Major NYC Landlord Blames Bankruptcy On High Interest Rates
Dozens of properties managed by Wiener's Pinnacle Group were put into Chapter 11 last week, saddled with roughly $564 million in mortgage debt and facing foreclosure actions from its primary lender, Flagstar Bank. The apartments also have outstanding amounts on Israeli-issued bonds, pushing the total debt on the properties to roughly $1 billion, according to bankruptcy papers filed Tuesday.
Interest rate hikes in 2022 significantly increased the cost of the mortgage debt, to the point that rental income was no longer enough to cover debt service and operating expenses, Ephraim Diamond, the properties' chief restructuring officer said in a court filing.
Rates on a large portion of the Pinnacle properties' mortgage debt has 'sky rocketed' since 2022, from between 3% to 4% to as high as 7.5% and 10.25%, in certain circumstances, Diamond said. The cost to service the debt was about $26 million in 2023, including $20 million interest. Last year, that amount jumped to $36 million, including $25 million in interest, and is projected to increase again in 2025, he said.
US Bankruptcy Judge David Jones, during the first hearing in the case since the filing, delayed ruling on a request by the apartment business to spend cash being held as collateral for the Flagstar debt. Jones asked both sides to try to come to a compromise about how the money would be used during the next few weeks. If they can't agree, Jones said he was prepared to rule on the request as soon as tomorrow, when both sides are scheduled to return to court.
Flagstar claims that rent money that should have gone to pay the mortgage instead may have been funneled to a related holding company where it went to 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 said in court papers filed Wednesday.
A lawyer for the apartment company did not immediately return a request for comment.
Most of its tenets get some form of rent stabilization and changes to state law in recent years intended to protect renters created further financial stress on the buildings, Diamond said. In 2019, state lawmakers placed restrictions on building owners' ability to raise rents when a tenement leaves a rent-regulated apartment and limited landlords' ability to turn apartments into condos, according to court documents.
'These legislative changes put further strain on the Company's and the Debtors' cash flow, and significantly slowed their condominium conversion initiatives,' Diamond said.
Diamond said bankruptcy will give advisers time to devise a restructuring strategy and discuss options with creditors.
The case is Broadway Realty I Co. LLC, number 25-11050, in the U.S. Bankruptcy Court for the Southern District of New York.
More stories like this are available on bloomberg.com
Try Our AI Features
Explore what Daily8 AI can do for you:
Comments
No comments yet...
Related Articles
Time of India
an hour ago
- Time of India
Nibe Limited signs agreement with with Israel's Elbit Systems; to manufacture Advanced Universal Rocket Launcher
Live Events (You can now subscribe to our (You can now subscribe to our Economic Times WhatsApp channel Private defence manufacturing comapany NIBE Limited signed a Technology Collaboration Agreement with Elbit Systems , a Israeli defence company for Advanced Universal Rocket Launcher partnership is aimed at manufacturing and supply of Universal Rocket Launcher ( SURYA ), which is a highly advanced defence system capable of engaging targets with precision over a range of up to 300 technology transfer will be the first time that such a sophisticated system will be produced in India, paving the way for both domestic and international markets, ANI reported"The Universal Rocket Launcher is set to revolutionise modern warfare with its remarkable capabilities and performance, positioning NIBE Limited as a key player in the global defense sector ," the company said in a release. Elbit Land Systems , a division of Elbit Systems Ltd. , is a global leader in the design, development, and integration of advanced land-based defense solutions. The company specialises in a wide range of platforms and technologies, including armored vehicles, artillery systems, unmanned ground vehicles, and combat vehicle modernisation and is known for its innovation, reliability, and battlefield-proven systems.
India.com
2 hours ago
- India.com
Is India's good friend cheating it over jointly developed air defense system? The friend is..., it is selling DRDO's...,
New Delhi: India and Israel have had a strong defense partnership for the last several decades. But this is the first time that questions have been raised on the intentions of the friendly country. Allegations are being made that Israel is marketing and trying to sell this air defense system alone, which it had made in collaboration with India's DRDO. What is the advanced air defense system in question? Barak-8 is an advanced air defense system. This is the same system that intercepted and shot down a Pakistani missile in the sky in Sirsa, Haryana. It has been developed jointly by India's DRDO and Israeli company Israel Aerospace Industries. According to the latest reports, Israel is now trying to sell this missile to some countries of the world by giving it a new name of 'Barak-MX'. Barak-8 was an important milestone in the strategic relations between the two countries, but Israel's attempt to sell this missile alone is going to trouble India. Why could it affect DRDO's credibility? A website named has claimed that Israel has not included the technology developed by DRDO in the export variant of Barak-8 air defense system. Especially the dual pulse rocket motor has not been included by Israel in the variant being sold. Israel's attempt to do so hurts the hard work of DRDO, its capability and the name it is building in the defense sector as it has made many weapons based on indigenous technology for India. What is the contribution of Indian entities in this project? India started this project in 2006 with Israel at an initial cost of Rs 2500 crore with an aim developing advanced air defense systems for both countries. This air defense system was designed to intercept ballistic missiles, advanced drones, cruise missiles and fighter aircraft up to the fourth generation. Major Indian defense companies including Bharat Dynamics Limited (BDL) and Bharat Electronics Limited (BEL) were involved in the production of essential parts of this system. In collaboration with Israel, India has developed an advanced air defense system, which has also proved its capability by shooting down the Pakistani ballistic missile Fateh-2 in the air. DRDO developed a special dual-pulse rocket motor for the Barak air defense system which gives the missile fired from this air defense system the ability to maintain its speed and change direction suddenly until it hits the target. Israel also got a huge defense market like India for this missile defense system. Why is Israel selling this system unilaterally under a different name? Despite this, Israel is selling this system unilaterally under the name 'Barak MX' for which it has signed a deal with Azerbaijan for 12 Barak air defense systems. In 2022, Israel had signed a deal worth $ 500 million with Morocco. The main point of contention is that the Barak air defense systems that Israel is selling do not have dual-pulse rocket motors, which have been developed by DRDO. Reportedly, Israel is talking to the United Arab Emirates (UAE) about the sale of Barak defense systems. Is Israel trying to bypass India? According to by using its propulsion system in the export model of the Barak Defense System, Israel is bypassing the help that India has provided at the technology level. Due to this, India is not getting any benefit in the global defense market. Apart from this, the situation is also not clear regarding the intellectual property and data rights related to this project, which raises questions on India's technical and economic participation. According to the report, Israel's doing this has put New Delhi into action. It is believed that if Israel tries to make partnerships on a unilateral basis, then both future strategic cooperation and trust in Israel may be affected. This may affect future defense agreements between the two countries.
