Friday, October 14, 2011

Rent-stabilized tenants reject lawyers' settlement with Pinnacle Group


October 12, 2011 08:30AM

Tenants of Pinnacle Group buildings, largely in Northern Manhattan, want a judge to throw out a settlement their lawyers reached with the landlord for rent overcharges, the New York Daily News reported.

Five years ago tenants sued Pinnacle, one of the city's biggest rent-stabilized apartment owners, for illegal rent charges and harassing tenants in an effort to drive them out and increase rents. Lawyers found rent-stabilized tenants, whose rents are registered with the state, had been, in some cases, charged as much as $800 per month more than the state registry indicates.

As per the terms of the agreement reached by Pinnacle and the plaintiffs' lawyers, Pinnacle has hired a court administrator to settle the claims and award damages to the tenants.

However, many of the rents were set by the previous owners of the building, including notorious low-income housing owner Barry Singer, and merely continued by Pinnacle.

Under the agreement, Pinnacle is "not liable for any alleged rent overcharges for any rent set by a prior owner." That means many of the plaintiffs, who began renting before Pinnacle took control of the buildings, are not eligible for any award.

Plaintiffs will speak before a judge next week, urge him to toss the aforementioned settlement and seek damages that cover more tenants. [NYDN]

Tags: barry singer pinnacle group rent-stabilization

Furious tenants urge federal judge to toss rent deal with their hated landlord, Pinnacle

Wednesday, October 12th 2011

Tenants of one of the city's biggest owners of rent-stabilized apartments have asked a federal judge to reject a proposed deal their lawyers made with their landlord - Pinnacle Group.

"I'm one of the lead plaintiffs and I'm excluded from this settlement along with thousands of others," said tenant leader Andres Mares-Muro of the Mirabal Sisters Community Center.

In court papers filed last week, tenants called the deal "unreasonable, inadequate" and "extremely unfair" to a majority of more than 20,000 Pinnacle tenants.

They want Federal Magistrate Judge Ronald Ellis to delay or reject it when he holds a fairness hearing Oct. 20.

A five-year-old class-action suit alleges Pinnacle systematically engaged in illegal rent overcharges, massive harassment of tenants and "meritless evictions" - all aimed at driving out low-income tenants and sharply increasing rents for newcomers.

Under the proposed deal, all tenant claims would be quickly reviewed by a special court administrator, who would be paid for by Pinnacle. The administrator could award damages to tenants and additional financial penalties to the landlord.

Tenants are angry because the deal exempts the firm and its chief executive, Joel Wiener, from any claims for rent overcharges before 2004.

It also does not extend to overcharges instituted by a prior landlord, but never corrected by Pinnacle when it gobbled up thousands of run-down apartments a decade ago.

Take, for example, Hamida Moumouni, a Nigerian immigrant who rented an apartment on W. 141st St. in Harlem in 2003.

When Moumouni and his wife signed his original lease, their landlord was a notorious slumlord named Barry Singer, and their initial rent was $1,200.

Then Pinnacle bought the building, and Moumouni's rent increased steadily until it reached $1,419 in 2010.

By then, Moumouni had fallen behind in rent, and Pinnacle moved to evict him. That was when lawyers from the Northern Manhattan Improvement Corp. discovered the state's registered rent for the apartment back in 2003 had been just $460.

That means Singer overcharged Moumouni nearly $800 per month - and Pinnacle continued the illegal charges for years.

State law requires landlords to verify registered rents when they buy a rent-stabilized building, and it holds them liable for overcharges.

Last month, instead of being evicted, Moumouni won back rent and legal fees against Pinnacle in Housing Court worth nearly $100,000.

Yet the proposed class-action settlement would exclude people like Moumouni from the class of plaintiffs it covers.

"Pinnacle and the defendants shall not be liable for any alleged rent overcharge for any rent set by a prior owner of the building in question," the agreement specifies.

The angry tenants "are simply wrong and don't understand the facts," says Richard Levy, a lawyer for Jenner and Block. Levy filed the original case for the tenants and negotiated the settlement with Pinnacle.

At next week's hearing, Levy said, he and Pinnacle's lawyers will state unequivocally that the firm's tenants will still retain the right to ask the state housing officials to roll back illegal rent overcharges that occurred before 2004.

Matthew Chachere, a new lawyer the tenants asked to intercede for them, insists the deal "cuts out huge swaths of the class-action plaintiffs from any benefits under the settlement."

Next week, the judge will hear from the tenants themselves.

Tenant leaders bash deal with firm embroiled in class-action racketeering suit

Back in 2006, this column revealed that one of the city's fastest-growing owners of rent-regulated apartments had declared war on an astonishing number of its tenants.

Over two years, Pinnacle Group LLC, owner of some 20,000 units - mostly in upper Manhattan, the South Bronx and central Brooklyn - filed 5,000 eviction notices in Housing Court.

At some buildings, such as the historic Dunbar Houses, a 534-unit complex in Harlem, or a 300-unit complex on Morrison Ave. in the South Bronx, Pinnacle tried to evict half the tenants within months of buying the buildings.

In one case after another, the Daily News found evidence the company harassed tenants into leaving, then quickly renovated the units so it could double or triple the rents.

Those stories, along with repeated protests by Pinnacle residents, prompted several investigations by authorities of what housing advocates called "predatory equity buyers" - investment groups that gobbled up rent-stabilized units during the real estate boom to deregulate them.

In 2008, then-Attorney General Andrew Cuomo reached a settlement with Pinnacle, requiring it to pay $1 million in rent overcharges to more than 300 tenants.

