Real Estate

Charles Cohen Plans 172 Condo Conversion Amid Struggles

Charles Cohen plans to convert Midtown office building into 172 condos amid market shift and occupancy challenges.

By Tal Alexander

5/16, 09:04 EDT
article-main-img

Key Takeaway

  • Charles Cohen plans to convert the upper floors of 623 Fifth Avenue, a largely vacant Midtown office tower, into 172 condos.
  • The conversion, supported by the Department of City Planning and expected to complete in 2026, faces challenges amid Cohen's broader financial struggles.
  • This move comes as Cohen faces foreclosure filings and legal battles over other properties in his real estate portfolio.

Navigating Challenges: Cohen's Strategic Shift

Charles Cohen, a prominent figure in the real estate industry with a net worth of $3 billion as reported by Forbes, is facing significant challenges within his real estate portfolio. Amid these hurdles, Cohen Brothers Realty has initiated a bold move by filing an application to convert the upper floors of 623 Fifth Avenue in Midtown East into 172 condominium units. This decision comes at a time when the property, completed in 1988 and once bustling with tenants like Swiss Bank, now stands 12 percent occupied. The Department of City Planning's support for this conversion, projected to wrap in 2026, marks a pivotal moment for Cohen, suggesting a strategic pivot towards residential real estate amidst a struggling office market.

The Conversion Plan Unveiled

The application for the conversion of 623 Fifth Avenue reveals a plan to transform the 38-story office property into a mixed-use building, retaining the department store space occupied by Saks Fifth Avenue and adding condominiums. This move is not just about repurposing a significantly underutilized asset; it's a reflection of the broader market's shift from commercial to residential spaces in prime locations. The project, estimated to take 18 months, faces the logistical challenge of relocating office tenants with leases extending beyond the project's completion date. This ambitious plan underscores Cohen's commitment to adapting his portfolio in response to market demands.

A Pattern of Conversion Challenges

Cohen's venture into residential conversions is not without precedent, nor is it free from obstacles. His previous attempt to convert another Midtown property at 135 East 57th Street was thwarted by the landowner's refusal, leading to a legal battle over alleged rent defaults and conversion permissions. This backdrop of legal and financial challenges, including a recent foreclosure filing against Cohen for failing to make debt payments on a $548 million portfolio, paints a complex picture of a real estate mogul navigating through turbulent waters. The situation at 623 Fifth Avenue, therefore, is not an isolated incident but part of a larger narrative of adaptation and resilience in the face of adversity.

Implications for the Real Estate Market

The proposed conversion of 623 Fifth Avenue by Charles Cohen signals a significant trend in the real estate market: the shift from commercial to residential use in response to changing occupancy dynamics. This move, supported by the Department of City Planning, not only reflects Cohen's strategic pivot but also highlights the broader market's adaptation to post-pandemic realities. As office buildings across major cities face declining occupancy rates, the conversion of such properties into residential units offers a potential path forward, reshaping urban landscapes and real estate portfolios alike.

Management Quotes

  • Charles Cohen, CEO of Cohen Brothers Realty:

    "Any alleged default in paying net rent has resulted from landlord’s unreasonable refusal to consent to a conversion of the building to residential use."