Mamdani’s spin cannot hide the truth of the Pinnacle auction

The bankruptcy auction of Pinnacle’s 5,141-unit Brooklyn-Manhattan portfolio so perfectly reflects the madness of New York’s rent stabilization—and the politics of Mayor Zohran Mamdani—that I could write a book about it.

But in the interest of urgency, here are some quick thoughts on Summit USA’s winning bid of $451.3 million.

Let’s start with this statement from Leila Bozorg, the mayor’s deputy mayor: “Thanks to our intervention and dedicated organizing by tenants, the new owner of these buildings has committed to investing $30 million and remediating all violations within six months.”

Is that spinning? Of course it’s spinning. This is why:

• Zohar Levy of Summit said he would spend $30 million over five years on repairs and maintenance. That’s $97 per unit, per month. One owner of recently stabilized buildings said he budgets $75 a month for maintenance. Levy promised only an additional $22 to repair these supposedly dilapidated properties. In the immortal words of Derrick Coleman: whoop-the-damn-doo.
• Levy says it will cost just $10 million to clear all violations within six months and clear the capital backlog within a year. His maintenance budget for years two through five is $81 per unit per month. That’s a typical maintenance budget – and the ‘commitment’ that Mamdani takes credit for isn’t even legally enforceable.
• Only 420 units – 8 percent of the portfolio – are responsible for all violations. These could be the units with tenants who like to call 311, or those recruited by Mamdani’s head of tenant protection, Cea Weaver.
• Mamdani’s government had claimed that the buildings were in a dilapidated condition. But 92 percent of units have no violations.
• Considering that Weaver has spent years recruiting tenants into Pinnacle buildings to fight the landlord, it’s surprising that only 1 in 12 units is in violation. Perhaps she told Mamdani that the buildings were in worse condition than they actually were.
• Levy says all he needs from the Mamdani administration is help convincing tenants to let repair crews into their units. If Mamdani agreed to this, I missed it. Perhaps the mayor does not want to publicly say that tenants can and will refuse access.
• If cash flow proves insufficient, Levy says, he will receive bridge loans and/or capital injections to make up the shortfall. Flagstar says it will provide a $3 million line of credit. Not really worthy of a Mamdani victory lap.

Now on to the bigger picture. What does the saga say about the rent stabilization system?

• Summit’s offer of $451.3 million works out to $87,614 per unit, which Mamdani said was too much. He admitted that these buildings have little value, which contradicts his narrative that the landowners are rolling in dough.
• The average sales price of apartments in Brooklyn last quarter was $840,000. If units with a 90 percent discount aren’t cheap enough for renters, as the mayor said, the solution probably isn’t a bigger discount. It creates a functional housing market, where houses are not extremely expensive or almost worthless.
• Flagstar, the lender that mortgaged the Pinnacle portfolio’s $564 million mortgage, is also the lender on the Summit purchase. Flagstar’s $338.5 million loan covers 75 percent of the purchase price. The lender, formerly New York Community Bank, is ripping off the Band-Aid over its bad loans on rent-stabilized buildings.

In politics, after a battle like this, the best thing to do is declare victory and move on – and, if you can, focus people’s attention elsewhere. That’s what Mamdani did.
On Friday, he announced a $2.1 million settlement (also not very large) that the Adams administration reached with giant landlord A & E. Was the timing a coincidence? There are no coincidences in politics.

Read more

Summit confirmed as buyer of Pinnacle, ending battle with Mamdani

Judge rejects Mamdani’s bid to pause Pinnacle auction, paving the way for a takeover by Summit

Mamdani, Trump and Hochul offer surprising real estate ideas