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Kushners will buy rest of 666 Fifth Avenue from partner Vornado
THE Kushner family appeared on Friday to have struck a deal to buy out its partner in the troubled Fifth Avenue skyscraper at the centre of its real estate empire, according to a filing with the Securities and Exchange Commission.
The Kushners' partner, the publicly traded Vornado Realty Trust, has indicated for months it was interested in selling its stake in the building, and on Friday, Steven Roth, Vornado's chairman, said in the filing that it had reached a handshake deal "to sell our interest to our partner".
The Kushners have attracted enormous public attention because of their connection to President Donald Trump. Jared Kushner, Mr Trump's son-in-law, was chief executive of the company until he joined the White House last year as one of Mr Trump's key advisers.
The Kushners have spent the last three years on a worldwide hunt for a new partner and financing to build either a new supertower designed by architect Zaha Hadid on the site of 666 Fifth Ave, near Rockefeller Center, or to renovate and reposition the 41-storey, aluminium-clad tower as a first-class building.
Mr Kushner's father, Charles Kushner, has scrambled to find partners to bail out its investment in the building, which also serves as the headquarters of Kushner Cos. The company has a US$1.4 billion mortgage on the building that is due in 10 months. Real estate analysts doubt that the office space is worth that much, making a traditional refinancing of the building problematic.
The Kushners tried to make a deal with Anbang Insurance Group, a giant Chinese insurance company with ties to some of the Communist Party's leading families, but those talks fell apart last year amid heightened scrutiny of the link to Mr Trump.
Charles Kushner also sought a US$500 million investment from the former prime minister of Qatar, according to The Intercept, the online news site. That entreaty was also unsuccessful. The negotiations have drawn scrutiny because Jared Kushner's White House responsibilities involve both China and the Middle East.
It is unclear if the announcement from Vornado means the Kushners have found a new partner, or who might be providing the financing for such a deal. Vornado declined further comment through a spokeswoman. A spokeswoman for Kushner Cos said Charles Kushner, an Orthodox Jew, was unavailable to comment because he was observing the Sabbath.
The Kushners made a huge splash in 2007 when they bought 666 Fifth Ave for US$1.8 billion, setting a record price for an office tower. Before then, Mr Kushner was known mainly as a developer of garden apartments in New Jersey, where he lived, and a major Democratic Party contributor.
The Fifth Avenue building was meant to signal a significant change in direction for the Kushners, who moved into Manhattan, installed the family headquarters on the building's 15th floor and went on a real estate shopping spree that has left them with properties in Brooklyn, Jersey City and Maryland.
But 666 Fifth Ave was bought mostly with borrowed money. To pay off some of the debt, the Kushners sold the building's most valuable asset, the retail space, to Carlyle Group and Crown Acquisitions for US$525 million. 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 per cent interest in the building's office space and agreed to invest up to US$80 million and take responsibility for a portion of the mortgage. The mortgage was divided into a US$1.1 billion note and a US$115 million secondary loan.
But Vornado imposed stiff terms. It was getting 11 per cent interest on money it actually invested in the building, and a 3 per cent 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 US$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 US$707 million, except for a portion owned by Zara, the Spanish clothing chain.
Vornado is expected to hang onto the retail space. In the filing Mr Roth said the price Vornado was receiving would repay the company's investment: "The existing loan will be repaid including payment to us of the portion of the debt we hold." NYTIMES