By then, tenant leaders had filed a class-action racketeering suit against the firm and its chief executive Joel Wiener. Those tenants were elated when, last year, a federal judge certified the class-action suit to proceed.

Earlier this month, Pinnacle and the firm representing the tenants suddenly announced a proposed settlement. Tenant leaders who spearheaded the suit immediately denounced the deal and are organizing tenants to ask a federal judge to reject it.

"This is a sham settlement," Ted Charron, a lead plaintiff, said. "Pinnacle conspired to harass and cheat tenants out of millions of dollars and our own lawyers turned this into just a rent overcharge case."

Charron and other tenant leaders say Jenner and Block, the firm that represented them pro bono, just didn't want to go to the expense of a full trial.

Richard Levy, the lead lawyer for the tenants, disagreed.

"We could never have done better," Levy said.

Under the deal, Pinnacle agreed to have a court-appointed administrator review all tenant claims of past overcharges, harassment and other rent-law violations and award individual damages with no cap.

The firm agreed to a series of procedures to protect tenant rights and to submit to a two-year period of monitoring.

In addition, Pinnacle would pay $2.5 million into a fund to finance legal representation for those tenants and up to $1.4 million for the tenants' law firm.

"This is a very good settlement," said Ken Fisher, a lawyer for Pinnacle. "You've got a claims administration process that will be done in an expedited process.

"We always said we made mistakes and certainly took responsibilities for those mistakes."

Pinnacle chose to settle the case to avoid spending millions on a drawn-out trial, he added.

"This is a complete whitewash of Pinnacle's responsibilities," said another lead plaintiff, Kim Powell. She is organizing fellow tenants to oppose the deal.

As in so many class-action suits, the biggest winners end up being the lawyers.

Deal Would Settle Tenants’ Harassment Suit

NEW YORK TIMES By A settlement deal has been reached between lawyers for a large New York City landlord and its rent-regulated tenants, who claimed in a class-action lawsuit that they had been subjected to harassment, unlawful rent increases and aggressive eviction attempts during the real estate boom.

Under the terms of the deal, the landlord, the Pinnacle Group, will pay $2.5 million to legal and tenant-rights groups to help current and former tenants make legal claims for damages. The $2.5 million is separate from any damage awards. A court-appointed claims administrator will hear the complaints and decide whether to award compensation.

The Pinnacle Group, which owns about 15,000 apartment units citywide, must also set up a help line and follow new protocols like carefully notifying tenants of plans to increase rents or start evictions.

Tenant advocates and housing experts hailed the settlement deal, which was reached in early August and announced last week, for strengthening tenants’ legal rights in cases claiming harassment and unlawful evictions.

“This settlement seems to be a significant admission of wrongdoing by Pinnacle,” said Benjamin Dulchin, executive director of the Association for Neighborhood and Housing Development, which represents housing groups. He added that the deal confirmed tenants’ assertions that Pinnacle’s “misbehavior, harassing” and causing tenants to overpay their rents “was a key part of their business model.”

But Kenneth K. Fisher, a lawyer for Pinnacle, said the company had settled to avoid the cost of a potentially long trial. “The company has been proud of its record of providing housing for thousands of New York families,” he said, “and never felt the allegations had merit.”

Advocates for residents’ and tenants’ rights have long claimed that people in rent-regulated apartments owned by the Pinnacle Group were widely intimidated as part of the owner’s efforts to empty its buildings to make way for higher-paying tenants.

During the housing boom, scores of apartment buildings in far-flung pockets of the city were bought by what housing advocates described as predatory equity buyers, who paid more than what the buildings’ rent rolls could support. Tenants routinely found themselves showered with eviction notices, and new owners often ended up walking away from buildings after defaulting on their mortgages.

The Pinnacle Group, which spent hundreds of millions of dollars buying hundreds of apartment buildings from May 2004 to May 2006, has consistently denied any wrongdoing, saying it was trying to improve conditions in deteriorating buildings. Yet its practices were scrutinized by lawmakers and law enforcement.

In 2006, Pinnacle and the state attorney general’s office reached a settlement in which a forensic auditor examined rents for each of Pinnacle’s rent-stabilized units. As a result, Pinnacle paid $1 million in rent overcharges and interest to about 300 tenants.

In the class-action case, the plaintiffs claimed that Pinnacle had schemed to harass them. They also said Pinnacle had skirted the state’s rent regulation and other housing laws and had violated federal racketeering laws. In 2010, a federal judge granted the class-action status without addressing whether Pinnacle had violated the racketeering statute. But the judge said that if the tenants’ claims were true, racketeering could indeed have happened.

“It means that if you conspire to violate New York laws and displace tenants from a place you are running, you are subject to violating federal RICO conspiracy laws, and you can be sued,” said Andrew Scherer, author of “Residential Landlord-Tenant Law in New York” and a consultant to the plaintiffs.

News of the deal, which is expected to be completed at a fairness hearing in October, drew mixed reactions from tenants.

Bobby Jones, president of the tenant association at Dunbar, a large complex in Harlem that Pinnacle recently lost to foreclosure, said that the deal was “better than nothing,” but that Pinnacle had wrought lasting damage on the place. About 45 percent of Dunbar’s tenants left their homes or were forced out during Pinnacle’s five-year ownership, he said. Mr. Fisher said that the claim was “factually inaccurate,” and that during Pinnacle’s ownership no units were removed from rent stabilization and that turnover averaged 6 percent a year.

Kim Powell, a tenant leader at an existing Pinnacle building, said she and other named plaintiffs were “totally disappointed” with the deal. Among the issues it left unclear, she said, was who would be eligible for compensation. “The two attorneys may be happy with it, but we’re not,” Ms. Powell said.