Mint
3 hours ago
- Mint
EM Debt Hedge Funds Eye Safeguards as World-Beating Rally Blooms
(Bloomberg) -- Hedge funds dedicated to emerging-market debt are increasingly turning to risk-mitigating strategies to ensure they lock in double digit gains as a broad rally in developing nation assets deepens. After a banner first half of the year, hedge funds targeting EM debt have returned nearly 13% on an annual basis — more than their peers positioned in any other asset class, according to data based on Bloomberg indexes. The latest global financial flows data shows the asset class remains thriving and the extra yield investors demand to hold the sovereign debt of developing nations over US Treasuries just hit a 15-year low. Such tight pricing, along with uncertainty over US policies and global conflicts, is pushing hedge funds to curb risks as they ride the historic rally. The funds do this by swapping longer-maturity bonds in their portfolios for less risky shorter-dated ones. They also focus on higher-rated debt and the most-liquid securities while keeping an ample cash pile. 'Do you just want to be massively long on credit on these valuations? I'd say probably not,' said Anthony Kettle, who co-manages BlueBay Emerging Market Unconstrained Bond Fund with Polina Kurdyavko and Brent David. 'Having a little bit of dry powder evidently makes sense, and also running elevated cash levels.' To be clear, Kettle said, there's still a 'decent environment' to gain additional returns as funds become more selective and can profit from both rising and falling asset prices, unlike index-based investors. The $784-million BlueBay fund has returned 17% over the past 12 months. Investors have taken advantage of EM inflows stoked by increased interest for alternative assets amid US policy unpredictability, which has also weakened the dollar. While many developing countries have come out of distressed debt levels as sentiment improved, further risks include another Iran-Israel flare up and potential additional increases in US tariffs, including on the buyers of Russian energy. President Donald Trump's administration has caused a 'breakdown of the traditional safe haven correlations' by shaking up the post-Cold War world order, creating an 'unusual and unpredictable' environment, said Demetris Efstathiou, the chief investment officer of Blue Diagonal EM Fixed Income Fund. 'It is very hard to predict what they will do next with tariffs, and on top of that you have ongoing wars,' Efstathiou said. His fund is 'very conservatively' positioned with shorter-maturity bonds and he avoids weak credits to protect the portfolio in the event of a global slowdown and market downturn. He has increased holdings of AAA- and AA-rated EM sovereigns along with less-indebted countries with large domestic markets like Brazil, Turkey and Mexico. EM-dedicated bond funds have received $31 billion in inflows year-to-date, with positioning increased in each of the last 14 weeks as global markets recalibrate after an era of US dominance. A near-record $5.7 billion piled into the asset class in the week though July 23, according to EPFR Global data provided by economists at Bank of America Corp. For some, flows of such a magnitude signal that EM debt is already predicting the best-case scenario. 'The market is now priced for a Goldilocks scenario with the risk of a severe recession receding significantly and expectations' of one or more rate cuts by the Federal Reserve, the $847 million Enko Africa Debt Fund said in a letter to clients. Managed by Alain Nkontchou, the Africa-specific hedge fund has returned 24% over the past year. Nevertheless, the expected volatility means that traditional buy-to-hold trades may not necessarily succeed and that hedge funds will prioritize holding more liquid assets to ensure an easier exit in case sentiment turns, according to ProMeritum Investment Management LLP, a $700-million fund that invests in developing markets outside China. 'Liquidity management will be critical in the second half of the year because of an unpredictable environment and geopolitical risks,' said Evgueni Konovalenko, managing partner and head of strategy at the firm. Such a focus is needed 'to take advantage of both short and long positions with sudden policy changes and a daily barrage of headlines.' --With assistance from Jorgelina do Rosario. More stories like this are available on
