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A Look at the Pinnacle Players and Their Bronx Buildings

By HEATHER HADDON

The controversial practices of the Pinnacle Group, a city real estate company, have started to attract citywide attention and scrutiny. Since 2002, the company has purchased over 400 buildings in lower-income communities across every borough, save Staten Island. Tenants have suffered through a variety of serious problems since, as the Norwood News reported last October.

Much of the focus has been on the company’s extensive holdings in Manhattan, where a growing number of tenants have organized against Pinnacle. Three upper Manhattan community boards came together last month to assess the situation with hundreds of angry Pinnacle residents. Growing numbers of city and state officials have become involved. Tenants are now petitioning state Attorney General Eliot Spitzer to investigate the company.

Pinnacle’s holdings in the Bronx, while not as numerous as in Manhattan, are extensive. The company owns 40 properties all over the borough, including several in the local area (see map).

A variety of people and entities are involved in financing and running Pinnacle’s buildings. Here’s a look at some of those involved:

Praedium Group

Who: A Real Estate Investment Trust (REIT) founded in 1991 to buy “underperforming and undervalued” real estate in the U.S.

Portfolio: Runs six REIT funds that have acquired office buildings, retail properties and multi-family homes across the country. Most holdings are in New York, California and Texas. Invests money from pension funds, foundations, endowments and other financial firms.

Partners: Started by Credit Suisse First Boston, one of the largest institutional banks in the country. Cadim, a real estate advisory firm from Montreal, invested $100 million to expand Praedium’s reach in 2001. The company is a division of Caisse de dépôt et placement du Québec, one of the largest institutional fund managers in Canada. Cadim has since formed a long-term partnership with Praedium.

Worth: Over $5 billion in assets. Requires a 15 to 20 percent return on its investments. Crain’s listed them as one of the top 500 money managers in the country last year.

Pinnacle Connection: Has financed many of the Pinnacle deals. The Praedium Fund V raised $465 million and made 139 investments in New York, with 70 percent going to apartment buildings. Praedium had purchased more than 10,000 city units as of 2004.

Russell Appel

Approximate Age: 45

Who: Founder of the Praedium Group. Former managing director of Credit Suisse First Boston and an associate at Goldman Sachs. Attended the Wharton School of University of Pennsylvania.

Strategy: Praedium holds on to properties “on average between three to six years, a relatively short term,” said Appel in National Real Estate Investor earlier this year. Praedium has bet on deals that other investment trusts might shy away from (like purchasing Florida properties after they were leveled by hurricanes last year). Appel has been outspoken about the profitability of low-income neighborhoods. “We look to take advantage of the opportunities in the marketplace,” said Appel in Commercial Property News last year.

Pinnacle Connection: Both Appel and Pinnacle Group Founder Joel Wiener appeared at the U.S. Real Estate Opportunity and Private Fund Investing Forum together last year. Wiener presided over a mock deal between a developer and real estate fund. Appel spoke on how to make “20 percent returns” in real estate investments, according to a brochure.

Pinnacle Group

Founded: Early 1990s by Joel Wiener

Located: 1 Penn Plaza, with some city satellite offices

Holdings: Owns over 400 rent-stabilized buildings in every borough but Staten Island. Purchases began in 2002, and include entire portfolios of buildings. The properties are managed through dozens of separate limited liability corporations.

History: Started with seven former Mitchell Lama buildings in the Bronx. Rapidly expanded, including the purchase of almost 3,000 northern Manhattan apartments for $500 million from Baruch Singer, a widely criticized landlord.

Management Style: Replaces many existing building staff with inexperienced workers, according to a federal class action lawsuit. Plaintiffs also accuse Pinnacle property managers of not closely supervising their properties. Many tenants charge that the supers do shoddy renovations, which have incurred code violations and ruined previous fixtures. They then send bills at inflated rates to residents.

Strategy: Tenants say they have received hundreds of eviction notices, lawsuits and harassing letters, along with exorbitant improvement costs and rent increases beyond the legal limit. They fear they are being forced out to make room for condos. Two Manhattan properties, 706 and 725 Riverside Dr., have begun the conversion process.

Joel Wiener

Approximate Age: 57

Background: Married, a daughter. Lives in Woodmere, NY, an affluent section of Long Island. Has owned homes in Brooklyn, Manhattan, Long Island and Florida.

Education: Graduated from Brooklyn Law School in 1974. His law practice is thought to deal exclusively with his real estate company.

Family History: Third generation real estate family begun in the ‘50s in Brooklyn. His father, Paul, acquired properties in the ‘60s, including some in Riverdale. Of Paul’s six children, Joel and Arthur carried on in the business. Arthur began acquiring properties in the ‘70s, but Joel has done more to expand their holdings in recent years.

Business history: The family business, Arthur Holding Company, bought buildings in the ‘70s and ‘80s. Joel Wiener purchased buildings on his own in the late ‘80s and early ‘90s. He started Wiener Realty in 1995 in Manhattan. He opened another site in Lawrence, NY. Pinnacle is now the flagship company.

Legal issues: Has been personally sued 84 times, according to civil county court records. Cases include contract disputes, negligence, back taxes, and a dispute with the Woodmere Club (a golf course).

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