Yet Richard F. Levy of the firm Jenner & Block, the plaintiffs’ lawyer, said the deal was in the best interest of the estimated 22,000 people who could be affected. “Certain matters needed to be compromised,” he said, “but this is a very good compromise.”

Saturday, June 05, 2010

Tenant Lawsuit Against Mega-Landlord Gains Steam

By Samia Shafi
Tuesday, Jun 1, 2010

Marc Fader/City Limits

Kim Powell is one of the nine original plaintiffs who filed suit against Pinnacle in 2007.
Morningside Heights — When The Pinnacle Group purchased the building where Kim Powell and her family were living in 1997, she and her family hoped their 19 years of housing woes might finally come to an end. Their dispute with the building's former owner had ended with a victory: a judge ordered their rent reduced $53 per month until necessary repairs were made. All they needed now was for Pinnacle to comply with that order, which is exactly what Powell says the company didn't do.
Not only would Pinnacle resist the order for the next 12 years – raising her rent to $705 and suing her for failing to pay it – they would also delay repairs and frequently fail to supply heat and hot water, according to a lawsuit that Powell and eight fellow tenants filed against the company in 2007. The company even installed three feet from Powell's door a device, Powell believed, to spy on her. The device consisted of an electrical junction box with a hole drilled in the face place.
More Tenants“It leaves a bitter taste on my family’s mouth since we had to deal with this so long," Powell says. "We spent a lot of mental energy in them coming to us and saying can we start anew and us extending our hand to them, only to be slapped one more time.”
Powell’s experience was not a series of isolated incidents, advocates say, but a classic case of predatory equity, a common landlord scheme that they hope will soon be restricted by the Pinnacle tenants' landmark lawsuit. In the scheme, real estate investors buy rent-controlled or stabilized buildings, then pressure the tenants – primarily through harassment and failing to make repairs – to vacate them. After a tenant leaves, the landlord rents or sells the vacant unit at a higher price.
"These hedge-fund backed landlords that acquired huge numbers of subprime apartments gambled on their ability to raise rents and evict low-income tenants," says Edward Josephson, director of litigation at South Brooklyn Legal Services. "Either the gamble pays off and they displace tenants or they don't succeed and their business model collapses."
The crash of the housing market in 2007 has already reduced the prevalence of predatory equity in New York City, but a tenant victory in the Pinnacle lawsuit would help ensure that when the market rebounds, the practice doesn’t. And this month, the prospect of such a victory grew brighter when a judge granted the plaintiffs class action status. Pinnacle owns over 420 apartment buildings in New York City, containing more than 21,000 apartments and 60,000 tenants. Gaining class action status will enable potentially thousands of current and former Pinnacle tenants to join the plaintiffs' case.
The Rent Stabilization Association, which represents property owners, said it’s too early to comment on the significance of the case. “It’s way too soon to know what impact it has” says spokesperson Frank Ricci. “We have to see the merits of the case. Right now it’s a very esoteric case, a very specific fact pattern with a very specific owner.”
Indeed, the case could drag on for several more years while the tenant’s attorneys labor to prove their case. The lawsuit alleges that Pinnacle and its chief executive Joel Weiner not only violated the New York Consumer Protection Act and rent stabilization laws and codes, but acted as a “criminal enterprise” under the Federal Racketeer Influenced and Corrupt Organizations Act (RICO), a law enacted to fight organized crime. That law applies to landlords who engage in predatory equity because, similar to an organized crime syndicate, they scheme to violate the law to make a profit, says Sateesh Nori, an attorney with the Legal Aid Society who has clients residing in Pinnacle buildings.
Proving that Pinnacle violated RICO will be the most difficult part of the case, because it will require plaintiffs to show that the company and Weiner engaged in a deliberate pattern of racketeering by violating over a 10 year period at least two of 35 crimes under the statute.
The other problem plaintiffs might face is convincing more tenants to participate, Powell says. In 2006, Pinnacle filed eviction proceedings against about 5,000 tenants. Since the plaintiffs filed suit, Powell contends, Pinnacle’s harassment and intimidation of tenants has worsened. “The massive fear that is being kicked out of your home,” says Powell. “What is perturbing to me even today, I have reason to believe, despite the signing of the settlement agreement they continued to conduct illegal practices.”
But if the plaintiffs succeed in obtaining an adverse judgment against Pinnacle, the company could lose billions of dollars. The judge could order the company to reimburse up to three times the rent it overcharged. Additionally, the state’s Division of Housing and Community Renewal can penalize landlords $250 for deliberate violations of rent regulations and $2,500 when it finds them guilty of harassing tenants to vacate apartments.
“I think if the plaintiffs prevail in Pinnacle, the precedent will create a strong additional disincentive for landlords to engage in broad predatory practices," says Josephson. "In fact, just the fact that the Pinnacle case has progressed as far as it has, has probably given landlords some food for thought."
The case is not the first to allege that landlords violated RICO laws, nor is it the first filed since the City Council passed the tenant anti-harassment law in 2008. But Josephson believes it could be the first time in New York City history that tenants have won class action status in a case filed under RICO.
Attorneys for the plaintiffs have set up a hotline for tenants with complaints against Pinnacle, and the Manhattan Borough President’s Office is recruiting tenant advocates in the 194 Pinnacle buildings in Manhattan to get more tenants involved in the lawsuit.
Powell recalls that when tenants in her building, 706 Riverside Drive in West Harlem, first began to realize that their problems with Pinnacle were systemic, their only option was to file a complaint with DHCR.
Now the court will have the opportunity to consider the impact on every alleged Pinnacle victim, Powell says. “While I sat back there in 1997, while I saw what I saw, I wasn’t able to articulate it 'til 2005, other than to say I saw something that was potentially terribly wrong,” she says. “I just needed to get someone to listen. I think we have that now.”

