You may recall that Jared Kushner’s company has been in deep financial trouble for some time.
Jared’s grand plan to tear down a 41-story Manhattan office building that he and his company vastly overpaid for acquired at 666 Fifth Avenue and replace it with a luxury condo/retail project has never gotten off the ground.
And now his primary partner in the project, Vornado Realty Trust, seems to have put the final nail in the coffin:
By Jonathan O'Connell and Michael Kranish October 31 at 2:19 PM
Jared Kushner’s $7.5 billion plan to transform a Manhattan skyscraper into a mix of high-end residences and retail has been deemed “not feasible” by the project’s partner, putting the future of the property — saddled with $1.2 billion in debt — in doubt.
Steven Roth, chief executive and chairman of office giant Vornado Realty Trust, owns 49.5 percent of the offices at 666 Fifth Ave. and said Tuesday that it did not appear that redevelopment plans, hatched by Kushner, President Trump’s son-in-law, before he left the company in January to become a senior White House adviser, were likely to succeed.
This is a huge financial problem for Kushner, as the detailed article from Bloomberg (published back on August 31) points out:
Jared Kushner, Donald Trump’s son-in-law and top adviser, wakes up each morning to a growing problem that will not go away. His family’s real estate business, Kushner Cos., owes hundreds of millions of dollars on a 41-story office building on Fifth Avenue. It has failed to secure foreign investors, despite an extensive search, and its resources are more limited than generally understood. As a result, the company faces significant challenges.
Over the past two years, executives and family members have sought substantial overseas investment from previously undisclosed places: South Korea’s sovereign-wealth fund, France’s richest man, Israeli banks and insurance companies, and exploratory talks with a Saudi developer, according to former and current executives. These were in addition to previously reported attempts to raise money in China and Qatar.
Kushner and his family went all in on this project:
As the building’s fate became increasingly bleak, the family, rather than forfeit, decided to go big. Their plan was to raze the structure and replace it with a glimmering Zaha Hadid-designed tower of massive proportions. The scale of the plan stirred the imagination, but the costs were astronomical because they involved repurchasing the property rights they’d sold to keep the original building afloat. That alone would require more than $1 billion. The elaborate renderings of the reconfigured building promised a kind of Time Warner Center on steroids: more than 80 stories with five levels of retail, a hotel and record-breaking expensive luxury condos on top.
For all its inspiring visuals, investors who reviewed the early version of the Kushners’ pitch book noticed a conspicuous omission: numbers. The company circulated a revised pitch, complete with financials, and the scale of the debt and risk involved were jarring. With a $4 billion construction loan and a business model that assumed the condos would sell at the aggressive price of $9,000 per square foot, it was similar to the leap of faith the Kushners had taken by overpaying for the original building a decade earlier, just before the boom went bust. A simple downturn in high-end New York real estate and the colossal new building would be in a hole of titanic proportions.
That’s why the Kushner clan was desperate for foreign investors. And they shopped this mess everywhere, as the Bloomberg piece shows, including, finally, Russian bankers:
Federal investigators want to know if the Fifth Avenue building’s finances came up in a post-election meeting Kushner had with the head of Russia’s state-controlled development bank.
The Kushners have reason to look far afield. Even after selling big sections of 666 Fifth in 2011, they have increased their own vulnerability by borrowing more money for other deals, people close to the company say. After a refinancing, the deed to 666 Fifth sits in an escrow account, ready to be seized by lenders in a default, an action indicating their trust has grown thin. The mortgage will become even more of a burden after a scheduled jump in interest rates in December. Under some dire circumstances, guarantees in the refinancing agreement could even give lenders the ability to go after the family’s other assets—many of which are also underpinned by debt.
The whiff of desperation is palpable.
Federal investigators know that Kushner met with then-Russian Ambassador Sergey Kislyak in Trump Tower last December and later met with Sergey Gorkov, head of the Kremlin-controlled VEB bank in two meetings that he didn’t, at first, disclose publicly or on his application for his national-security clearance. After those meetings became public, Kushner and the White House said the contacts were made in his role as a Trump adviser and didn’t involve discussion of his family business. But VEB and a spokesman for Russian President Vladimir Putin described the meetings quite differently, noted Adam Schiff of California, the top Democrat on the House Intelligence Committee. They said that Kushner was there in his capacity as head of his family’s real estate business. Investigators say they are studying those accounts with keen interest.
Jared Kushner had hundreds of millions of reasons for meeting with Russians, especially Russian bankers. And Russian bankers had hundreds of millions of reasons to get sanctions related to the Magnitsky Act thrown out.
The Feds have been looking at Jared’s meetings for some time. This news today that his big project is “not feasible” must send shivers down his spine. Combined with yesterday’s news, I’d say it’s nervous times in the Kushner household.