Kushner Companies’ plan for extensive renovations at 666 Fifth Avenue rejected by Vornado

Posted On Mon, October 16, 2017 By

Posted On Mon, October 16, 2017 By In Midtown, Policy

A previous rendering of 666 Fifth Avenue, courtesy of Kushner Companies/Zaha Hadid Architects

Instead of the 41-story Midtown tower becoming an 80-story office building with hotel rooms and luxury housing, 666 Fifth Avenue will now get a much more simple upgrade. According to Bloomberg, Vornado Realty Trust, the project’s partner alongside Kushner Companies, told brokers the property will remain an office building, with“mundane” renovations planned. As one of the most financially troubled developments for Kushner Cos., the Fifth Ave project has been losing money since its purchase was first coordinated by Jared Kushner, currently a senior advisor to President Donald Trump, in 2007.

666 5th Avenue as it stands today. Image via Wiki Commons

The company first acquired 666 Fifth Avenue in 2007 for $1.8 billion, the most expensive real estate transaction ever in the United States at the time. Proving to be an ill-timed deal, just before the country’s economic recession, the property’s value dropped dramatically shortly after. In 2010, the Kushner family nearly lost the building after being late on payments and was forced to restructure debts. Today, the building’s lease revenue is not covering monthly interest payments with one-fourth of its office space empty.

After occupancy rates at 666 Fifth Ave dropped to 70 percent and its net operating income decreased from $61 million in 2007 to $41 million, Kushner Cos. and Vornado unveiled plans in March to redevelop the property. The ambitious project, expected to cost between $7.5 billion and $12 billion, would convert the 41-story tower into an 80-tower office building designed by late architect Zaha Hadid, adding hotel rooms and luxury housing.

Sources familiar with the investment told Bloomberg that Vornado, which owns 49.5 percent of 666 Fifth Ave, is unlikely to invest any more into the building without being certain of its future. A spokesperson for Kushner Cos. said no decision has been made for the building.

“As equal partners, Vornado and Kushner have been exploring a range of options for the future of 666 Fifth Avenue,” the spokesperson said in an email to Bloomberg. “All options are still being assessed, and no decision has been made about which option to pursue. Any implication that an agreed upon path has been reached or that there is contemplation of an outcome that would be to the sole benefit of one party over the other would simply be wrong.”

In March, Anbang, a Chinese insurance company, backed out of investing in the redevelopment. Anbang is closely tied to the Chinese government, which has previously raised security issues about U.S. investment. The former prime minister of Qatar, Hamad Bin Jasim al-Thai, and potential investor in 666 Fifth Ave backed away from the deal that was expected to provide $500 million.

As 6sqft covered last month, Jared Kushner’s role in the Trump administration may be linked to the problem-plagued Midtown project. Despite divesting his stake, concerns remain about Jared using his role to financially help his family. Since Jared’s rise to the White House, investors appear reluctant to enter discussions with the Kushner Cos.

[Via Bloomberg]

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