Editor's Note: City Limits has learned that the following article contains an inaccuracy, a mischaracterization and an omission. Pinnacle does not stand to lose "billions" in this case, in which it has moved for leave to appeal. Attorney Sateesh Noori did not assert--as the article might suggest--that he knows of any instances in which Pinnacle violated laws in a manner that could fall under the federal RICO law. Pinnacle, which through a reporting error was not contacted for this article, asserts that "it does not have any hedge fund backers." An article exploring the case more deeply is forthcoming.

Friday, May 14, 2010

Judge allows tenant lawsuit against hated Pinnacle Group landlord for harassment

Thursday, May 13, 2010

Judge allows tenant lawsuit against hated Pinnacle Group landlord for harassment

Thursday, May 13th 2010, 4:00 AM

Landlord Joel Weiner, owner of Pinnacle Group Corp, accused in a Manhattan Federal Court lawsuit of 'corporate slumlording.'

A federal judge has allowed thousands of tenants to sue one of the city's most hated landlords for trying to strong-arm them out of their apartments.
Manhattan Federal Judge Colleen McMahon granted current and former tenants the right to file a class-action suit against notorious landlord Joel Weiner. Damages could run into the millions.
Weiner and his Pinnacle Group are linked to 420 city buildings with at least 60,000 tenants across the city, according to Buyers and Renters United to Save Harlem, a plaintiff.
Tenants have long charged that Pinnacle launched harassment campaigns to drive them from their rent-regulated apartments.
"They placed a surveillance camera at my door when I complained about conditions," said Kim Powell, 48, who has lived in a Pinnacle apartment on Riverside Drive for 28 years.
"They held my [rent] checks and claimed I didn't send them. They have denied tenants heat and hot water, and when repairs are done, the work is invariably substandard."
McMahon's decision expands a suit filed by Powell and 10 other tenants in 2007 claiming Weiner inflated rents, failed to make repairs and systematically evicted tenants to raise rents.
In her April 27 order, McMahon wrote that if the allegations are true, "all of [Pinnacle's] rent-regulated tenants either have been subjected to or are at risk of being subjected to the same pattern of racketeering."
Any big payoffs could take years. Tenants first have to prove that Pinnacle violated federal racketeering laws by plotting to oust them from the cheap flats. If they succeed, they can then sue individually for damages.
The city Department of Housing Preservation and Development has cited many Pinnacle apartments for inadequate fire exits, lack of heat and hot water and lead paint. Some hazardous conditions have not been corrected for years.
The suit is open to current and former tenants who have rented from Pinnacle since 2004. Many vowed to add their names to the plaintiff list at a meeting held Wednesday by Manhattan Borough President Scott Stringer.
"Count me in," said Kahn Hightower, 42, who said he staved off attempts to evict his family from a Riverside Drive apartment. "Those people at Pinnacle almost made me homeless," he added.
Weiner's lawyer, former City Councilman Kenneth Fisher (D-Brooklyn), dismissed the allegations as "overblown."
"In an organization that manages as many properties as they do, they will make mistakes from time to time," Fisher said. "But that is a far cry from a claim that this was a vast conspiracy."Read more:

Judge Grants Class Action Status in Tenant-Pinnacle Suit

Globe St. com
May 13, 2010

By John Jordan

New York City-The five West Harlem tenants that are suing New York City landlord the Pinnacle Group LLC are asking for tenants in Pinnacle buildings across New York City to submit evidence that will substantiate their charges.
A press conference was held on Wednesday at The Dunbar where the five West Harlem tenants, Manhattan Borough president Scott M. Stringer, several members of the City Council and the group Buyers and Renters United to Save Harlem (Brush) spoke of the importance of a recent decision by US District Court Judge Colleen McMahon in granting class action status to the case originally filed in 2007 against Pinnacle and its CEO Joel Weiner. The tenants charge the Pinnacle Group fraudulently inflated rents, failed to make needed repairs and groundlessly harassed tenants out of rent-regulated apartments throughout New York City.
Ken Fisher, an attorney representing Pinnacle in the case, says that it has filed for leave to appeal the class action status ruling rendered by Judge McMahon on April 27 with the US Court of Appeals.
Supporters of the tenants in their case against Pinnacle term the class action ruling as "one of the most far-reaching court decisions in New York City’s history that could potentially benefit thousands of tenants in rent-regulated apartments across the city." The decision certifies that the class consists of all persons who are rent regulated tenants in Pinnacle properties as of April 27, 2010 and a liability class for rent regulated tenants who lived in Pinnacle properties between July 11, 2004 and April 27, 2010.
Pinnacle’s Fisher, a member of the law firm Cozen, O’Connor, says, "three years into the litigation it is the same group of five tenants that are plaintiffs, which speaks for itself. Pinnacle is proud of its record of providing safe and affordable housing to thousands of New York families and is confident that at the conclusion of the case the allegations will be found to be baseless." He adds that four other tenants who had originally been part of the case have since settled and that no other Pinnacle tenants have come forward to join the lawsuit.
Representatives of the tenants state that Pinnacle and Weiner are linked to more than 420 apartment buildings that contain more than 21,000 apartment units and approximately 60,000 tenants throughout the five boroughs.
"This lawsuit is a huge victory for all working people in New York City and retired and elderly tenants, too," states Andres Mares-Muro, one of the five tenants that filed the lawsuit against Pinnacle. "At a time when we are all living on less and less and terrified of losing our jobs, this...suit is the first step in protecting us from losing our homes. It sends a [resilient] message to flippers and speculators..."
Stringer adds, "This lawsuit constitutes an unprecedented fight against [these] corporate landlords and a powerful show of resistance for middle- and low-income residents throughout the city who believe that illegal tactics are being used to drive them out."
Fisher said, in response to some politicians' comments, "It is disappointing that grandstanding politicians chose to involve themselves in this, rather than trying to come up with real solutions to New Yorkers' housing needs."
In December 2006, Pinnacle Group, LLC, while admitting no wrongdoing, reached an agreement with then New York State attorney general Eliot Spitzer in regards to alleged overcharges in some of its rent stabilized apartments that had recently become vacant and required repair. Fisher says that the overcharges centered on about 300 of the 9,000 vacant apartments in its portfolio and that Pinnacle sent refunds to the affected tenants who later took occupancy of the renovated apartments totaling about $900,000 and about $100,000 in interest.
A meeting described as "a class action classroom" has been scheduled on May 23 from 1 p.m. to 3 p.m. at the Oberia Dempsey Center on 127 West 127th St., by Stringer, the plaintiffs and BRUSH to provide Pinnacle rent regulated tenants with information concerning the litigation and provide the opportunity for tenants to submit evidence in the case.

