Mamdani Intervenes in Pinnacle Bankruptcy

The Mamdani administration wants to pump the brakes on Pinnacle Group’s bankruptcy auction, not only because it wants time to review the new proposed owners of the firm’s buildings, but officials are also worried that stabilized rents at the buildings are too low and the sale price is too high for the properties to survive.

In a request filed with the court late Monday, the city asked federal Bankruptcy Court Judge David Jones to delay the auction of Pinnacle’s portfolio by 30 days. The auction, for more than 5,000 rent-stabilized apartments, is slated for Thursday.

The filing follows Mamdani’s announcement that he would intervene in the case and a similar request by the Adams administration to delay the auction. Pinnacle tenants had urged the Adams administration to intervene in the case, wanting more time to weigh in on future ownership.

But the new request goes further than its predecessor: not only does the administration want more time to consider who buys the properties, it also warns that the future health of the buildings is imperiled by the fact that most of the units are rent-regulated.

“HPD’s preliminary internal analysis, based on information and belief, is that the proposed sale would not lead to a supportable business as long as the properties continued to have exclusively rent stabilized or rent controlled units because the current rents are very low-averaging,” the filing states, pointing to increased distress and citing letters from tenants detailing health and safety problems at the buildings.

Such an acknowledgement comes as the administration is pushing to freeze rents for stabilized tenants for the next four years.

A landlord group quickly seized on the filing’s language, saying it was a stunning admission by the city that stabilized rents cannot support building operations.

“It’s an astounding contradiction from the Mamdani administration, less than a week into their admin,” said Kenny Burgos, CEO New York Apartment Association. He said the financial realities of the Pinnacle portfolio are shared by other rent-stabilized buildings where the 2019 rent laws closed off most options for raising rents.

“It’s not as if this is some sort of anomaly,” he said. “This is the norm.”

NYAA was part of a federal lawsuit challenging the state’s rent stabilization system, which was dismissed and ultimately not picked up by the U.S. Supreme Court. The group has also argued against the mayor’s plans to freeze rents for stabilized tenants.

A City Hall source pointed to the reference to the “proposed sale” as a critical part of HPD’s analysis, noting that the danger of the sale price being too high plays a significant role in the properties’ future viability. The filing posits that if the buildings fall into disrepair, tenants may be pushed out and replaced by higher-paying residents unaware that their units are regulated.

Cea Weaver, Mamdani’s newly-appointed head of the Office to Protect Tenants, previously told the New York Times that it is unfair to blame rent stabilization for the state of Pinnacle’s buildings. She said the landlord’s record of “egregiously treating renters” predates the 2019 law.

These latest filings object to the sale of Pinnacle’s properties to Summit Properties USA, which made a $451 million stalking horse offer to acquire the buildings. Pinnacle, owned by billionaire Joel Wiener, amassed hundreds of stabilized units in the city over the years, many of which have fallen behind on maintenance and racked up housing code violations. In an effort to stave off foreclosure, 82 of the firm’s entities filed for bankruptcy last May, leading to this week’s scheduled auction. The city argues that it wants time to ensure that the new owner of the firm’s stabilized apartments can address $12.7 million in unpaid bills and violations.

The administration notes its “substantial concern” that Summit “may not have sufficient resources or willingness to rehabilitate the properties, or be able to maintain a profitable business based on the income stream from the rent stabilized or rent controlled apartments in the properties.”

The city states that the next owner of the buildings must be able to show that the transfer of the buildings won’t result in further distress and devolve into “financial and social chaos potentially worse than the current situation of the Debtors themselves.”

“If Summit cannot – or does not – remediate the violations the costs of doing so might well fall upon the city, which might have no means to recover such costs,” the filing states.

The filing states that the properties shouldn’t be transferred to Summit because the company has “failed to demonstrate that the Properties can support the proposed sale price and maintenance needs and costs given the regulated rents.” The administration wants more time to review Summit’s plan and to “explore alternatives.”

The filing was submitted by Corporation Counsel Muriel Goode-Trufant, a holdover from the Adams administration. Mamdani’s nomination for the role, Steven Banks, awaits approval by the City Council.

Mamdani announced his plans to intervene in the case shortly after taking office, as part of several early actions related to housing. He also unveiled plans to hold a series of hearings aimed at uncovering landlord neglect and finding policy solutions to tenant complaints.