By Benyamin Davidsons
The Kushner family’s real estate investment in Times Square retail has turned up thorns.
On Friday, Kushner Cos said it will need to renegotiation the terms of a $285 million loan, after the firm’s tenants broke their leases. As reported by Bloomberg News, in 2016, the real estate firm took out a loan from Deutsche Bank AG, in order to refinance the retail space in the former New York Times building. Since then, however, things have been less than rosy. Over the past few months, the market has been less than booming, and Kushner has found it necessary to engaged in legal battles with tenants who have not been paying the rent.
A food hall planned for the area never ended up opening. Kushner also granted tenants substantial rent reductions—including to a National Geographic-themed exhibit in the space. To top it off, in October, one of the largest tenants filed for bankruptcy. Gulliver’s Gate, an interactive exhibit of intricate miniature models of noteworthy sites, has filed for Chapter 11 bankruptcy protection, after only two-and-a-half-years in business. The tourist destination has had trouble making the rent payments, which are $5.7 million per year. According to the NY Post, it stopped making regular payments in November 2018, leading it into a lawsuit with Kushner in Manhattan state court.
Consequently, rent income at the property has amounted to less than the interest payments for Kushner Cos, as per analyst note this week on behalf of Wells Fargo & Co., which is managing the loan. The loan is being transferred to a so-called special servicer, which normally oversees this type of deal talks. The loan is not in default, and has not yet moved to special servicing, Wells Fargo clarified in a statement. “Everyone is aware of the fact that the retail environment is very challenged to say the least,” a spokeswoman for Kushner Cos. said. “The main tenants representing a big percentage of the rent roll defaulted on their lease obligations, which necessitates a workout.”
In 2015, Kushner Cos., the family company of Jared Kushner, son-in-law to President Donald Trump, purchased the first six floors at 229 West 43rd Street for $296 million. The top floors of the 18-story building is made of offices and owned by Columbia Property Trust. A year later, after Kushner inked in new tenants, and got a $470 million appraisal for the property, which supported a $370 million loan package, allowed it to also take out $59 million in cash. However, the annual interest payments have left the firm with little flexibility to absorb tenant deflections.