Saturday, May 08, 2010

Pinnacle Group Hit with Class-Action Suit

The Real Deal

May 04, 2010 10:00AM

A class-action lawsuit that accuses controversial landlord Pinnacle Group NY and its CEO, Joel Weiner, of harassing rent-regulated tenants and evading New York's rent regulation laws has been certified to proceed in federal district court. Pinnacle, which controls or owns more than 400 apartment buildings throughout the city, was also accused of violating the federal racketeering statute, RICO, and the New York Consumer Protection Act. An attorney for Pinnacle called the allegations "baseless" and said the company plans to appeal. This isn't the first time Pinnacle has gotten into legal trouble. The company previously repaid more than $1 million to tenants after coming under intense pressure from the New York attorney general's office. [Crain's]

Big Residential Landlord faces Class-Action Suit

By James Comtois
Published: May 3, 2010 - 2:21 pm

A federal district court judge has given the go-ahead for a class-action lawsuit to proceed against landlord Pinnacle Group NY and its chief executive, Joel Weiner.
Plaintiffs Marjorie and Theodore Charron, Andres Mares-Muro, Raymond Andrew Stahl-David, and Kim Powell allege that Pinnacle and Mr. Weiner have engaged in a wide ranging scheme to harass and intimidate its tenants and evade New York's rent regulation laws with its properties. In addition, the plaintiffs charge that Pinnacle's conduct violates the federal racketeering statute, RICO, and the New York Consumer Protection Act.
In her April 27 opinion, which did not address whether or not Pinnacle had violated RICO or the New York Consumer Protection Act, Judge Colleen McMahon of the U.S. District Court for the Southern District of New York certified two overlapping classes to proceed against Pinnacle. She stated that if the plaintiffs' allegations are true, then all of Pinnacle's rent-regulated tenants “either have been subjected to, or are at risk of being subjected to the same general course of allegedly fraudulent and harassing conduct, the same pattern of racketeering.”
According to Jenner & Block, the law firm appointed to serve as lead counsel for the plaintiffs, the court certified a class comprised of all persons who, as of April 27, 2010, are tenants in rent-regulated apartments in New York City directly or indirectly owned in whole or in part by the Pinnacle Enterprise. The company controls or owns over 400 apartment buildings across the city.
The court also certified a liability class so that those tenants seeking damages for Pinnacle's conduct will have the opportunity to prove that Pinnacle and Mr. Weiner violated RICO and state consumer protection laws. The liability class is comprised of anyone who was a tenant in a rent-regulated apartment in the city directly or indirectly owned by Pinnacle at any time between July 11, 2004, and April 27, 2010.
Ms. McMahon directed Jenner & Block to submit a proposed method of notifying all members of the liability class of the suit to the court within 14 days.
Pinnacle's conduct has previously been the subject of an enforcement action by the New York attorney general's office, which resulted in Pinnacle repaying over $1 million to tenants.
Ken Fisher, the attorney representing Pinnacle, said in a statement that the landlord is "in the process of reviewing the court's procedural decision" to determine its rights for an appeal, adding that the firm believes the suit's allegations are "baseless and that will be proven if and when this matter goes to trial."

