11-building Emerald Equity portfolio placed in bankruptcy with $203M owed to LoanCore

124-136 East 117th Street (Credit Google)

By Adam Pincus

A portfolio of rental buildings acquired by Isaac Kassirer’s Emerald Equity Group with $203 million in defaulted debt owed to LoanCore petitioned for bankruptcy yesterday seeking to confirm a restructuring plan and to transfer ownership of the assets to the lender. The 11 petitions representing the buildings were signed by a restructuring manager, not by Kassirer.

Emerald and LoanCore value the assets at an amount lower than the $203 million in debts, the filings say. The plan is available here.

Emerald acquired the properties in two groups, one along 107th Street in Manhattan Valley including 203 West 107th Street in 2018 for $116 million, and the other along 117th Street including 124-136 East 117th Street for $89.3 million.

The Real Deal reported in January 2020 that Emerald was weighing “all options” to save the 117th Street portfolio.

Emerald declined to comment.

This filing is a “prepackaged bankruptcy,” said David Goldwasser of FIA Capital Partners, who restructures assets in bankruptcy and is not involved in this case. Typically, “all parties agree to the terms before they go in and then just use the [bankruptcy] laws to give over control with ease and clean title as well as save on transfer taxes etc. Many times it includes releases of any personal liability for guarantors.”

The original mortgages were for $95 million secured by the properties on 107th Street and $89.7 million for those on 117th Street. Before Covid, LoanCore declared the loans in default and as of yesterday the loans and interest total $203.075 million, according to the filing.

The filing notes there are additional unsecured claims of $665,752, which the bankruptcy plan expects to pay off in full.

Emerald’s original plan, according to the filing, was to convert the properties along 107th Street to residential condominiums and sell apartments. The plan for those along 117th Street was to renovate apartments as they became available and boosts rents and thus the rent roll and value of the buildings.

However, the passage of the 2019 Housing Stability and Tenant Protection Act impeded these plans, including increasing the percent of tenants approving a conversion plan from 15 percent to 51 percent. Condo conversions, the petition says, “were effectively blocked.”

Further impacting the renovation and conversion plans was a rent strike. The petition claims a law firm representing the tenants had $283,000 in trust accounts as of January 2020. The filing alleges that none of that money was given to the landlord and “some of those funds were paid (without debtors’ agreement) to [the law firm] or disbursed to tenants.”

Emerald brought on Arbel Capital Advisors and Ephraim Diamond to manage the restructuring and Tri-Hill Managment to manage the properties along 107th Street and Bronstein Management for the properties along 117th Street.

The plan envisions transfer of control to LoanCore entities and the dissolution of the current ownership entities.

This plan, like all bankruptcies, allows for the transfer of the property without paying transfer taxes. The filing notes the transfer would be exempt but asserts that the plan will result in a quick ownership transfer “without affecting or impacting negatively the rights of the tenants” and full payment of allowed claims. The plan continues: “Accordingly, the principal purpose of the plan is not the avoidance of taxes.”

As for the tenants, “The successor owners are assuming all obligations of the debtors as landlord under all of the assigned tenant leases from and after the effective date and shall pay all cure costs that may be due in connection with the assumption and assignment of the tenant leases.”

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