A real-estate tycoon's loan went bad. Then they came for his Ferraris and fine wine

Mint

4 days ago

In France's Provence region late last year, a group of men entered Château de Chausse, the 138-acre home and vineyard of Charles Cohen. While the New York real-estate tycoon was away, the men scoured the palatial house, taking high-priced artworks, furniture and Cohen's collection of fine wines.
They weren't thieves. The men were following orders of the French court, and they seized hundreds of thousands of dollars of Cohen's personal belongings in the château on behalf of Fortress Investment Group.
Fortress says it was simply taking what it is owed. In 2022, the New York-based investment firm made a $535 million loan to Cohen Realty Enterprises as a way to consolidate his previous debt. Cohen's collateral included a Manhattan office tower, the Le Méridien Dania Beach hotel in Fort Lauderdale, Fla., and four other properties, according to records from New York State Supreme Court, where Fortress is suing Cohen.
But crucially, Cohen also personally guaranteed $187.2 million of that loan. That 'recourse" portion of the debt gave Fortress additional powers to go after Cohen personally if his business defaulted.
Now, that's what's happening.
Cohen's business defaulted last year, and Fortress took control of most of the collateral. But the firm said that the value of those properties falls far short of what Cohen owes.
Now the lender is trying to confiscate Cohen's personal possessions. Fortress launched legal efforts to seize Cohen's houses in Provence and Greenwich, Conn., according to New York court records. Fortress is also going after his 25 luxury automobiles including two Ferraris and other valuable belongings.
Earlier this month, an Italian judge ruled that a 220-foot yacht couldn't leave the Port of Loano without court approval. The superyacht, valued at $49.6 million, is one of five yachts that Fortress is trying to seize from the real-estate mogul. Cohen transferred ownership of the yacht in Port of Loano to his wife last year, court records show.
Each side accuses the other of impropriety. Fortress says Cohen improperly blocked the firm's enforcement of his guarantee by transferring his yachts and other valuable assets—including his $20 million Greenwich home and Château de Chausse—to family members, according to court records.
Cohen's net worth is nearly $2 billion, according to a financial statement that he filed with the court. He said the transfers were legitimate and made for estate and tax-planning purposes. A French court ruled in his favor on the Provence château.
In an interview with The Wall Street Journal, Cohen said he is in the process of selling some properties to pay Fortress but needs more time to complete complicated deals.
'They keep pecking at us, like a bird would peck at something," he said in a February deposition about his negotiations with Fortress. 'Enough was never enough."
Personal-recourse debt has a long, bruising history in commercial real estate. Developers often turn to personal guarantees because they would have no other way to obtain enough financing, and because they are convinced they can easily pay back their loans.
'They think if you hold on to a property long enough, the values are always going to justify the loan," said Mark Edelstein, chair of Morrison Foerster's global real-estate group.
Donald Trump famously used recourse loans to build his property empire in the 1980s, only to find himself on the brink of personal bankruptcy in the early 1990s because of these personal guarantees. Trump said during a TV appearance that in 1991 he pointed to a homeless person and said he 'is worth $900 million more than I am."
Personal guarantees were also a big reason why New York developer Harry Macklowe faced near financial ruin during the 2008-09 financial crisis, after he took out a $1.2 billion bridge-equity loan from a group including Fortress with recourse contingencies. Macklowe said that the situation was resolved and is now 'old history."
Cohen has used personal guarantees before, but said he has never had this kind of problem. His business is countersuing Fortress. His dust-up with the investment firm is one of the nastiest in commercial real estate for many years.
Attorneys for Cohen say that Fortress's actions amount to improper harassment. The investment firm has put restraints on Cohen's personal brokerage accounts, and on brokerage accounts held by his mother and sister. Cohen cannot withdraw money from his personal accounts without Fortress's approval.
'His family's lives are being disrupted," said Christopher Caffarone, Cohen's attorney, at a court hearing in May. 'They are getting subpoenaed. They are getting deposed."
Fortress subpoenaed Cohen's family members because he transferred personal assets to them and because they are involved in running or financing his companies, a Fortress spokesman said.
Fortress, an investment giant owned in part by Abu Dhabi government fund Mubadala Capital, said that it has a duty to its investors that include retirement and pension funds. 'Fortress is left with no choice but to begin enforcing its judgment against Cohen's assets," the firm said, according to court records.
Charles's father and his two uncles went from selling cars to building what would become a real-estate empire, developing towers on Manhattan's Third Avenue as the old elevated railway was dismantled. Charles became president of the company in 1983 and more than tripled it in size to 12 million square feet.
Nowadays, Cohen, 73 years old, is a widely recognizable figure in New York real-estate circles, where he is known for his tailored suits and reflective stainless-steel glasses.
He also has invested tens of millions of dollars in filmmaking. Cohen's production firm has distributed more than 100 films including 'The Salesman," which won the Academy Award for best foreign language film in 2017. Cohen also purchased movie theaters in Europe and the U.S.
Fortress and Cohen's business relationship goes back decades. The investment giant has lent hundreds of millions of dollars to Cohen, and it financed many of his real-estate deals in the years leading up to the pandemic.
Then during Covid-19, demand for office space plummeted. People also stopped going to the movies, upending Cohen's movie-theater holdings.
Other office-building owners at the time were conceding defeat, giving properties back to lenders. Cohen said he felt the market would rebound soon. He also felt emotionally attached to the properties, some which had been in his family for decades. The two sides agreed on a restructuring plan, which included the personal guarantee.
But the market didn't rebound quickly. The two sides modified the 2022 loan four times but the properties weren't able to generate enough cash to pay the debt service. In March 2024, Cohen's business defaulted.
Cohen said that he had a handshake agreement with Fortress for another extension, according to court records. But the firm said there was no such deal, and the state supreme court ruled for Fortress.
Cohen says now he is selling properties to raise cash to meet his obligations to Fortress.
'I've always been good at hanging on," Cohen said. 'That's what we've always done and we will continue to do that."