By Janet H. Cho

Flagstar Bank stock jumped on Thursday after a U.S. Bankruptcy Court denied New York City Mayor Zohran Mamdani's request to postpone the auction of about 5,500 rent-regulated apartments owned by bankrupt landlord Pinnacle Group.

The regional bank's shares were up 6.4% in midafternoon trading after the decision, which cleared the way for the auction to proceed this afternoon. The $13.35 price is up 44.2% from 52 weeks ago, according to Dow Jones Market Data.

For Flagstar, it's a chance to get past the long-running saga. Pinnacle filed for bankruptcy last year after Flagstar moved to foreclose on the portfolio. The bank has said it expects the process of auctioning the $563 million rent-regulated portfolio to conclude in early 2026, with a resolution to issues related to the debt during the first half of 2026.

Bernard von Gizycki, research analyst for Deutsche Bank, wrote in a Thursday note that while there might be some additional write down needed based on the current offer, Flagstar management "has already taken marks and reserves against the loan."

The analyst added that "if the loan issues can be resolved, it would be a credit positive" for Flagstar.

Rebel Cole, a chaired professor of finance at Florida Atlantic University in Boca Raton, Florida, told Barron's that although the city has legal standing to weigh in, it's a relatively small player in the proceedings. Flagstar has the right to recover on its debt, and the bankruptcy court is focused on finding a speedy resolution, he said.

The new mayor swept into office last week promising to tackle affordability issues, particularly related to housing. The city sought a 30-day pause on the auction to address concerns about "distressed conditions" and other problems raised by tenants, tenant organizations, public officials, and others.

The city said in court filings that a delay would give them more time to evaluate an offer by Summit Properties USA of up to $451 million for the portfolio or consider any possible alternatives.

Leila Bozorg, the city's deputy mayor for housing and planning, said in a statement after the judge's decision: "This is not the end of our fight to protect Pinnacle tenants and working New Yorkers across the city. We are assessing our options as these proceedings move forward, and we will continue to fight to ensure any owner of this portfolio makes necessary repairs to bring the buildings up to code and respects the rent stabilization regulations."

New York City was involved because Pinnacle owes the city about $12.7 million, according to preliminary city Housing Department estimates, stemming from more than 5,000 building-code violations and roughly 14,000 unresolved tenant complaints, The Wall Street Journal reported.

Mamdani met with tenants at one of the Pinnacle properties the afternoon after he was sworn in as mayor, and promised that his administration would work to protect tenants' rights to "safe and habitable homes" and the city's interests in the pending bankruptcy cases. "The city is owed money that Pinnacle never paid," he said.

The problem is, even if Summit succeeded in its bid, it might not have enough resources to rehabilitate the dwellings or maintain a profitable business, the city argued. Flagstar and Summit haven't demonstrated how the properties can support the sale price and maintenance needs given the lower rents, it said.

Delaying the auction wouldn't necessarily have resulted in another buyer emerging, Florida Atlantic's Cole told Barron's.

"I'm sure Pinnacle has looked high and low [for other buyers]," he said, but landlords are limited in how much they can raise rent despite their rising property taxes and other costs, and many are losing money renting their properties. "It's crazy to think that anyone would want to invest in multifamily properties in New York City under the current environment."

Write to Janet H. Cho at janet.cho@dowjones.com

This content was created by Barron's, which is operated by Dow Jones & Co. Barron's is published independently from Dow Jones Newswires and The Wall Street Journal.

(END) Dow Jones Newswires

January 08, 2026 15:42 ET (20:42 GMT)

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