On Friday, April 6, a filing with the Securities and Exchange Commission revealed that the Kushner family may have reached a deal to buy out its partner, the publicly traded Vornado Realty Trust, in their skyscraper at the infamous 666 Fifth Avenue.
For several months, Vornado has been expressing its interest in selling its stake in the Fifth Avenue building. Then on Friday, in the filing, Vornado chairman Steven Roth said that a deal had been reached “to sell our interest to our partner.” It is unclear whether or not this means a new partner has been found by the Kushners to finance this deal.
Over the last three years, the Kushners have gone on an international search for financing and a new partner to recreate the prime real estate nearby Rockefeller Center at 666 Fifth Avenue. The developers had two possible outcomes for the space: one was to create a completely new Zaha Hadid-designed super-tower on the site, and their other option was to renovate the 41-story, aluminum-clad building and reposition it on the market as a high-end skyscraper.
Jared Kushner’s father Charles has been looking high and low for partners to repay his investment in the building that houses the headquarters of Kushner Companies. In just 10 months, the company’s mortgage on the building of $1.4 billion is due. A traditional refinancing of the building is an issue, since the value of the building’s office space does not appear to be as much as the mortgage according to real estate analysts.
The Chinese insurance giant Anbang Insurance Group, which is linked with many of the top families of the Communist Party, was talking about making a deal with the Kushners. However, last year, all negotiations crumbled as their connection to President Trump was being closely examined.
According to the online news site The Intercept, Charles Kushner even tried to get an investment for $500 million from the former prime minister of Qatar. However, that channel also failed to reciprocate.
President Donald Trump’s son-in-law Jared Kushner was the company’s chief executive up until last year when he joined the White House as a key advisor to the president. Since the duties Jared Kushner’s position in the White House involves the Middle East and China, his company’s negotiations with Anbang have been placed under the microscope.
Back in 2007, the Kushners purchased 666 Fifth Avenue for a record setting price of $1.8 billion. This was the deal that introduced the Kushners to the New York City real estate development arena. Prior to the 2007 buy, the Kushners had a reputation as a big contributor to the Democratic Party and as a developer of apartments in their home garden state of New Jersey.
For the Kushners, 666 Fifth signified a total change in direction for both their lives and business. The family moved to Manhattan and set up the company headquarters on the 15th floor of their newly acquired office building. They then proceeded to snatch up real estate in Brooklyn, Jersey City and even Maryland.
Since the majority of the money used to buy 666 Fifth was borrowed, the Kushners had to sell the building’s most valuable space to pay back some of the debt. This high valued asset, was the building’s retail space, which they sold for $525 million to Carlyle Group and Crown Acquisitions.
According to The New York Times, “The family had expected to boost rents in the building. But as the 2008 recession set in, the building lost some of its largest tenants and the financial bleeding started. Fearing a possible default, its lender appointed a ‘special servicer’ to oversee the building. In 2011, the Kushners sought to restructure their debt. Vornado bought a 49.5 percent interest in the building’s office space and agreed to invest up to $80 million and take responsibility for a portion of the mortgage. The mortgage was divided into a $1.1 billion note and a $115 million secondary loan. But Vornado imposed stiff terms. It was getting 11 percent interest on money it actually invested in the building, and a 3 percent return on the remaining money, if any, according to a financial report from Trepp, a company that tracks real estate debt. The mortgage has swelled to $1.4 billion with accrued interest. The partners have been forced to cover shortfalls on the mortgage payments. And Vornado subsequently bought much of the retail space along Fifth Avenue from Crown and Carlyle for $707 million, except for a portion owned by Zara, the Spanish clothing chain. Vornado is expected to hang onto the retail space.”
The amount of money that Vornado is receiving in the deal will be used to repay the company’s investment. In the filing, Roth said, “The existing loan will be repaid including payment to us of the portion of the debt we hold.”
By Charles Bernstein