Investors are starting to feel pain from the state's new rent regulations, with two landlords of those kinds of units now behind on their debt obligations.

Emerald Equity Group and Sugar Hill Capital Partners fell behind on loans issued by LoanCore Capital over the last few months, The Wall Street Journal reports.

The loans, backed by a collection of more than 600 rent-regulated units in Upper Manhattan that the companies separately own, were for more than $200M and packaged into securities. The firms had purchased the properties with the hope of moving units out of rent stabilization, per the WSJ.

Under the new laws, passed in July, landlords' ability to increase rents on stablized units and take units out of regulation and into the free market has been significantly reduced.


Isaac Kassirer's Emerald Equity is delinquent on $86M in loans on East 117th Street buildings and on $85M in mortgages on an apartment building in Manhattan Valley. Sugar Hill has missed payments on properties along Central Park West. Emerald and LoanCore are discussing resolving the issue, and one possible outcome is that the lender will take the properties over, a source told the WSJ.

Generally speaking, lenders will likely seek to renegotiate loans with their sponsors over foreclosure, Ariel Property Advisors President Shimon Shkury said.

Investment sales in the city have been sliding, particularly among multifamily properties, which many say is a direct result of the rent regulation reform and a disaster for the city. In the third quarter of the year, multifamily sales volume in Manhattan dropped some 60% year over year, according to data from Ariel

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