Kushners’ New York tower saved in time by Brookfield
Kushner Companies, the real estate company run by the family of US presidential sonin-law Jared Kushner, has secured a crucial investment in its over-leveraged New York tower, reaching a deal to lease the building’s office space for 99 years to a Canadian asset manager.
Brookfield Asset Management announced the leasehold at the weekend for 666 Fifth Avenue. It’s the marquee holding of Kushner Companies. Terms were not disclosed. Rather than pay the rent on an annual basis, Brookfield will give Kushner Companies an upfront sum that will allow the company to pay off its outstanding debt on the building, according to sources who asked not to be identified.
The Toronto investor is prepared to inject up to $700 million in equity and will essentially take control of the building unencumbered with a 100 per cent leasehold, the sources said. A Brookfield representative declined to comment.
The deal provides relief to Kushner Companies, which bought the 41-storey tower for a record-setting $1.8 billion in 2007, making a splashy entrance to the Manhattan real estate scene. The transaction was funded with more than $1.7bn of loans, and rapidly ran into trouble when property markets plummeted following the financial crisis.
In 2011, Vornado Realty Trust took a 49.5 per cent stake as part of a deal to rework the huge debt load and stave off foreclosure.
The building lost $25m last year and has almost always been unprofitable. Attempts to find other investors who would take a back seat to the Kushners in a redevelopment deal have come up short over the past couple of years. As a first step in its latest restructuring plan, Kushner Companies said in June it would buy out Vornado Realty Trust.
The cash infusion from Brookfield is just in time, with a $1.2bn mortgage on the property coming due in February. Kushner Companies executives led by Charles Kushner, Jared’s father, have been scouring the globe in search of a partner to salvage the investment. Last year, a deal with Chinese conglomerate Anbang Insurance Group fell apart after drawing media scrutiny in the US.
Jared Kushner, who is married to the daughter of President Donald Trump, stepped aside from managing his family’s company when he became a senior White House adviser.
Brookfield said it was making the investment through one of its private funds, and its Brookfield Properties subsidiary will operate the building.
“Given Brookfield’s experience in successfully redeveloping and repositioning major office assets in New York and other cities around the world, we are well placed to capitalise on that opportunity,” said Ric Clark, Brookfield Property’s chairman.