Newly-inaugurated New York City Mayor Zohran Mamdani’s housing agenda is facing its first test as the city balks at the bankruptcy sale of thousands of rent-stabilized apartments owned by Pinnacle Group, where residents have railed against living conditions.
City authorities on Monday asked a bankruptcy judge to delay a Chapter 11 auction scheduled for Thursday, saying they need more time to both evaluate a proposed $451 million deal to Summit Properties USA and “explore any potential alternatives.” After the buildings were put into bankruptcy last year, Summit offered to buy dozens of buildings in Brooklyn, Manhattan, Bronx and Queens in the form of a stalking horse bid, meaning the transaction is subject to potentially better offers at auction.
Advisers representing the bankrupt properties haven’t provided the city with information about Summit’s ability to consummate the proposed sale or whether it is willing and financially able to repair the buildings, New York City Corporate Counsel Muriel Goode-Trufant said in a court filing. The Pinnacle-owned buildings owe the city $12.7 million for unpaid debts and housing violations, the city said.
“Completion of the bankruptcy auction process will bring financial stability along with the opportunity to stabilize services, outcomes which we would expect the City would not want to disrupt,” Pinnacle lawyer Ken Fisher said in an email. Summit didn’t immediately return a message Tuesday seeking comment.
The challenge follows an assertion from Mamdani, just hours into his term as mayor, that the city would intervene in the bankruptcy to protect tenants. It foreshadows the 34-year-old’s ambitious plans after he campaigned with a relentless focus on affordability, particularly around housing, ahead of his ascent to chief overseer of the most populous city in the US.
Residents have dealt with a lack of heating, roaches and “the kind of conditions that no New Yorker should have to live through,” Mamdani said at a press conference after touring a Pinnacle-owned building in Brooklyn.
A number of residents in Pinnacle buildings organized in response to what they have described in letters as “years of mismanagement and neglect” and won support from other elected city officials before Monday’s court filing. Pinnacle placed the buildings into Chapter 11 in May carrying more than $500 million in mortgage debt.
“Our intervention in the Pinnacle case shows we are walking the walk, and fighting to ensure any outcome from this case improves living conditions and protects affordability for Pinnacle tenants,” said Cea Weaver of the Mayor’s Office to Protect Tenants.
The city also raised concerns about the economics of the proposed deal on Monday, saying advisers overseeing the bankrupt Pinnacle buildings haven’t demonstrated the properties can support the proposed sale price or ongoing maintenance costs given that the apartments are rent-regulated. Advisers also haven’t provided New York City authorities with a comprehensive assessment on what repairs the buildings require, the city said.
The proposed sale also wouldn’t result in “a supportable business” so-long as the bankrupt properties have rent-stabilized or rent controlled apartments because the current rents “are very low-averaging,” the city said in its court filing. That could mean that the task of addressing emergency repairs might fall upon New York City authorities or tenants themselves, or pressure residents to move out, the city said.
Advisers have blamed the bankruptcy on rising interest rates and inflation-driven increases in operating expenses and lower rent collection. Tenants at multiple Pinnacle properties have told Bloomberg News that the company has for years either failed or been slow to respond to requests for repairs.
Summit owns a swath of properties, including regional malls as well as NYC apartments and office properties in Manhattan, according to the firm’s website. The proposed sale of the Pinnacle buildings must be approved by Judge David Jones, who is overseeing the bankruptcy case.
“Continuing losses and mounting expenses might lead to the need for additional bankruptcies or reorganizations, a state of financial and social chaos potentially worse than the current situation of the debtors themselves,” the city said.
The case is Broadway Realty I Co. LLC, number 25-11050, in the U.S. Bankruptcy Court for the Southern District of New York.
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