Sugar Hill Capital Faces Foreclosure on Harlem Apartments

Another building acquired by David Schwartz’s Sugar Hill Capital Partners near the height of the multifamily market in the late 2010s is now in the crosshairs of its lender.

U.S. Bank, as a trustee for CMBS bondholders, wants to foreclose on the six-story, 23-unit property at 121 West 116th Street in Harlem, alleging in a complaint that Sugar Hill is in default on a $4.9 million loan after failing to make payments since July.

The complaint names an entity connected to Sugar Hill and several current and former employees of the firm as guarantors on the loan, including Schwartz and former principal Alex Friedman, who co-founded Sugar Hill with Schwartz in 2009 but is no longer with the company.

An affiliate of Long Island-based Arbor Realty Trust, provided the loan in 2018, according to the complaint, the same year records show Sugar Hill acquired the building for $7.5 million. The debt was assigned to the CMBS trust in 2020 and a notice of default was issued in September of last year after the borrower had not made payments for three straight months, the complaint alleges. CW Capital is special servicer on the loan.

Sugar Hill Capital declined to comment.

The 18,000-square-foot building was acquired by Sugar Hill as part of a $250 million portfolio deal in 2018 for 53 Harlem apartment buildings owned by Irving Langer’s E&M Management. The deal came during the boom years of the city’s multifamily market, before changes to state rent laws limited landlords’ ability to raise rents on stabilized apartments.

Now signs of distress are emerging for owners of stabilized apartments as interest rates remain high and billions of dollars in debt on multifamily properties is set to come due in the next two years.

The foreclosure filing comes as Sugar Hill is facing a similar action on a 54-unit property at 4300 Broadway in Washington Heights, where it allegedly fell behind on a $16 million mortgage and has failed to make loan payments since August.