Ladder Capital moves to foreclose on Emerald Equity’s Harlem rentals

Ladder Capital intends to foreclose on four Harlem rental properties owned by Isaac Kassirer’s Emerald Equity, after the firm defaulted on a $32 million loan.

The lawsuit said the loan for 110 St. Nicholas Avenue, 110 West 116th Street, 120 West 116th Street and 1917 Adam Clayton Powell Boulevard is 30 days past due. The suit was filed in New York Supreme Court on Thursday.

In April, Isaac Kassirer extended the maturity date for the loan from April 6 to Oct. 6, and personally guaranteed the note. By Nov. 6, the nearly $32 million in principal, interest and fees was unpaid.

E&M Management and Churchill Real Estate Holdings are also defendants in the court filing because they may have stakes in the assets. The defendants have a month to respond before a default judgment would place the properties in receivership.

Emerald Equity purchased the four properties in May 2019 for $40 million from Galil Management — which was formerly tied to E&M Management — with a $30.6 million financing package from Ladder Capital.

The lender argues the foreclosure can go forward in part because the default was not due to Covid-19. Renter payments in residential apartments have stayed strong during the pandemic, resulting in little, if any distress in the multifamily sector.

A source with direct knowledge of the matter but not authorized to discuss it said Emerald overpaid for the buildings, and because it did not have enough money to close, sought expensive bridge financing. There were many vacancies in the building at the time, the person said, and Emerald planned to raise rents after doing improvements in those units. That plan was spoiled a month later, when changes to state law made that impossible.

Emerald Equity and Ladder Capital did not immediately respond to requests for comment. E&M declined to comment.

Emerald Equity was one of the most aggressive multifamily players in New York City before changes to state law dramatically altered the investment landscape, by limiting the cost property owners could pass on to tenants for improvements.

In the company’s East Harlem portfolio, Emerald Equity planned to renovate apartments and raise rents, but those plans were disrupted in June 2019 when the Housing Stability and Tenant Protection Act was passed, to the dismay of the real estate industry.

Those East Harlem properties, known as the Dawnay Day portfolio, were not included in Ladder Capital’s foreclosure suit. Sources have said that portfolio is overleveraged, and earlier this year Kassirer said his firm was weighing “all options” to save it. Tenants in those buildings are still refusing to pay rent, according to the Wall Street Journal, and organizers say apartment conditions have worsened during the pandemic.