Problems at 666 Fifth Avenue tower linked to Jared Kushner’s White House role

Posted On Thu, September 14, 2017 By

Posted On Thu, September 14, 2017 By In Major Developments, Midtown East, Policy, real estate trends

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

In 2007, Kushner Companies purchased a 41-story tower in Midtown for $1.8 billion, which was the most expensive real estate deal ever in the U.S. at the time. The transaction of 666 Fifth Avenue, coordinated by Jared Kushner, now a senior advisor to President Donald Trump, was ill-timed, making the purchase just before the economic recession. As the Washington Post reported, the Fifth Avenue project is one of the most financially troubled for Kushner Cos., with one-fourth of office space empty, and its lease revenue not covering monthly interest payments. While Kushner has divested his stake in the property to avoid conflicts of interest, the property’s value has dropped and foreign entities have withdrawn financial support. Currently, Kushner’s dealings are under investigation by special counsel Robert Mueller, as part of the broader investigation into Russian collusion with the Trump campaign.

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

To purchase the nearly $2 billion Fifth Avenue property, the Kushners had sold most of their real estate in New Jersey. After the Great Recession dropped the property’s value significantly, Kushner nearly lost the building in 2010. He was late on payments and was forced to restructure his debt. Kushner turned to two friends of his father-in-law for help, Thomas Barrack of Colony Capital and Steve Roth of Vornado Realty Trust.

Barrack’s real estate company in 2010 invested $45 million and took on part of the building’s debt, eventually making a profit.  In 2011, Roth’s company bought 49.5 percent of the office portion of the Fifth Avenue property, allowing Kushner to restructure the debt and extend the $1.2 billion loan until 2019.

Since then, problems have persisted at 666 Fifth Avenue. As the Post learned from lending documents, the occupancy rate has dropped to 70 percent. Citibank, one the main tenants, has left the property except for one small space. The law firm, Philip Nizer, which has occupied two floors of the building for decades, is leaving at the end of this year. Plus, the building’s net operating income has dropped to $41 million from $61 million in 2007.

In an attempt to salvage the property’s money-making capabilities, Kushner Cos. and Vornado Realty revealed plans in March to redevelop the property for a cost that could range from $7.5 billion to $12 billion. The plan would convert the tower into an 80-story office tower, adding hotel rooms and luxury housing, designed by the late architecture icon, Zaha Hadid.

In March, 6sqft covered the decision of Anbang, a Chinese insurance company, to back out of the redevelopment of 666 Fifth Avenue. Their withdrawal from talks regarding the property came about after Kushner’s meetings with a Russian bank, known for its close ties to Russian President Vladimir Putin, were disclosed publicly. Plus, Anbang is closely tied to the Chinese government, which has previously raised security issues about U.S. investment. Kushner told Congress in July that the meeting did not involve “any discussion about my companies, business transactions, real estate projects, loans, banking arrangements or any private business of any kind.”

The former prime minister of Qatar, Hamad Bin Jasim al-Thani, was a potential investor in 666 Fifth Avenue, who was expected to provide $500 million. The official also backed away from the deal and the Kushner Cos. lost out on the investment. The balance of the $1.2 billion mortgage for 666 Fifth Avenue will be due in February 2019.

[Via The Washington Post]

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