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Tuesday, July 23, 2024

Cohen Brothers Realty Faces $534 Million Debt Default, Legal Battle Looms

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Edited by: TJVNews.com

Cohen Brothers Realty, led by a conglomerate of entities, finds itself in the midst of a financial quagmire, defaulting on a staggering $534 million debt linked to a portfolio of properties spanning multiple states. According to a recently published report on The Real Deal web site, the defaulted debt is tied to a diverse array of assets, including a Florida design center, a Westchester redevelopment site, a New York office tower, a Fort Lauderdale hotel, and three theaters spread across different states.

The lender, a subsidiary of Fortress Investment Group, has taken swift legal action, filing a lawsuit on Monday seeking a substantial $187 million judgment – the amount guaranteed by Cohen – in addition to accrued interest, legal fees, and expenses arising from the default, according to court documents.

Dave Cohen, Senior Vice President at Cohen Brothers, affirmed the company’s stance in response to the legal proceedings, stating, “We want to take the high road – we don’t litigate in the papers and we intend to defend,” as was reported by The Real Deal. This resolute declaration underscores Cohen Brothers’ commitment to navigating the complex legal challenges ahead.

Meanwhile, Fortress Investment Group has remained tight-lipped about the situation, with a spokesperson declining to provide any comment on the matter. However, Steven Stuart, a prominent executive at Fortress, previously stated at The Real Deal’s New York Showcase + Forum that the firm’s primary objective is not to seize assets but rather to ensure the success of its investments.

The legal action initiated by Fortress represents the latest setback for Cohen Brothers Realty, which has been grappling with financial difficulties in recent months. Last October, the Real Deal reported that the firm encountered another significant hurdle when it defaulted on $635 million in loans secured by New York City office properties. At the time, the company expressed its commitment to collaborating with lenders to address the outstanding loan payments and restore financial stability.

While the company managed to rectify defaults at two properties, 805 Third Avenue and 3 Park Avenue, earlier this year, concerns persist over outstanding payments on loans linked to other key assets.

According to Morningstar, Cohen successfully brought the loans on the aforementioned properties current in February, averting further financial turmoil. However, The Real Deal report indicated that data revealed that payments are now overdue by more than 30 days on loans totaling $172 million, secured by 222 East 59th Street and the Decoration & Design building at 979 Third Avenue.

One of the most notable setbacks for Cohen Brothers is the $130 million in loans associated with 750 Lexington, which entered special servicing in November. According to the information in The Real Deal report, this property, situated in Lenox Hill, serves as Cohen Brothers’ office headquarters and houses a WeWork location. However, WeWork ceased rent payments in October, adding another layer of complexity to Cohen’s financial predicament.

In total, Cohen Brothers Realty now faces delinquency on at least $966 million in debt, reflecting the magnitude of the challenges confronting the company, the report on The Real Deal website said.  The recent default filing of $534 million underscores the extent to which Cohen’s financial troubles have permeated various sectors of his business empire, extending beyond Class A office spaces to encompass his cherished passion for cinema.

Charles Cohen, the visionary behind Cohen Brothers Realty, has long harbored ambitions of becoming a theater chain owner, as highlighted in a 2018 Variety article. Noted in The Real Deal report was that in an interview with Variety, Cohen expressed his deep commitment to the cinematic arts, underscoring his ownership of Cohen Media Group, an independent theatrical distribution and production company.

The theaters linked to the Fortress loan, which now forms part of the collateral, include iconic venues such as Philadelphia’s Ritz V, the Nickelodeon Theatre in Santa Cruz, California, and the Crest Cinema Center in Shoreline, Washington, as per the information contained in The Real Deal report. However, amidst Cohen’s financial challenges, the future of these cultural landmarks hangs in the balance, casting a shadow over his aspirations in the entertainment industry.

Cohen’s diverse assets, including Landmark Theaters, have been affected by financial strains, prompting scrutiny and speculation about the underlying causes behind the default.

Landmark Theaters, acquired by Cohen in 2018, represents a significant component of his entertainment ventures. However, the report on The Real Deal website indicated that due to Fortress’ status as a private lender, detailed information about revenue shortfalls contributing to the default remains undisclosed. The lawsuit filed by Fortress alleges that Cohen failed to meet various financial obligations, including deferred amortization payments and interest, exacerbating the financial strain.

The impact of the COVID-19 pandemic on Cohen’s cinema empire cannot be understated, with closures and revenue declines plaguing Landmark-leased theaters across the country. The Nickelodeon Theatre, for instance, shuttered its doors permanently in 2020, reflecting the broader challenges faced by the entertainment industry during the pandemic, as was detailed in The Real Deal report.  Additionally, Landmark-operated theaters in the Bay Area, Milwaukee, and Dallas have also faced closures, with the Texas location citing lease issues as the primary cause.

In addition to the cinema segment, Cohen’s New York office building, Tower 57, has encountered its share of setbacks, The Real Deal report added. Vacancy issues led to a ground lease default, prompting discussions about surrendering the property in December. Cohen’s proposed residential conversion plan for Tower 57 faced obstacles from the landlord, adding another layer of complexity to the situation.

The performance of other Cohen-owned properties, such as the Design Center of the Americas in South Florida and Le Méridien Dania Beach hotel, remains uncertain amidst the prevailing financial challenges, The Real Deal reported. Similarly, the fate of the former Doral Arrowwood hotel in Westchester County hangs in the balance, with redevelopment plans stalled amid the financial turmoil.

Despite the setbacks, Cohen remains optimistic about the potential of his redevelopment projects, as evidenced by his recent appearance at a village meeting to discuss plans for the former Doral Arrowwood hotel, according to the Real Deal report.  Cohen expressed confidence that the proposed redevelopment would elevate Rye Brook’s status and set a new standard in the community.

The outcome of Cohen’s efforts to address the default and revitalize his properties remains uncertain, underscoring the challenges inherent in managing a diverse real estate and entertainment empire in today’s volatile market conditions.


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