Summit Plans $30M to Fix Pinnacle Portfolio

Summit Properties is on a mission to purchase 5,200 mostly rent-stabilized New York apartments at a bankruptcy auction.

But there’s been a thorn in its side: the Mamdani administration, which has filed numerous objections to the auction and sale, generating paperwork and press.

Now, Summit is trying to get the city off its back. In a declaration filed Wednesday, Summit CEO Zohar Levy outlined a plan to fix the bankrupt properties.

Summit appears poised to be confirmed as the buyer in a Thursday morning bankruptcy hearing. If confirmed, it would foil attempts by the city and renters to find a more tenant-focused buyer. But the declaration also illustrates that New York’s big landlords are living in a new reality, one where the mayor will personally make private transactions a political issue, and hope to extract concessions for tenants where it can.

In the declaration, Levy laid out a management structure and timeline to address housing code violations at the properties, seeming to reply directly to city filings arguing the company won’t be able to fix up the properties.

Tenants and the city have cast Pinnacle, the owner who placed the buildings in bankruptcy, as a slumlord, given the portfolio’s nearly 7,000 housing code violations.

But Levy says violations in the portfolio appear to be incredibly concentrated. Only 420 of the 5,200 units in the portfolio have documented violations, he wrote, representing just 8% of units.

Levy outlined a plan to divide the violation-ridden buildings between two management companies. Resources will be prioritized for the Brooklyn portion of the portfolio, which comprises less than half the units but more than 60 percent of the violations.

Summit plans to spend $30 million over five years on capital expenditures for the portfolio, with $10 million required in the first year to fix existing violations and a maintenance backlog. That works out to about $1,940 per unit in the first year and $5,824 over five years.

Some of the open violations are, however, immediately hazardous, including vermin infestations and lead paint violations.

Levy said Summit plans to address half the violations in the first 60 days and the remaining in 180 days. About 13 percent of violations are related to vermin infestations and 20 percent are related to paint and plaster. Others relate to general repairs, lead paint and water.

About 15 percent of the violations are in apartments Pinnacle says it hasn’t been able to access. Levy said Summit is prepared to work with the city to get access to the units.

The filing also revealed that Flagstar Bank, the biggest creditor in the bankruptcy, has agreed to finance up to 75 percent of Summit’s $451.3 million bid. The arrangement will lower the mortgage debt on the portfolio by $275 million and lower the interest rate.

The mayor’s office, which has objected to the sale in part because of the lack of plan from Summit, declined to comment on the declaration.

But the Union of Pinnacle Tenants, representing tenants at the properties, said Summit is trying to diminish the scale of neglect across the portfolio. The city’s housing arm hasn’t been able to complete roof-to-cellar inspections of every unit up for sale, and Summit would be required by law to address the most serious violations within 24 hours, the union said.

Summit’s existing portfolio already contains more than 5,000 open violations and has earned it a place on the public advocate’s “Worst Landlord” list, tenants said.

“The violations recorded are almost certainly an undercount,” the union said of Pinnacle’s portfolio in a statement. “The judge should look at [Summit’s] documented history of neglect, not unenforceable promises.”

The city along with tenants have asked the judge to reject the sale. They’ve raised concerns about Summit’s stewardship, financial ability to invest in the properties at the sale price, and also suggested more time would allow for a tenant-focused buyer to bid.

Flagstar Bank, to whom the Pinnacle portfolio owes $564 million, also objected to that formally in a separate declaration. The city’s argument that the sale price of about $88,000 per unit is too high, the bank said, is antithetical to the goals of the bankruptcy process.

“It is also not the approach of a party that believes, and is ready to invest, in the properties,” Flagstar wrote. “In the end, it appears that the City’s real objective is to scuttle the Sale Transaction so that it has more time to come up with a competing bid for significantly less money.”