A federal judge ruled on Friday that a real estate investment firm could complete a $451 million purchase of thousands of apartments from a landlord that has filed for bankruptcy, an early setback for Mayor Zohran Mamdani, who had vowed on his first day in office to protect the tenants.
The landlord, the Pinnacle Group, and the new owner, a subsidiary of Summit Properties, Ltd., both have thousands of open code violations in their housing portfolios, city and state officials said in arguing against the sale. Some Pinnacle tenants have long complained of neglect by management, saying their buildings were plagued by leaks, mold, insufficient heat, and infestations of roaches and rodents.
In the hours after Mr. Mamdani’s public inauguration on Jan. 1, the new mayor visited a Pinnacle building in Brooklyn, where one tenant showed him cracked tiles in her apartment and spoke of ceiling pieces falling onto her daughter in bed.
But despite the Mamdani administration’s vigorous opposition, first to the properties’ auction and then to the completion of the sale to Summit, the city failed to persuade the courts in its favor. With promises to protect tenants at the heart of Mr. Mamdani’s campaign, and a prominent theme in his first weeks in office, his administration’s failure to thwart the transfer of apartments he had taken a personal interest in may raise doubts about his ability to deliver on his many housing-related promises.
The city, however, credited its intervention and “dedicated organizing by tenants” for a multimillion-dollar commitment from Summit to fix violations.
In issuing the decision on Friday, Judge David S. Jones of Federal Bankruptcy Court in Manhattan said that those objecting to the sale had raised “serious concerns,” but that he was persuaded by Summit’s “serious and reasonable-sounding plan” to manage the Pinnacle buildings, “inject capital into the properties” and make needed repairs.
“The city’s approach to this case gives me every confidence that the city will monitor and police Summit’s performance,” ensuring that tenants could “have confidence” that repairs will be made promptly, the judge said.
During an all-day court hearing on Thursday, the city’s lawyers asked for any sale to be delayed, saying they wanted time to examine Summit’s plans and that they feared the company’s purchase of the Pinnacle buildings could lead to future problems. The lawyers suggested that Summit had not allocated enough money to cure violations related to the buildings.
“Summit has a track record as a landlord of mismanaging their buildings,” Steven Banks, Mr. Mamdani’s nominee to lead the Law Department and a current pro bono counsel to the agency, told Judge Jones. Moments later, Garrett Fail, a lawyer representing the debtors, accused opponents of the sale of “speculation and fear-mongering.”
The judge replied, “Emotions are very high,” and issued what he called “an exhortation to follow Zen practices.”
The City of New York was not the only party to weigh in on the sale. Lawyers for several groups of Pinnacle tenants spoke against it or sought guarantees that necessary repairs would be made swiftly.
The New York State attorney general’s office had opposed the sale to Summit, saying in a court filing this week that there were more than 4,000 open violations connected to Summit’s existing portfolio, which consists of 90 buildings with about 3,000 units bought in 2021 and 2022. The Pinnacle purchase includes about 5,150 apartments, most of them rent stabilized.
“Summit has provided no indication it will own and manage the Pinnacle buildings any better than its current portfolio,” the attorney general’s office wrote.
Summit’s existing portfolio is associated with two companies owned by Jonathan Wiener, who the attorney general’s office said had signed mortgages on behalf of Summit entities. He is the brother of Pinnacle’s principal, Joel Wiener.
The centerpiece of Thursday’s hearing was testimony from Zohar Levy, the chief executive of Summit Properties, Ltd., an umbrella organization for Summit Gold, which won the auction and that Mr. Levy said was essentially the same as another entity, Summit Properties USA.
Testifying via video link from overseas, Mr. Levy said that Summit would hire experienced managers to run the Pinnacle buildings and that it had a plan to cure half the violations in those properties within 60 days of buying them. The rest of the violations, he added, would be fixed within 180 days of purchase.
In a statement on Friday, Mr. Levy called the ruling “a new chapter.”
“This process has been difficult for the residents, and we understand their frustration and concerns about their homes,” he said, adding that Summit has “the capacity, commitment and resources to succeed for everyone’s benefit.”
Leila Bozorg, the city’s deputy mayor for housing and planning, said in a statement that Summit had committed to investing $30 million to fix the violations within six months.
“Our administration said from Day 1 that we would make tenants a priority, and that is exactly what we have done in these proceedings,” she said.
Mihir Zaveri and Dana Rubinstein contributed reporting.
The post Mamdani’s Push to Halt Sale of 5,000 Apartments to Big Landlord Fails appeared first on New York Times.
