The housing agenda of newly sworn-in New York City Mayor Zohran Mamdani is encountering its initial challenge as the city resists the sale of thousands of rent-stabilized apartments owned by the Pinnacle Group, following tenant complaints about poor living conditions.
On Monday, city officials petitioned a bankruptcy judge to postpone a Chapter 11 auction set for Thursday. They stated that more time is needed to assess a proposed $451 million sale to Summit Properties USA and to “explore any potential alternatives.” Summit made a stalking horse bid to purchase dozens of buildings across Brooklyn, Manhattan, the Bronx, and Queens after the properties entered bankruptcy last year, meaning the deal could be outbid at auction.
In a court filing, New York City’s Corporate Counsel stated that advisers for the bankrupt properties have not given the city details regarding Summit’s capacity to finalize the sale or its willingness and financial capability to make necessary repairs. The city also noted that the Pinnacle-owned buildings owe $12.7 million in unpaid debts and housing violation fines.
“Completing the bankruptcy auction process will provide financial stability and a chance to stabilize services, outcomes we would expect the City would not wish to disrupt,” Pinnacle attorney Ken Fisher said in an email. Summit did not immediately respond to a request for comment on Tuesday.
This legal move comes after Mayor Mamdani declared, just hours into his term, that the city would step into the bankruptcy proceedings to safeguard tenants. It signals the ambitious plans of the 34-year-old mayor, who campaigned heavily on affordability, especially in housing, before leading the nation’s most populous city.
Residents have endured heating failures, cockroach infestations, and “the kind of conditions that no New Yorker should have to live through,” Mamdani stated at a press conference after visiting a Pinnacle-owned building in Brooklyn.
Numerous Pinnacle residents have organized, citing in letters “years of mismanagement and neglect,” and had appealed to other city officials before Monday’s court action. Pinnacle filed the buildings for Chapter 11 protection in May, burdened with over $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 from the Mayor’s Office to Protect Tenants.
The city also expressed doubts on Monday about the financial viability of the proposed sale. It argued that the advisers have not shown the rent-regulated properties can sustain the proposed purchase price or ongoing maintenance costs. Furthermore, the city said it has not received a full evaluation of the repairs needed for the buildings.
In its court filing, the city contended the sale would not create “a supportable business” as long as the properties contain rent-stabilized or rent-controlled apartments, because the current rents “are very low-averaging.” This situation could force the city or tenants to pay for emergency repairs, or could pressure residents to relocate, according to the city.
Advisers have attributed the bankruptcy to rising interest rates, inflation-driven operating cost increases, and lower rent collection. Tenants in several Pinnacle buildings have informed Bloomberg News that the company has for years either ignored or been slow to address repair requests.
Summit’s portfolio includes regional shopping malls, New York City apartments, and Manhattan office properties, as per its website. The proposed purchase of the Pinnacle buildings requires approval from Judge David Jones, who is presiding over the bankruptcy.
“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 warned.
The case is Broadway Realty I Co. LLC, number 25-11050, in the U.S. Bankruptcy Court for the Southern District of New York.