The walls of Fortress Credit Corporation are closing in on Charles Cohen.
Fortress won the right to go after Cohen for a $187 million personal guaranty he signed to score a monster mortgage for Cohen Brothers Realty in 2022. When Cohen quit making payments on the $534 million loan earlier this year, Fortress sued, alleging default. A knock-down-drag-out ensued.
Cohen’s argument: His team and the lender had agreed to modify the loan over email.
But last week, a New York Supreme Court judge ruled in the lender’s favor. “Despite the foregoing exchange, no written agreement was ever signed,” Judge Joel Cohen wrote, referring to the emails.
Charles Cohen’s attorney Donald Harwood of Harwood Reiff said they would be appealing the decision. Fortress’ attorney did not return a request for comment.
The decision comes with a caveat: Fortress can’t collect just yet. First, the parties have to see through the $534 million UCC foreclosure Fortress initiated.
After Fortress sued Cohen for the guaranty, it launched a UCC foreclosure on the collateral for the loan — entities that own a grab bag of assets, including a design center and Le Méridien hotel in Dania Beach, Florida; 50 bleeding movie theaters and Tower 57 at 135 East 57th Street, an office building in default on its ground lease.
Cohen managed to stave off the auction in June while the courts determined if the sale was “commercially reasonable,” a requirement under the Uniform Commercial Code.
In August, the judge decided Fortress had met the standard, and set the auction for Nov. 8.
If the portfolio sells at auction, the price could satisfy some or all of the $187 million judgment against Cohen, the decision details. That is, the landlord wouldn’t have to dig so deep into his own pockets to pay out Fortress.
But the odds aren’t in Cohen’s favor. Most UCC foreclosures are uneventful, drawing few if any bidders, auctioneers say. Almost always, the lender wins in a credit bid. However, Fortress has widely marketed the Cohen auction, thought to be the largest UCC foreclosure ever.
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Even if the sale satisfies Cohen’s $187 million guaranty, Cohen Brothers Realty is still on the hook for the balance of the $534 million debt.
In an August hearing, Fortress’ attorney Lindsey Harris said the lender would have an “unsecured claim” it could pursue against Cohen Brothers Realty “in the case that the collateral plus the guaranty is not more than the debt.”
“If it’s solvent,” Harris said of Cohen Brothers.
This article has been updated with a comment from Charles Cohen’s attorney.