The bankruptcy sale of 5,151 apartments from Pinnacle Group to Summit Properties is on the eve of a possible confirmation.
But the sale was unable to close at a Thursday court hearing. The city and tenants had objected to the sale, prompting hours of cross examination and argument before a bankruptcy court judge. Despite conversations about a settlement between the parties, no agreement was reached by the end of the hearing, with an attorney for the city saying that getting approval from the administration would go beyond business hours.
By the end of the day, the U.S. bankruptcy court judge, David Jones, was considering arguments from tenants and the city that Summit Properties had failed to make adequate assurances that it could perform and cure the thousands of existing violations in the portfolio for sale.
Summit CEO Zohar Levy had said in a declaration that Summit planned to spend $10 million in the first year on capital improvements and curing existing violations, with $30 million spent in the first five years.
However, under questioning from attorneys for tenants and the city, Levy specified Summit had planned on just $3 million for the violations and that the money would not be put in escrow or confirmed in a bankruptcy order. The properties would be owned by individual LLCs and there would be no recourse to go after Summit as the parent. Levy testified remotely from Austria and said Summit had engaged REM Management to manage part of the portfolio.
Jones considered arguments that Summit had not shown “adequate assurance of future performance” as a purchaser. But he appeared to be encouraged by a promise by Flagstar Bank, which is the biggest creditor in the case and also the financier for Summit’s potential purchase, that it would extend a $3 million line of credit to Summit to pull from should any of the repairs go over what was estimated. But Jones did not make a ruling Thursday.
Before final arguments, parties returned from a lunch break and told the court they had begun talking about a settlement. However, Zachary Kass, the city attorney, said the city would need to go through official channels, including engagement with Mayor Mamdani.
“Getting the city to do anything is a bit like turning a tanker,” Kass said before the court, later adding that Mayor Mamdani had been engaged.
After another break, the parties said they had exchanged numbers in a negotiation.
“Summit has the capacity and the commitment to preserve, restore, and improve the 5,151 units and the lives of the residents,” according to Jordan Barowitz, a spokesperson for Summit, adding that the company “looks forward to the Court’s decision.”
It’s possible that a settlement will be discussed overnight. Kass said the city would feel more comfortable with some sort of guarantee from Summit.
In a declaration, Levy said only 420 units in the 5,151 unit portfolio had housing code violations.
Despite talk of a potential insider connection in the deal concerning Jonathan Wiener, brother of Pinnacle’s Joel Wiener, Jones said he was not convinced of any insider involvement.
An attorney for Flagstar argued that the city was trying to be unduly involved in a bankruptcy transaction.
“What they really want is to pick the buyer, to pick the price,” the attorney said.
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