A real estate firm focused on neighborhood gentrification shows cracks after a group of its apartment buildings in New York's Upper West Side and Harlem filed for bankruptcy.
Buildings controlled by Emerald Equity Group LLC owe LoanCore Capital $ 203 million arising from debt tied to properties on East 117th Street and West 107th Street. Plans set out in the documents provide for LoanCore to take over the residential complexes that house several hundred tenants.
The Chapter 11 petitions follow missed payments on a $ 65 million loan tied to another Emerald-controlled property, a luxury rental at 2 Cooper Square in the East Village.
Emerald, listed as a co-debtor and led by Isaac Kassirer, was founded in 2012. The company presents itself on its website as a leading real estate company focused on multi-family rental acquisitions with approximately 7,000 units in the US, including 1,500 inches of Manhattan development areas.
The bankruptcies could indicate a greater emergency for apartment buildings in the coming year. The pressure is particularly high in expensive markets like New York, where new regulations make it difficult for landlords to raise rents and evict tenants. Some tenants withheld payments during the coronavirus pandemic, leaving landlords with less income to cover their mortgages.
Emerald and LoanCore representatives in New York did not immediately respond to requests for comment.
Emerald bought the 107th Street properties in December 2016 with the intention of converting them into condominiums, while the 117th Street properties were acquired in March 2018 with a plan to increase rents, according to a bankruptcy notice. The "well thought out" plans were "hampered" by New York's 2019 Rent Reform Act, the company said.
The changes included requiring landlords to have 51% of tenants approve condominium conversions instead of 15%, as evidenced by court records. Emerald's tenants opposed it and began a rent strike in the summer of 2019 that withheld about $ 283,000. New York law also reduced rent increases associated with improvements after the landlord had already put "significant borrowed money" into renovations, the file shows.
Emerald filed for bankruptcy for buildings at 124-136 East 117 St., 215 East 117 St., 231 East 117 St., 235 East 117 St., and 244 East 117 St., according to court records. It also sought bankruptcy protection for 203 West 107 St., 210 West 107 St., 220 West 107 St., 230 West 107 St. and East 117 Realty LLC and 1661 PA Realty LLC.
Home loan default rates have been lower than other commercial properties, such as retail and hotel properties, which had to close during the lockdown. Average rents in Manhattan fell 22% year over year in November to their lowest level in ten years.
According to the StreetEasy website, a 625-square-foot, two-bedroom unit at 231 East 117th St. went up for rent for $ 2,395 in August 2019.