Charles Cohen stops Fortress’ $548M foreclosure — for now

Judge gives lender until July 15 to rework largest UCC case in history

Fortress’ $548M Foreclosure Against Charles Cohen Halted

A photo illustration of Charles Cohen (Getty)

Charles Cohen got himself more time to ward off the biggest UCC foreclosure ever.

The billionaire’s Cohen Brothers Realty scored a win Friday when a judge postponed the $534 million foreclosure filed by Fortress Investment Group.

The New York Supreme Court judge decided the foreclosure would not be “commercially reasonable” under the Uniform Commercial Code that governs such actions.

Neither Cohen’s team nor a Fortress spokesperson immediately responded to requests for comment.

The decision was an 11th-hour lifeline for Cohen, whose interests in a grab bag of commercial real estate assets — a hotel, office building, development site, design center and 50 movie theaters — were to be auctioned off July 1.

Still, his victory could be a hollow one.

In its April lawsuit to block the auction, Cohen’s firm argued that it had not defaulted on the $534 million loan because it had worked out a loan modification with Fortress in December. But the judge denied the company’s motion to cancel the auction on those grounds.

The judge also gave Fortress a second chance to submit a commercially reasonable foreclosure plan. Recent history suggests that minor changes could do the trick.

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Cohen’s team argued the auction notice didn’t meet the “standards of commercial reasonableness” because it 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.

“The UCC Notice merely refers to a sale on May 28,” the Cohen Brothers complaint reads, referring to the original auction date.

The allegations smack of a square-off between Ziel Feldman’s HFZ Capital Group and lender CIM Group a few years back.

CIM in 2020 planned a UCC foreclosure sale of four notes tied to as many HFZ condo projects in New York. HFZ sued and managed to stop the sale when a judge ruled the auction was “commercially unreasonable.”

In that case, the judge found that ads for the auction failed to spell out what was for sale, that bids could not be made for individual properties, and that the $1 million deposit required to bid and the $9 million required from a winning bidder were unreasonably high, law firm Morrison Foerster explained in a recent post.

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CIM responded by initiating another foreclosure auction that clarified the interests for sale, allowed bids on all four buildings or just one, and cut the initial deposit in half and the winner’s deposit to just 5 percent of the winning bid.

The lender then made a credit bid using its existing debt and walked away with interests in all four properties for $65 million.

If Fortress submits a reworked plan by July 15, as is likely, Cohen’s team will get until July 29 to oppose it. The back and forth is a recipe for further delays. Whether that presents an opportunity for Cohen to save the portfolio or just postpones the inevitable remains to be seen.