Manhattan Gentrifier Stumbles With Rental Apartment Bankruptcies
(Bloomberg) -- A real estate firm focused on gentrifying neighborhoods is showing 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 $203 million to LoanCore Capital, stemming from debts tied to properties on East 117th Street and West 107th Street, Dec. 28 bankruptcy filings show. Plans outlined in the documents call for LoanCore to take ownership of the residential complexes, which are home to 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.
The bankruptcies may foreshadow wider distress among multifamily properties in the coming year. The pressures are especially high in costly markets such as New York, where new regulations make it harder for landlords to raise rents and evict tenants. Some renters have withheld payments during the coronavirus pandemic, giving landlords less income to cover their mortgages.
Representatives for New York-based Emerald and LoanCore didn’t 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 raise rents, according to a bankruptcy disclosure statement. The “well-laid” plans were “stymied” by New York’s 2019 rent reform law, the company said.
The changes included a requirement for landlords to get 51% of tenants to approve condo conversions instead of 15%, court papers show. Emerald’s tenants were opposed and began a rent strike in summer 2019, withholding about $283,000. New York’s law also reduced rent hikes tied to improvements after the landlord had already “sunk significant borrowed money” into renovations, the filing shows.
Emerald filed bankruptcy petitions for buildings located 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 filings. It also sought creditor 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.
Delinquency rates for apartment loans have so far been lower than other commercial real estate, such as retail and hotel properties, which were forced to close during lockdowns. Median rents in Manhattan plunged 22% in November from a year earlier to their lowest level in a decade.
A 625-square-foot, two-bedroom unit at 231 East 117th St. was listed for rent in August 2019 for $2,395, according to the property listings website StreetEasy.
The case is 203 W 107th Street LLC, U.S. Bankruptcy Court, 20-12960, Southern District of New York (Manhattan).
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