666 5th Avenue, ironically, has been a curse to Jared Kushner ever since he purchased the tower for a then-record $1.8 billion in 2007. It was supposed to be a signature move that signaled Kushner’s intention to expand beyond his family’s extensive holdings in suburban apartments to more prestigious urban properties in Manhattan.
Unfortunately, Kushner’s market timing couldn’t have been worse with the ‘great recession’ paralyzing the commercial real estate market just months after his trophy purchase. Four years later, with the property on the verge of insolvency, Kushner was forced to sell a 49.5% stake in the skyscraper to Vornado for an $80 million capital injection. Voranado later invested even more in the tower in 2012, purchasing the retail spaces at the building’s base from Kushner and others for $707 million.
Meanwhile, the latest headache from 666 Fifth Avenue came after Kushner’s family trust decided to pursue a potential transaction with China’s Anbang Insurance Group which resulted in complete outrage from the left over alleged “conflicts of interest”. Now, just a couple of weeks after rumors of the deal first surfaced, the Kushner family has confirmed they ended talks with Angang to redevelop the Manhattan office tower. Per Bloomberg:
“Kushner Companies is no longer in discussions with Anbang about 666 5th Avenue’s potential redevelopment, and our firms have mutually agreed to end talks regarding the property,” according to a statement emailed by a Kushner spokesman, who declined to comment further. “Kushner Companies remains in active, advanced negotiations around 666 5th Avenue with a number of potential investors.”
A spokesman for Anbang declined to comment.
As we noted a couple of weeks ago, the potential deal with Anbang raised some eyebrows in Washington DC due to, among other things, the Chinese company’s murky links to the Chinese power structure which raised national security concerns over its previous U.S. investments as well as some favorable debt relief terms contemplated in the transaction. Per Bloomberg:
Anbang will pay for most of the building and take out a construction loan of more than $4 billion to convert the property’s higher floors into luxury residential units. The Kushners have agreed to invest $750 million in the retail portion of the building and will end up with a one-fifth stake in a project that the deal document says would be valued at $7.2 billion when completed. In addition to the $400 million from Anbang, the Kushners will receive another $100 million from other investors.
An unusual consideration in the refinancing plan is the proposal to pay off a part of the mortgage known as a “hope note,” which was for $115 million when Kushner Cos refinanced its debt in 2011. The loan, which was made by Barclays Plc and has since been sold off to investors, is now valued at more than $250 million because of compounded interest. But according to the deal documents, the Kushners will settle the debt for just $50 million. The Kushners declined to discuss the agreement. LNR Partners LLC, which currently oversees the debt, declined to comment.
The plan also relies on the government program known as EB-5, which grants two-year visas and a path to permanent residency to foreigners who invest a minimum of $500,000 in projects that create jobs in economically distressed areas.
Supporters argue that the program, which is overwhelmingly used on deals involving Chinese investors, attracts foreign capital and creates jobs at no U.S. taxpayer cost. But some Homeland Security officials and the General Accounting Office have warned that lax vetting has threatened to turn the program into a mechanism for the government to sell visas to wealthy foreigners with no proven skills, paving the way for money laundering and compromising national security.
The deal contemplated would have valued the 41-story tower at $2.85 billion, the most ever for a single Manhattan building, including $1.6 billion for the office section and $1.25 billion for the retail section. Of course, the sheer size of the transaction combined with a questionable foreign partner and the curious timing, coming just months after Trump took over the White House, certainly contributed to the Democrats’ angst.
“This is a huge, huge exit strategy for an office building,” said Joshua Stein, a New York real estate lawyer. “It does sound like a home run of a transaction for Kushner and his group.”
“At the very least, this raises serious questions about the appearance of a conflict that arises from the possibility that the Kushners are getting a sweetheart deal,” said Larry Noble, general counsel at the Campaign Legal Center. “A classic way you influence people is by financially helping their family.”
The transaction would allow the Kushner Cos.’ investment in the tower to be salvaged by lenders and businesses that could have extensive dealings with the federal government, while also permitting the Kushners to buy back into the building’s more lucrative retail spaces and maintain a 20 percent stake.
So with one “conflict” removed, Democrats will have more time to focus on Kushner’s coordination with Russian spies to steal a U.S. election.