In the second of our two-part series on enforcement actions in the private credit market, we dig into the ongoing saga between Fortress Credit Group and New York real estate tycoon, Charles Cohen.

Cohen is contending with the perils of a large personal guarantee, just like the subject of the first part in this series, Safra.

Fortress Credit Group v. Charles Cohen

In September 2022, Fortress Investment Group’s credit arm lent just over half a billion dollars — $533.6m to be exact — to Cohen Realty Enterprises together with a number of other affiliated borrowers (including Design Center of the Americas, Cohen Purchase Building Company, Landmark Acquisition Corp, Cohen Dania Beach Hotel, Cohen International Exhibition Company, and 135 East 57th Street) for the purpose of refinancing four properties and two theater chains.

Cohen Realty Enterprises is an entity within the broader Cohen Brothers Realty real estate firm owned by developer billionaire Charles Cohen. As collateral for the loan, certain assets of these borrower entities were pledged and Charles Cohen himself provided a personal guarantee.

This guarantee came sharply into focus as Cohen Brothers’ huge Manhattan real estate portfolio came under pandemic-related pressures that weighed on the borrower’s ability to service the debt.

Ultimately this led to the point where, in March 2024 and following a months long period of negotiations with Cohen, Fortress, represented by Kirkland & Ellis, commenced the suit Fortress Credit Group v. Charles Cohen and sought to recover $187.3m from Charles Cohen on account of said personal guarantee, the maximum amount permitted under the loan documents.

How did we get here?

Like most loan agreements, the borrower was required to make payments according to a schedule, with the failure to make such payments amounting to an event of default. Also like most loan agreements, an event of default gave the lender the option to accelerate the loan.

After failing to pay an amortization payment, a PIK interest payment, and an additional interest payment in February 2024, Fortress notified the borrowers via letter that they were in default on 11 March 2024 and requested payment within five days.

When that deadline passed with no payment, Fortress sent a second letter on 19 March accelerating the loan and demanding that all outstanding principal and interest on the loan was due. The letter also declared Cohen’s personal guarantee immediately due and payable.

Many of Cohen’s challenges stem from the Cohen Brothers Realty’s immense midtown Manhattan office holdings, where they have lost many major tenants thanks to the changing post-Covid work and office environment and as a result of the WeWork bankruptcy.

Additionally, many of these buildings face competition with the newer, shinier, more amenity-filled buildings that have been constructed over the years, leaving many leases in need of replacement. These factors have contributed to Cohen’s wealth dropping from its high of $3.7bn in 2022 to now just $1.6bn, as reported by Forbes. In addition to the commercial office spaces, Cohen’ other real estate holdings — movie theaters and design centers — were also impacted by pandemic contractions.

With these mounting challenges, over the course of several months between May and December 2023, the parties amended the loan agreement four times to extend the payment schedule, eventually entering into a pre-negotiation agreement (PNA) on 30 November 2023, stating that they were “willing to have discussions . . . regarding the status of the Loan” and reserving all parties rights.

Thereafter, the parties continued to negotiate, with email correspondence indicating that the parties would create a written agreement formalizing the terms of the agreement. No such written agreement ever materialized. Eventually, on 19 March 2024, Fortress accelerated the loan and demanded payment from Cohen Reality and from Cohen himself on the personal guaranty.

In making his defense, Cohen, initially represented by Cooper Horowitz, relied on the PNA and the emails indicating that a written amendment was forthcoming to assert that the loan agreement was properly amended — neither of which were convincing enough for Judge Joel Cohen in the Supreme Court of the State of New York.

The court focused primarily on the defendant’s argument that genuine factual disputes existed as to whether an event of default occurred under the loan agreement, or whether the parties validly amended the loan agreement through email exchanges.

Cohen asserted that the loan agreement unambiguously permitted amendment absent a written agreement by the parties, specifically pointing to a particular section of the credit agreement (section 14.4) regarding the amendment of the loan document for purposes of granting a new lien. Cohen argued that such an amendment was permitted without written amendment. Fortress vehemently disagreed, asserting that Cohen’s interpretation of section 14.4 was baseless, and even if correct, the amendment the parties discussed encompassed far more than simply the granting of a new lien.

The court agreed with the plaintiffs, however, and determined that the agreements to agree contained in the emails cited by Cohen were not sufficient. Cohen’s argument that the purported granting of a new lien for the benefit of the secured parties via the email discussion amounted to a permitted amendment was also unconvincing.