Monday, April 06, 2009

New York Landlord's Portfolio Goes Into Special Servicing

Pinnacle Group Not Meeting Financial Expectations on Upper West Side Portfolio
By Mark Heschmeyer
April 1, 2009
Standard & Poor's Ratings Services placed its ratings on commercial mortgage-backed securities (CMBS) GE Commercial Mortgage Corp. Series 2007-C1 Trust on CreditWatch with negative implications. The action comes primarily from problems with loans tied to New York landlord Pinnacle Group and its owner Joel Weiner. The loan, called the Manhattan Apartment Portfolio loan ($192.1 million), is secured by 1,083-unit apartment units in 36 apartment buildings on the Upper West Side of Manhattan. Most of the units in the portfolio are subject to rent-stabilization laws and the borrowers had intended to convert rent-stabilized units into market-rent units. The loan was transferred to special servicer LNR Partners Inc. on Feb. 26. Standard & Poor's preliminary analysis of the MAP loan indicates a 48% valuation decline since issuance in 2007. At issuance, Standard & Poor's estimated the borrower would be able to convert 88 units per year to market rents; however, only 14 units have been converted since issuance. Since its October 2008 review the interest reserve has declined 34% to $11.8 million. The master servicer, KeyBank Real Estate Capital, reported debt service coverage of 0.36x for the year-ended ended Dec. 31, 2008, compared with 0.40x for the year ended Dec. 31, 2007. Wiener has ownership and management interests in an estimated 100 buildings totaling approximately 20,000 rental apartment units in the New York City metropolitan area. Currently, New York City landlords cannot increase rental rates on rent stabilized units more than approximately 4% annually until they reach $2,000 per month and the tenant income exceeds $175,000 for two consecutive years. New York state is proposing tenant-friendly changes that could increase the rent trigger to $2,700 and the income trigger to $250,000. This can extend a unit's participation in the rent regulation program up to eight additional years, according to recent analysis by Fitch Ratings. The Manhattan Apartment Portfolio properties in GE 2007-C1 consist of 36 multifamily buildings (1,083 apartment units and two office suites) situated between West 100th and West 161st streets.
# of Bldgs # of Units Neighborhood Boundary
21 484 Upper West Side Between West 100th and West 108th streets
4 104 Morningside Heights Between West 113th and West 115th streets
6 311 West Harlem Between West 127th and West 139th streets
2 53 Hamilton Heights Between West 147th and West 148th streets
3 131 Washington Heights Between West 156th and West 161st streets

Controversial Pinnacle Group Sheds Uptown Property

The NewYork Observer
By Dana Rubinstein
March 25, 2009 3:32 p.m

Controversial landlord Pinnacle Group has shed one of its uptown properties for $12.5 million, according to city property records.
A group called Latham Properties, affilitated with the budget Latham Hotel on East 28th Street, bought 169-175 East 101st Street, a 119-unit apartment building, on February 26.
The buyer could not be reached for comment. The seller had acquired the building in 2004 for $9.4 million.
Pinnacle Group, which, according to a July 2007 New York Post article titled "'Slum Bum' Hit with RICO Suit," owns 420 buildings in Manhattan and the Bronx, has been the subject of repeated attacks by housing advocates for its tactics in turning affordable units into market-rent apartments.
According to a 2006 Village Voice exposé, a community forum on Pinnacle's alleged abuses attracted 200 residents:
One by one, residents accused Pinnacle of aggressive court tactics—attempts to violate tenants' succession rights, for example, and to evict for bogus reasons. They complained that the company fails to make repairs, or delays repairs, or does shoddy improvements to raise rents beyond regulated limits. Mostly, they blasted the real estate giant for moving into their neighborhoods and moving them out.
In January of 2008, Pinnacle hired Eastern Consolidated to market a portfolio of its properties, hoping to get more than $70 million for 384 apartments, according to an article by my colleague Eliot Brown. Sources say that Eastern Consolidated did not do this deal.

Sunday, December 28, 2008

Kid to Riverside Tenants: No Garage Related Rent Hike

Brooklyn Heights Blog
December 17th, 2008

New York State Senator-elect Daniel Squadron has written tenants of the Riverside Apartments assuring them that they will not be subject to garage construction related rent increases. Squadron spoke to the building’s landlord, the Pinnacle Group, who claim that they will not seek an MCI increase for the construction of its proposed garage.
The content of the letter after the jump.

To the residents of Riverside Apartments

Dear Neighbors:

I want to share a quick update with you about my ongoing conversations with the owner of your building.

Riverside tenants have expressed a few concerns to me: that the proposed garage construction will disrupt life in the building, that it could permanently make the courtyard impossible to enjoy, and above all that the building owner might use the garage construction to seek a Major Capital Improvement (MCI) rent increase for rent-regulated tenants.

I want to let you know that I have personally received an assurance from the landlord’s representative that the landlord will not seek an MCI increase for the work he proposes to do to install a garage. Additionally, the landlord is not allowed to use any garage work as a pretext for evicting any tenants.

This news is an important development and I wanted to share it with you as soon as possible. Of course, it is only the beginning of a longer process. As I expressed previously to tenants in the building, I have serious concerns about the proposed garage, its impact on the quality of life for residents of the building, and the precedent it would set for the Heights Historic District. I look forward to continuing to work with the tenants of the building.
Please feel free to call my office any time with concerns about this or any other issue. I can
be reached at 646-472-5712 or

Wednesday, July 23, 2008

Role of Private Equity Worries Tenant Advocates


July 10, 2008

“The prices being paid for Bronx apartment buildings are out of step with the buildings’ actual profitability.”- Greg Jost University Neighborhood Housing Program


Ed. note: This article has been corrected. In the original version we erroneously reported that the Pinnacle Group had purchased 10 Bronx buildings in 2008. The buildings were purchased by several limited liability corporations (LLCs) through Chestnut Holdings. The Norwood News regrets the error.

In 2005, when the Pinnacle Group first roused the ire of tenants for aggressive tactics in housing court, landlords funded by unregulated capital were an anomaly. More common were the likes of Nicholas Haros and Frank Palazzolo, owners reviled for their determination to squeeze rental income from deteriorating buildings.

Pinnacle is backed by the Praedium Group, which is in turn controlled by the Caisse de depot et placement du Quebec, one of the top 10 real estate pension fund managers in the world. No longer just the province of local landlords, rent regulated Bronx real estate has whetted the appetite of international finance.

