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.