Charles Cohen’s office problems could soon grow as a ratings agency reviews a decision to downgrade a mortgage backed by a Midtown South property.
Fitch Ratings is reviewing Cohen Brothers Realty’s 3 Park Avenue, a 360,000-square-foot-office property where occupancy has dropped since the onset of the pandemic, for a potential credit rating downgrade, Crain’s reported.
In 2019, the occupancy rate at the 41-story property was 85 percent. Since then, occupancy has cratered to 54 percent as of July after tenants including TransPerfect and Icon Capital departed in recent years.
The departures have had a devastating effect on the rental income for Cohen’s tower, which has fallen by more than 40 percent since 2019, according to Fitch. The average rent at the tower is $58 per square foot, well below the record $82.78 per square foot average in the neighborhood recorded by Colliers last month.
Cohen Brothers did not comment to Crain’s about the looming Fitch decision.
The firm is facing trouble across its office portfolio, something Cohen likely couldn’t see coming early in the pandemic when he downplayed the pandemic’s potential impact on the office market.
The Real Deal reported in August that Cohen was delinquent on loans totaling hundreds of millions of dollars across his portfolio. Among the places where Cohen was at least 30 days late were loans collateralized by 3 Park Avenue, 222 East 59th Street, 750 Lexington Avenue and the Decoration & Design building at 979 Third Avenue.
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Occupancy across Cohen-owned properties averaged 62 percent as of last month, according to updated vacancy figures from Morningstar. Across five troubled buildings — the fifth being the Crystal Pavilion at 805 Third Avenue — revenue covered less than 30 percent of debt service on average as of the end of last year.
Should Fitch downgrade Cohen’s credit, it will be the latest blow struck by the ratings agency, which recently downgraded SL Green’s credit.
— Holden Walter-Warner