Pinnacle has been joined in the northwest Bronx by Ocelot, backed by the Israeli-owned Eldan Tech Ltd.; SG2, backed by Blackrock, of which Merrill Lynch owns 50 percent; Urban American Management, created by the Ramius Capital Group; and Normandy Investment Partners, which is funded primarily by international investment and corporate and state pensions. These firms have purchased portfolios of properties from New York-based landlords such as Nicholas Haros, the Palazzolo Investment Group, Jacob Selechnik and the Bodak family. The University Neighborhood Housing Program estimates that over 14,000 apartment units in the Bronx are owned by private-equity-backed landlords.

The management style of these firms – including level of commitment to repairs and aggressiveness in housing court – varies. But they share the basic perspective that rents in regulated buildings can be increased significantly through “value enhancement” and “aggressive management” – catchphrases that reflect a strategy of capitalizing on vacancies to increase rents and carrying out Major Capital Improvements.

From the landlords’ perspective, gentrifying neighborhoods, where regulated rents are far below market, are the most fertile grounds for this strategy. In Urban American’s Sunnyside, Queens properties, for example, new renters are paying upwards of $1600 for two bedrooms, most of which underwent improvements or repairs during vacancy. Some apartments have even surpassed the $2000 rent deregulation mark.

Gentrification on Kingsbridge?
But gentrification feels a long way off from 131 W. Kingsbridge Rd. According to city public records, this building was purchased by SG2 for just over $100,000 per apartment in February 2007. There are 384 violations in this 31 unit building, 239 of them documented since May 2007.
Gladys Cardona has lived at 131 W. Kingsbridge Rd. for 10 years. When her bathroom ceiling fell, exposing wooden slats and pipes from the apartment above, SG2 didn’t respond to her phone calls. Only when HPD threatened to deploy its emergency repair unit did the landlord order the ceiling patched, she said.

“I’m tired of this,” said Gladys, who is 60 and still battles vermin infestation and lack of hot water. “But the costs of moving are very high.”

Miguel Jimenez, Gladys’ neighbor, shares her concerns. He says he called SG2’s Walton Avenue office four times last month about the hole in his bedroom ceiling and didn’t receive a call back. Finally he visited the office in person and secured a commitment from manager Evelyn DeJesus to address the problem. Jimenez never heard from her again and DeJesus did not return two voicemail messages or an e-mail from the Norwood News.

Jimenez’s rent is $922, but Section 8 pays the majority. Like Cardona, he would like to move, but cites fees for credit checks, moving costs and security deposits as expenses he can’t afford. For now, the two are staying where they are, hoping that organizing assistance from the Northwest Bronx Community and Clergy Coalition will help to force repairs.
Cardona and Jimenez are not alone. Their neighborhood, Kingsbridge Heights, is one of the poorest neighborhoods in the poorest borough in the City. According to the Furman Center, 59 percent of households in this community district make less than $35,752 a year; 31 percent make less than $16,556. Though rents here are low by city standards, the median proportion of income tenants pay for rent – stands at 37.8 percent. Thirty percent is considered acceptable by HUD.

Further east, at the SG2-owned 750-760 Pelham Parkway South, tenant association president Ray Ruiz lists broken front door locks, malfunctioning boilers and rent overcharges as persistent problems. This building has nearly 140 units and 768 housing maintenance code violations, 687 documented in the past year alone. “We thought Michael Goldberg [the previous landlord] was bad, but at least they answered the phone,” says Ruiz, who has lived in his apartment since 1997. “SG2 people just have voicemail that they never check.”
Some improvements

In some SG2 buildings, however, tenants have seen improvement. Charles Long, a fire safety inspector and 10-year resident of 1212 Grand Concourse, joined with members of Community Action for Safer Apartments (CASA) to meet with SG2 manager John Sutherland. Long was mostly pleased – management responded quickly to concerns about inadequate outdoor lighting and elevator breakage.

“In some ways SG2 is a saint compared to the previous landlord [Jacob Selechnik],” said Long. “But they’re in business, and they wouldn’t be curing these violations if they didn’t expect to get their capital improvement increases.”

Long counts on continued maintenance improvements and hopes that noise pollution and late-night partying will come under control as well. But he is ambivalent about what these changes will mean for the poorest tenants – those on public assistance and Section 8 – who he is certain will be pushed out. “I have never seen such an army of workers sent to renovate vacant apartments,” Long says.. He has not met any new tenants yet, but believes they will pay significantly more.

These observations have not escaped community groups and local leaders. Fernando Tirado, district manager for Community Board 7, held a meeting with SG2 managers in February 2008. “We wanted to meet with them because we were concerned about the number of properties they had purchased – 23 in our Community Board alone and 75 in the whole Bronx-- but we got a good response. They assured us that they were not there to push people out, that they were there to improve the properties and that this was an investment that they cared about.” Tirado reports that they have not heard complaints from tenants of SG2 buildings in recent months.

In 2005, the University Neighborhood Housing Program noted that purchase prices of Bronx buildings were increasing disproportionate to rental income, sometimes to as much as $67,000 per unit. UNHP worried that landlords’ inability to make mortgage payments on overleveraged properties would lead to another wave of disinvestment and property deterioration.
According to City records, in 2007, SG2 paid $6,632,467 for 1212 Grand Concourse -- $108,729 per apartment. There is little in the data, it seems, to justify SG2’s enthusiasm. According to the Rent Guidelines Board, Bronx landlords’ net operating income increased only 3% from 1990 to 2006, far less than the other boroughs.

And unlike poor renters in Washington Heights or Sunnyside, Bronx tenants live far from Starbucks and other markers of middle class desirability. It is unclear where – if tenants like Cardona and Jimenez were to leave -- their higher-paying successors would come from.

