Kushner Cos. spent the Trump years unwinding its scion’s costly bets
Guy Fieri’s Times Square restaurant, where Jared Kushner and Ivanka Trump partied in late 2016 before heading to Washington, is gone. The office tower at 666 Fifth Ave., once the headquarters of the Kushner family’s real estate empire, has been sold. So too has a stake in a project in the trendy Dumbo neighborhood of Brooklyn.
New York looks a lot different now than it did before Jared Kushner left town to take a job as a senior adviser to his father-in-law, President Donald Trump. Kushner Cos., the company where he was chief executive officer, has pulled back from the city, winnowing almost a decade’s worth of investments in a few years. Instead, it has relocated its ambitions to apartment complexes in New Jersey and Florida.
It isn’t clear if Kushner will return to an active role in the company after four years in the White House, or even if he’ll go back to New York. The changes made in his absence by his father, Charles Kushner, and company president, Laurent Morali, come after a decadelong push into the city, most of it when Jared Kushner was CEO. Although there were successes, some of the biggest deals foundered. High purchase prices, excessive borrowing and unrealistic expectations were followed by declining valuations and debt renegotiations.
Kushner Cos. didn’t respond to questions about whether Jared Kushner would rejoin the company or about the change in strategy. But Christopher Smith, its top lawyer, pointed in an email to a number of profit
able transactions, including investments in Lower Manhattan and the Gowanus neighborhood of Brooklyn. He said other buildings had gained in value.
During the Trump years Kushner Cos. chased investors from China, Qatar and Israel as Jared Kushner was helping shape foreign policy. He stepped down from his role at the company and transferred some of his assets to family members, but the structure of the divestments wasn’t clear, exacerbating ethics concerns.
At the same time, the company purchased 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. It is also looking to break into new territory: multifamily projects in South Florida.
Some of the transactions that brought the company to this point have been painful. The 2018 sale of 666 Fifth Ave. was necessary to pay off a loan incurred in 2007, at the peak of the market, when Kushner Cos. purchased the office tower for a then-record $1.8 billion. Jared Kushner didn’t become CEO until the following year, but he was involved in the negoti
ations and touted the purchase in a news release as having “great upside potential.”
Saying goodbye to the property - a 99-year lease on the office space was sold to Brookfield Asset Management Inc. for $1.3 billion - was a comedown from plans to demolish the building and replace it with an even taller skyscraper in partnership with China’s Anbang Insurance Group, an option weighed by the company during Kushner’s first months in the White House.
A few blocks away there’s the Times Square retail property - six floors of the building that once housed the New York Times. Kushner Cos. bought the space in 2015, and a year later raised $370 million of debt based on an appraisal price of $470 million, a 59% increase over what it had paid.
Now it looks as though the financial assumptions underpinning that valuation were a mirage. To fill the building, Kushner Cos. turned to tenants whose need for space was great but whose assessment of demand for experiential attractions turned out to be misguided. There was an exhibit featuring digital dolphins, and another with detailed miniatures of world monuments.
By 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 wasn’t paying full rent. Kushner Cos. defaulted on $85 million of its debt there last December, and an August appraisal put the property’s value at $92.5 million, lender records show, about a 70% drop from the purchase price.
“The former New York Times building was really a retail disaster,” said Joshua Stein, a New York-based real estate attorney. “One concept after another failed.”
Kushner Cos. also sold a less than 5% stake in the Watchtower complex in Brooklyn’s Dumbo neighborhood, acquired from the Jehovah’s Witnesses in 2016. Jared Kushner, whose fatherin-law was running for president at the time, trumpeted plans to convert the buildings into stores and loft office spaces. Kushner’s father decided to refocus elsewhere.
The list of New York sales since January 2017 includes two other Brooklyn development sites and apartments in Queens. The company hasn’t announced any major acquisitions in the city since then.
Some New York deals that originated during Jared Kushner’s tenure have been successful. Three properties were sold for a combined gross profit of $239 million, according to data provided by Smith, the company’s lawyer. But that’s more than offset by about $200 million in operating losses at 666 Fifth Ave. after debt payments, figures provided by lenders to investors show, and a $200 million drop in value for the Times Square space.