The court determined that the agreement discussed between parties in the emails was clearly aimed at excusing a payment default and the extension of the payment terms, and Judge Cohen found that simply because the email also included reference to the granting of a new lien, it would be a “derogation of the clear terms” of the loan agreement, saying, “the bottom line is that under the plain language of the loan agreement no amendment of the loan repayment schedule — a clearly material term — is effective unless contained in a signed writing agreed by the parties.”

Nor did the emails themselves constitute a signed writing as required by the credit agreement given the explicit language within the emails, which made clear the proposed agreement was still subject to internal approvals by both parties.

In October 2024, the Supreme Court of the State of the New York ruled in favor of Fortress, but deferred entry and enforcement of the order pending an auction of certain underlying collateral on the loan which may have satisfied some or all of the amount owed and which was scheduled to take place 8 November 2024.

Despite that, Cohen immediately appealed. However, Fortress, buttressed by enforcement specialist law firm Kobre & Kim (which also made an appearance in part 1 of this series on behalf of MGG), filed papers noting that they “learned of conduct by Cohen necessitating immediately relief” and requesting that the court (1) permit Fortress to obtain documents from and question Cohen under oath for the purposes of identifying his assets (2) restrain Cohen from making any sale or transfer of any of his property until the judgment is satisfied and (3) immediately enter a judgment in the amount of the personal guarantee.

Among the accusations, Fortress asserted that since May 2024, Cohen transferred over $70m in assets to “new ownership structures that may shield assets from Fortress.” These transfers include transferring his $20m home in Greenwich, Connecticut to his wife and transferring four luxury boats with a combined value of over $50m to an entity in the Cayman Islands. Cohen was also allegedly failing to comply with obligations under the personal guarantee to provide personal financial information to Fortress, which made it impossible for Fortress to fully assess Cohen’s financial status, according to the investment group.

With new representation of Pillsbury Winthrop and Harwood Reiff, Cohen asserted that he has “never failed to make good on [his] financial obligations or the financial obligations” of his business and the allegations of Fortress “to the contrary are flat-out wrong and downright insulting.” The court, noting that Cohen’s appeal was pending with the Appellate Division of the First Department having heard oral argument on 30 January 2025, denied Fortress’s request for immediate entry of the judgment, but did grant Fortress’s request for restraint and to examine Cohen and his financial records.

Not long thereafter, Cohen’s appeal was deemed unsuccessful and in February 2025, the appeals court affirmed Judge Cohen’s lower court decision, affirming that Charles Cohen is on the hook for the $187m personal guarantee and clearing the way for Fortress to begin enforcement. Per Fortress’s immediate request, Judge Cohen entered the judgment against Cohen in the amount of the personal guarantee — $187m — on 28 February.

Unfortunately for Fortress, they have not been successful in immediately satisfying their judgment. While they were given the the go-ahead to enforce directly against the borrowers of the loan and enforce on the collateral which provided security against it, they are far from recovering the full amount that was initially.

In November 2024, one of the largest foreclosure auctions was held, resulting in Fortress credit bidding a total of nearly $150m and becoming the owner of the Design Center of the Americas and Le Meridien hotel, both in Dania Beach, Florida, as well as the Doral Arrowwood golf club in Westchester, New York and an arthouse movie chain in the UK. Even after taking possession of those assets, however, the remaining outstanding balance on the loan following the auction totaled $443.8m.

Similarly, in the months following the entry of the judgment on the personal guarantee, Fortress has not yet received payment from Cohen.

Instead, Cohen requested that the restraints on his various account be lifted, asserting that “there is no dispute that [Cohen] possesses more than sufficient assets to satisfy the judgment” and that the issue was merely one of timing. Cohen further asserted that, in order to “prevent irreparable harm to innocent third parties and maintain the value”, the businesses need approximately $2m per month.

Despite enumerating a number of different sources of potential funds (a bridge loan, sale of certain properties) at a hearing before the court on 30 May 2025, Judge Cohen raised a question that Fortress likely has been asking themselves for some time: “what do I do if this doesn’t happen?”

Judge Cohen went on to say that after “whatever period of time . . . I conclude is reasonable to allow an ordinary course sales process to go forward . . . you do have to come to grips with the fact that there is a judgment. . . Judgment enforcement at some point takes center stage.” He concluded by saying “hopes and dreams about selling assets is not enough to shut off all need for judicial enforcement.”

When the time for judicial enforcement will come remains to be seen.

In the meantime, Fortress has also been pursuing enforcement options in France, where Cohen has a vineyard and cinemas, as well as in the Cayman Islands. Which forum yields the greatest return at the most expedited pace remains to be seen.