“The prices being paid for Bronx apartment buildings are out of step with the buildings’ actual profitability,” said Greg Jost of UNHP. “Landlords’ expenses are increasing faster than rent income, but these sales seem to assume that either the building can be flipped for a higher amount, or that rents can be driven way up, or both. But residents’ incomes here are among the lowest in the city and I don’t see any higher income folks moving to our area.”

Now batting: Pinnacle's baseball league

The Real Deal

It's baseball season and the Pinnacle Group, which has been investigated by the state attorney general and the Manhattan district attorney for allegedly trying to remove rent-stabilized tenants, is pitching something it hopes will bring some good PR. It has sponsored the New York City Middle School Baseball League, a new spring league for 200 middle school students. Neighborhoods represented include Chinatown, Lower Manhattan and West Harlem. Teachers launched a similar league two years, but few students could afford the $30 uniforms. Now Pinnacle is paying for uniforms, gloves and equipment. CEO Joel Wiener has led Pinnacle's controversial effort to buy more than $1 billion in distressed buildings in Upper Manhattan and the Bronx over the past few years. TRD

Group Wields Racketeering Law Against Landlords to Combat Illegal Immigration

Published: June 22, 2008
PLAINFIELD, N.J. (AP) — A federal lawsuit challenging the right of landlords to rent to illegal immigrants has stoked tensions over immigration that have been rising for years here.
A group opposed to illegal immigration filed suit against a Plainfield property management company this month, seeking to set a legal precedent by using a federal law normally employed against racketeers to punish landlords who rent to illegal immigrants.
The lawsuit accuses the company, Connolly Properties, of allowing so many undocumented tenants to live in its buildings that it amounted to unlawful harboring and should be considered a criminal enterprise that encouraged illegal immigration.
The suit was brought by the Immigration Reform Law Institute in Washington — the legal arm of the Federation for American Immigration Reform. The institute previously supported ordinances in Hazelton, Pa., and Riverside, N.J., that tried to punish landlords who rented to illegal immigrants or businesses that hired them.
A judge overturned the Hazelton ordinance, ruling it unconstitutional, and Riverside rescinded its ordinance, with officials saying the town could not afford the legal costs of defending it.
Flor Gonzalez, head of the Latin American Coalition in Plainfield, worries that her city may become the latest battleground in the nationwide debate over immigration.
She says that tensions over the city’s large immigrant population have been rising, with a recent series of beatings and robberies of immigrants, raids by federal immigration officials and ticketing of day laborers by the police.
“This is the worst it’s been. There is a lot of unfriendliness and disrespect against immigrants, and a lot has been happening quietly,” Ms. Gonzalez said. “We need big help in this town.”
Plainfield’s mayor, Sharon M. Robinson-Briggs said that she was not familiar with the details of the lawsuit, but added that immigrants deserved respect, regardless of their status.
“All our residents deserve to be treated fairly and equitably, whether they are born here or not,” she said.
The lawsuit was filed against Connolly Properties on behalf of a former Connolly employee and two tenants who are American citizens. The tenants charge that they were steered into buildings occupied by illegal immigrants who were too afraid about their legal status to complain about decrepit conditions, according to Michael M. Hethmon, a lawyer for the Reform Law Institute.
Connolly Properties has several rental complexes in northern New Jersey and Allentown, Pa.
Ron Simoncini, a spokesman for Connolly, said executives were bewildered as to why the company had become the target of the suit, which was filed under the Racketeer Influenced and Corrupt Organizations Act, known as RICO.
He added that he could not comment further before the company filed a response to the suit.
Mr. Hethmon said his group decided to take the case as part of its strategy of “attrition through enforcement,” or urging illegal immigrants to leave the country by making it more difficult for them to find employment and housing.
“We have felt for a long time that the racketeering statute would be useful in dealing with situations where businesses and commercial enterprises were heavily involved with illegal immigration,” Mr. Hethmon said.
“We’ve also felt that individual citizens, communities, neighborhoods and law-abiding small businesses have always needed tools with which they can defend themselves against the harmful effects of illegal immigration.”
Using anti-racketeering laws to prosecute landlords is a strategy that immigration experts say they expect to be tried in other parts of the nation.
“I think it’s a new tactic, because some of the other things haven’t worked,” said Donald W. Benson, a lawyer in the Atlanta office of the San Francisco labor law firm Littler Mendelson.
“Congress couldn’t reach a consensus to reform the immigration laws, states are trying to fill in the gaps and they’re having varied success, and local groups are trying to work through local ordinances, so it’s just one part of a much bigger picture of immigration struggles in the U.S.,” he said.
“I have no idea why they picked Plainfield,” said Christian Estevez, a member of the Plainfield school board who also sits on Gov. Jon S. Corzine’s panel on immigrant policy.
“This has caught us by surprise.”
Mr. Estevez said that he and other Plainfield residents were contacting national immigration advocacy groups for help.
According to the 2000 census, Plainfield, a city of some 50,000 people, is about 60 percent black, with the remainder roughly split between white and Hispanic.
In the past decade, Ms. Gonzalez said there had been a large influx of Hispanic immigrants, mostly from Central America.
The Plainfield City Council president, Harold Gibson, said he was unaware of the lawsuit, but that city officials had been trying to address concerns over immigration.
He cited the city’s efforts to find a solution to the day laborer situation that respected the laborers’ right to look for work while addressing community concerns.
“I think that the people in Plainfield, in terms of the City Council and the general population, they frown on illegal immigration, they don’t want undocumented persons living in the town, generally speaking,” he said.
“However, my position is that I don’t think we should set ourselves up as an immigration authority in terms of people who come from other countries and work hard to better themselves and help their families.”