4 days 12 hr agoMay. 29, 2025 11:27 am
Last week, Pinnacle Group filed for Chapter 11 bankruptcy, pulling dozens of its properties into the process. The buildings in question carry roughly a billion dollars in debt, and their lender, Flagstar Bank (formerly New York Community Bank), has initiated foreclosure proceedings.
When asked about the bankruptcies, Pinnacle’s chief restructuring officer pointed to skyrocketing interest rates that made the debt on the rent-stabilized properties nearly impossible to service. The company also cited a 2019 New York City law that limits landlords’ ability to raise rents when tenants move out.
While those are valid explanations, Flagstar says they’re not the primary reason foreclosure was triggered. The issue, according to the bank, lies with the rent payments. Instead of using the buildings’ cash flow to pay down debt, Pinnacle allegedly redirected the funds to a holding company to pay bondholders. “No one knows where the rental income went, but it did not go to pay the lenders and appears to have been consolidated to pay bondholders,” Flagstar stated in court filings.
Despite rising borrowing costs, most commercial landlords have avoided foreclosure by negotiating with lenders who want to sidestep the lengthy and costly process of seizing distressed assets. That’s especially true for Flagstar, which is still trying to calm investor concerns after acquiring Signature Bank’s troubled debt portfolio. Pinnacle’s failure to reach a deal with Flagstar suggests the relationship has broken down. Now, both sides are left defending their positions in bankruptcy court—a place where neither may come out ahead.
Bloomberg
