank on the buildings were too high to be supported by revenues from the rent-stabilized tenants in the apartments.

The sale price for multi-family buildings and the reduction in first mortgages are important indicators of how commercial assets in New York City will be disposed of in the weak real estate market and at what discounts.

Housing advocate Dina Levy, director of organizing and policy at the Urban Homesteading Assistance Board, began organizing tenants at the buildings and calling elected officials such as United States Senator Charles Schumer to put pressure on the bank.

Her group wants the first mortgage debt cut and the buildings sold to long-term owners who will make capital improvements in the aging buildings, she said.

“The bank thought they could get away with the sale with the loans intact. But the fact we were nosing around and getting tenants organized [made] them realize they could not do it,” Levy said.

Pinnacle and Hudson Realty disputed Levy’s assessment of the buildings finances. The buildings “generate sufficient income to meet all required current and future obligations under the mortgage documents and to maintain a high level of maintenance and service at the properties,” the two companies said in a statement.

The partners also said the 2008 sales prices listed on the city Department of Finance Web site were allocated as part of a much larger portfolio and did not necessarily reflect an accurate price for each building.

The partners added that the asking prices, although below the purchase prices, were higher than the debt.  

“In every case, the asking price is in excess of the outstanding loan balance,” said the statement.

Robert Knakal, chairman of Massey Knakal, declined to comment. A spokesperson for the New York Community Bank also had no comment.  

While the asking prices are as much as 19 percent below the purchase prices for the Pinnacle and Hudson Realty properties, rating agencies have been slashing the estimated values of other Pinnacle holdings by more.

Ratings firm Standard & Poor’s said earlier this month that the securitized $192 million loan on the Pinnacle Group’s Upper West Side portfolio of 36 buildings had lost 48 percent of its original value and the loan was transferred to a special servicer in February.

Kenneth Fisher, a spokesperson for Pinnacle, said the downgrade was not related to cash flow, and that all loans in their portfolio were performing.

The three Pinnacle Bronx property listings were removed from Massey Knakal’s site in recent weeks, Levy said. Her group saved the properties’ descriptions while they were online and provided them to The Real Deal (see chart).

And there are more indications of a troubled apartment market for Pinnacle. A mortgage on a 22-building Pinnacle Group portfolio on the Upper West Side is expected to sell at a 40 percent discount, according to Commercial Mortgage Alert. The Orbach Group agreed to buy a $75 million loan from Deutsche Bank secured by the buildings owned by Pinnacle and equity partner Praedium Group, for just $45 million, the March 27 report said.

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