Tenants of Bankrupt NYC Apartments Seek Cash to Fix Rat Woes

(Bloomberg) -- Tenants in bankrupt Manhattan apartment buildings affiliated with Emerald Equity Group LLC are demanding that housing code violations including rat infestations and bed bugs be immediately addressed as part of a Chapter 11 agreement.

Residents are seeking an order compelling the debtor, 203 W 107th Street LLC, to use available funds to address outstanding New York City Housing Court orders and make any urgent repairs to the buildings, according to court papers.

Emerald purchased the apartments in December 2016 with the aim of converting them into condominiums as part of its business model of capitalizing on gentrifying neighborhoods. Instead, a cluster of its buildings filed for bankruptcy last week, blaming tougher housing regulations and a tenant rent strike for their debt troubles.

“New violation conditions arise daily, but the building managers fail to address them in a timely manner,” according to a declaration signed by Douglas Kellner of Kellner Herlihy Getty & Friedman LLP, who represents a group of tenants at 203, 210, 220 and 230 West 107th Street on Manhattan’s Upper West Side.

Tenants, the debtor’s lawyers and the lender LoanCore, which is taking ownership of the buildings in bankruptcy, reached a tentative agreement to bring the properties into compliance with the housing code, the filing said. Kellner said the buildings have already been found in contempt of housing court orders to address violations, many of which are hazardous.

Representatives for Emerald Equity and LoanCore didn’t immediately respond to requests for comment.

‘Rats Scratching’

Emerald, led by Isaac Kassirer, pitches itself on its website as a leading real estate firm focused on multifamily rental acquisitions, with about 7,000 units across the U.S., including 1,500 “in developing areas” of Manhattan. 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.

Tenants living in Apartment LL2 at 230 West 107th Street reported rats in the walls and ceiling of the whole unit, as well as a cockroach infestation in the kitchen and bathroom. The unit also doesn’t have a proper fire exit, the papers said.

Another renter living in 6E said heating pipes didn’t work properly in the kitchen or bathroom, and plumbing regularly overflowed. A tenant in 2E reported “rats scratching and clawing” in the bathroom walls and multiple days without heat. The declarations were among pages of complaints filed by Kellner.

The current budget of $30,000 for repairs during the month of January is “woefully inadequate,” and cash should be used to address those concerns ahead of a planned $984,187 allocation for property taxes, according to the declaration.

Rat infestations in the buildings are caused by a failure to keep the garbage area clean, and the current staff of two superintendents and two porters is insufficient to address the problem, the papers said.

The case is 203 W 107th Street LLC, U.S. Bankruptcy Court, 20-12960, Southern District of New York (Manhattan).

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