Charles Cohen Can’t Convert Office Tower, May Surrender It

Add Tower 57 to Charles Cohen’s list of troubled office properties. In fact, the billionaire is looking to surrender the Midtown building to the owner of the land beneath it.

Earlier this year, the billionaire head of Cohen Brothers Realty defaulted on his ground lease at 135 East 57th Street for failing to pay rent, court records show. His landlord, William Wallace, sued to evict the building owner, citing $9 million in rent arrears and $4.2 million in overdue property taxes.

In a July email to Wallace, Cohen said the trouble stems from “substantial vacancy” at the Billionaires’ Row tower and weak demand for office space.

But in an affidavit submitted a few months later he blamed Wallace, too.

In that filing, Cohen claimed he wanted to convert the office tower into a residential condominium, “the highest and best use of the building,” but the owner of the land beneath it “arbitrarily and in bad faith refused.”

“Any alleged default in paying net rent has resulted from landlord’s unreasonable refusal to consent to a conversion of the building to residential use,” Cohen added.

Wallace’s suit was dismissed last week on a technicality but an entity tied to him filed a similar suit days later.

In October, Cohen opened an arbitration proceeding over Wallace’s move to terminate their lease. But in the summer, he had said because the ground owner rejected the conversion to apartments, he wants out of the lease altogether.

“Accordingly, we intend to surrender the premises to you as soon as practicable,” Cohen wrote in July.

“We have no interest in negotiating and executing a pre-negotiation agreement with you nor will we fund any of your legal expenses,” he added.

The attorney representing Wallace did not respond to a request for comment. A member of Cohen Brothers Realty declined to comment, citing the ongoing arbitration.

WeWork’s demise might have contributed to Cohen’s troubles at Tower 57. The co-working firm leased about one third of the 300,000-square-foot building in 2018. That location is marked “closed” on Yelp. WeWork had been quietly exiting buildings for years before its November bankruptcy filing.

Cohen, in October, was delinquent on over $600 million in CMBS debt backed by New York office properties. The firm had failed to recoup the tenants lost during Covid.

“We see office occupancy improving,” the firm said in a statement this fall. “We are working with our lenders to bring any past due loan payments current.”

As of December, the debt was still marked delinquent in Morningstar. The loans are on 3 Park Avenue, 222 East 59th Street, 750 Lexington Avenue, 979 Third Avenue and 805 Third Avenue.