lawsuits | Jun 12, 2024 |
D&D landlord temporarily halts $544 million foreclosure

Charles Cohen, the billionaire landlord whose company, Cohen Brothers Realty, owns design centers in New York, Houston, Los Angeles and Dania Beach, Florida, has managed to stave off a $544 million foreclosure—for the time being, at least. A New York Supreme Court judge ruled that the foreclosure would not be “commercially reasonable” under the state’s Uniform Commercial Code.

The suit, which was brought by lender Fortress Investment Group in March, alleged that the real estate executive defaulted on debt tied to seven properties, including the Design Center of the Americas in Florida. The legal action came after Cohen Brothers had already fallen delinquent last summer on $635 million in loans backed by its New York properties, including the Decoration & Design Building.

In April, Cohen moved to have the suit dismissed, alleging that his company had reached a loan modification agreement with Fortress in December. As part of that arrangement, he agreed to put up 49 percent of his interest in the D&D Building and the Manhattan office building 3 Park Avenue as collateral. Fortress claims the deal didn’t work out because the buildings weren’t profitable, with internal financial documents showing that 3 Park Avenue was operating at a $2.7 million net loss in June 2024 and the D&D Building reported a $4.3 million loss after debt service the same month.

The judge in the case denied that motion and has given Fortress an opportunity to resubmit a foreclosure plan with revisions. According to Cohen’s team, the original did not include a description of the pledged interests or the assets owned, the terms of the sale, and the eligibility of bidders, among other details that would have made it a commercially viable plan. The lender has until July 15 to submit a new one, which Cohen can again oppose, potentially setting up a long game of legal back-and-forth. If the auction were to go through, it would reportedly be the largest UCC foreclosure ever.

What the turmoil means for Cohen’s tenants remains unclear, though more than a few in the industry are rooting for the lender. A tenant in the DCOTA who asked to remain anonymous told BOH that “the downward spiral of the showrooms in Houston, Dania, Los Angeles and New York is devastating to our industry, and I am hopeful that [Cohen] will default in all of them to give our industry a fresh start from his ‘slumlord’ approach.”

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