It’s a familiar story for Charles Cohen at 979 Third Avenue, though one his company thinks will have a happy ending.
The mortgage backing the Decoration & Design Building on the Upper East Side was transferred to special servicing this month, Bisnow reported, citing Morningstar Credit. Green Loan Services, an affiliate of SL Green, was appointed special servicer of the $150 million loan, which matured on May 6, leading to a default for Cohen Brothers Realty.
The mortgage is securitized in two CMBS trusts. Citigroup originated a $165 million loan in 2015, but the CMBS bonds backed by the trusts were downgraded last year by Fitch Ratings. Still, the loan was current as of last month, according to servicer commentary.
Cohen Brothers general counsel David López told the publication it was “business as usual” and that the developer was “actively working with the lender,” adding that the landlord was in the market to refinance the debt “shortly.”
Cohen acquired the lease for the D&D in 1996 for $70 million. The 18-story, 588,000-square-foot property was built three decades earlier.
Occupancy has been waning. It stood at 63 percent at the end of last year, according to Morningstar, down from 83 percent at the end of 2020 and 95 percent back in 2015. Annual revenue, meanwhile, slipped to $36.7 million from $48.4 million over the last decade.
Complicating matters is that Cohen doesn’t own the land beneath the building. That distinction belongs to the Rice Foundation, which linked Cohen to an extension on the ground lease two years ago. Annual payments on the extension began at $5.8 million, but are due to skyrocket to $10.5 million by the 12th year of the deal.
Distress is nothing new for Cohen’s real estate empire. In March, U.S. Bank filed to foreclose on 222 East 59th Street after the borrower defaulted in September and failed to pay its bills, according to the lender. The East 59th Street building is technically separate, but considered part of the Decoration & Design building.
López blamed the default on high ground rent for the property.
Earlier this year, Cohen lost the firm’s headquarters at nearby 750 Lexington Ave in a foreclosure auction; the tower went back to the lender.
Cohen is also being hounded by Fortress Credit: the lender scored a $187 million personal judgement against Cohen last year and has been pushing to collect. The two sides recently extended a deadline for a sale expected by Cohen to satisfy the remainder of his debt to May 20.
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