19, No. 11
June 1 - 14, 2006
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:
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.
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
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.
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
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
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.
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
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
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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