Bloomberg
Kushner Cos. Spent the Trump years handling Scion’s costly bets
(Bloomberg) – Guy Fieri’s Times Square restaurant, where Jared Kushner and Ivanka Trump celebrated in late 2016 before heading to Washington, has disappeared. The office tower at 666 Fifth Ave., once the seat of the Kushner family’s real estate empire, has been sold. Also involved in a project in the trendy Dumbo neighborhood of Brooklyn. New York looks very different now than it did before Jared Kushner, who left the city to take a position as senior advisor to his father-in-law, President Donald Trump. Kushner Cos., The company where he served as chief executive officer, has pulled out of town and gained nearly a decade in investments in just a few short years. Instead, it has shifted its ambitions to apartment complexes in New Jersey and Florida. It’s not clear whether Kushner will return to an active role in the company after four years in the White House, or whether he will even return to New York. The changes his father Charles Kushner and company president Laurent Morali made in his absence can be traced back to a decades-long foray into the city, most notably when Jared Kushner was CEO. While there have been successes, some of the biggest deals have failed. High purchase prices, excessive borrowing, and unrealistic expectations have been followed by falling valuations and debt renegotiations. Kushner Cos. Didn’t answer questions about whether Jared Kushner would rejoin the company or whether the strategy would change. Christopher Smith, his top attorney, pointed out a number of profitable deals in an email, including investments in Lower Manhattan and the Gowanus neighborhood of Brooklyn. He said other buildings had increased in value. During the Trump years, Kushner chased Cos. Investors from China, Qatar and Israel when Jared Kushner helped shape foreign policy. He stepped down from his position with the company and transferred some of his assets to family members, but the structure of the divestments was not clear, which heightened ethical concerns. At the same time, the company bought apartment buildings in the suburbs of New Jersey, Maryland and Virginia, markets that are now booming as people flee cities during the Covid-19 pandemic. Attempts are also being made to break new ground: multi-family projects in South Florida. Some of the transactions that got the company to this point have been painful. The sale of 666 Fifth Ave. in 2018 was necessary to repay a loan that was taken out at the height of the market in 2007 when Kushner Cos. Bought the office tower for $ 1.8 billion at the time. Jared Kushner did not become CEO until the following year, but was involved in the negotiations and touted the purchase in a press release as “great upside potential”. He said goodbye to the property – a 99-year lease for the office space was sold to Brookfield Asset Management Inc. for $ 1.3 billion – a compromise between plans to demolish the building and work with an even taller skyscraper A couple of blocks away is the Times Square retail store – six floors of the building that once housed the New York Times – China’s Anbang Insurance Group, an option the company considered in Kushner in White’s early months . Kushner Cos. Purchased the space in 2015 and took out $ 370 million in debt a year later based on an estimate of $ 470 million. This is an increase of 59% over what he paid. Now it looks like the financial assumptions underlying this valuation are a mirage. To fill the building, Kushner turned Cos. To tenants whose space requirements were large but whose assessment of the demand for adventure attractions turned out to be wrong. There was an exhibition with digital dolphins and one with detailed miniatures of world monuments. At the end of last year, Guy’s American Kitchen & Bar was closed, a planned food hall never opened, a third tenant went bankrupt, and a fourth did not pay full rent. Kushner Cos. Delayed $ 85 million of its debt there last December, and an August estimate showed the property was worth $ 92.5 million, according to lenders, a 70% decrease from the purchase price corresponds. “The former New York Times building was truly a building retail disaster,” said Joshua Stein, a New York-based real estate attorney. “One concept after the other failed.” Kushner Cos. Also sold less than 5% of the Watchtower Complex in Brooklyn’s Dumbo neighborhood, which was acquired by Jehovah’s Witnesses in 2016. Jared Kushner, whose father-in-law ran for president Die Zeit trumpets plans to convert the buildings into shops and loft office space. Kushner’s father decided to focus elsewhere. The list of New York sales as of January 2017 includes two more development locations and apartments in Brooklyn, Queens. The company has not announced any major acquisitions in the city since then. Several New York deals made during Jared Kushner’s tenure have been successful. According to the company’s attorney, Smith, three properties were sold for combined gross income of $ 239 million. However, this is offset by operating losses at 666 Fifth Ave. about $ 200 million more than made up after the debt was paid off, as lenders’ numbers show investors, and a $ 200 million loss in value for Times Square. New York isn’t the only big corporate city in which Kushner Cos. withdraws. The company was in talks to buy its only Chicago office property, a 31-story tower originally built for AT&T Inc., for $ 188 million, a 32% discount from 2007 and barely enough To cover the mortgage of the property, other markets to outsource were plentiful. In 2019, the company made its largest purchase in more than a decade, spending more than $ 1 billion on 6,000 homes in the Baltimore and Washington suburbs. Two years earlier, it had teamed up with Israel’s largest asset manager to buy 1,000 homes in Plainsboro, New Jersey. The company’s return to its suburban roots seems like a surprising solution, at least for those who believed that Jared Kushner’s public role could make private-manufacturing easier. But working for Trump often turned out to be cumbersome rather than lucrative. Kushner’s rising star caught the interest of investors who hadn’t done business with his family’s company. It was also publicly scrutinized when his sister Nicole Kushner Meyer mentioned her brother’s role in the White House when she hired investors in China for a project in Jersey City, New Jersey. The company later apologized to anyone who interpreted their comments as an attempt to attract investors. Anbang, who was buying real estate in the US prior to Trump’s China bashing climb to the White House, left 666 Fifth Ave. shortly after Bloomberg News reported in early 2017 on details of a proposed deal with Kushner Cos. that would have given the Kushners a $ 4 billion construction loan and a $ 400 million payout. The Chinese authorities confiscated Anbang the following year and detained its chairman for fraud and embezzlement. The royal kings of Qatar also considered investing in 666 Fifth Ave. During the 2016 presidential campaign, Jared Kushner and his father spoke to Sheikh Hamad bin Jassim Al Thani. who previously served as Prime Minister of Qatar and Head of the State Fund for Investments in the Tower. The deal would have included $ 500 million from the sheikh’s investment firm, pending other investors. The talks, which stalled after concurrent negotiations with Anbang, collapsed. A Kushner Cos. Business associate, unwilling to be identified to discuss the close deal, said Jared Kushner’s work as Trump’s envoy in Israel and the Middle East introduced him to a new group of wealthy investors that Jared Kushner was working on his last trip to the region to bridge the gap between Saudi Arabia and Qatar, which had worsened after Saudi Arabia blocked the neighbor, this Trump supported. A White House spokesman declined to comment. The company is also able to benefit from Trump’s 2017 tax bill, which incentivized investment in low-income neighborhoods that are designated as opportunity zones. One Florida development is in one such area that allows investors to defer taxes on capital gains reinvested there. Kushner Cos. Expands real estate in zones in the beach town of Long Branch, New Jersey. It refused to say whether it was taking advantage of the tax break and no public disclosures are required. Whether he returns to the family real estate business, Jared Kushner still has stakes in Cadre, the startup he co-founded that sells fractions of real estate investments. Cadre agreed to buy it last year, but the deal was suspended after the pandemic and the company cut staff and made other cuts. A spokesman for Cadre did not comment. You can find more articles like this at bloomberg.com. Sign up now to stay up to date with the most trusted business news source. © 2020 Bloomberg LP