Kush­ner’s pre­vi­ous crises — and his re­ac­tions

The Washington Post Sunday - - FRONT PAGE - BY MICHAEL KRANISH AND JONATHAN O’CON­NELL

new york — Jared Kush­ner had barely sur­vived a fight to save his fam­ily’s real es­tate em­pire.

Tak­ing charge of the busi­ness af­ter his fa­ther went to prison, Kush­ner, 25 at the time, paid $1.8 bil­lion in 2007 for the na­tion’s most ex­pen­sive of­fice build­ing. Then the mar­ket went south, the debts piled up, and Kush­ner spent years push­ing banks to rene­go­ti­ate the loans.

But af­ter one dis­grun­tled lender had tried to block him, Kush­ner had an un­usual weapon at his dis­posal: He owned a news­pa­per.

Kush­ner, who had pur­chased the New York Ob­server in 2006, walked into his ed­i­tor’s of­fice and sug­gested a story ex­pos­ing po­ten­tially em­bar­rass­ing de­tails about the un­co­op­er­a­tive lender.

“I could tell he was an­gry at the guy,” said the ed­i­tor, El­iz­a­beth Spiers, who re­signed in 2012. Only af­ter months of dead-end re­port­ing did Kush­ner fi­nally stop ask­ing for the story, she said. That fol­lowed a sep­a­rate in­ci­dent in which Kush­ner wanted a “hit job” on an­other foe, a sec­ond Ob­server ed­i­tor told The

Post.

Kush­ner’s ca­reer in the cut­throat world of New York real es­tate shows how he dealt with his worst busi­ness cri­sis, avert­ing catas­tro­phe through con­nec­tions, savvy ne­go­ti­a­tion and hard­ball tac­tics that left ene­mies in his wake. Kush­ner was not re­luc­tant to strike back against those he said had crossed him.

Now, as a pow­er­ful se­nior White House ad­viser, Kush­ner faces a new cri­sis that risks not only his own rep­u­ta­tion but ul­ti­mately, the suc­cess of his fa­ther-in-law Pres­i­dent Trump, who has en­trusted him with re­spon­si­bil­i­ties in­clud­ing Mid­dle East diplo­macy and rein­vent­ing the fed­eral gov­ern­ment.

A fed­eral in­ves­ti­ga­tion has fo­cused on Kush­ner’s se­cret meet­ings with Rus­sians dur­ing and af­ter Trump’s 2016 cam­paign. The Post re­ported Fri­day that Kush­ner dis­cussed with the Rus­sian am­bas­sador the pos­si­bil­ity of es­tab­lish­ing back-chan­nel com­mu­ni­ca­tions with the Krem­lin, ac­cord­ing to U.S. of­fi­cials briefed on in­tel­li­gence re­ports.

Kush­ner’s at­tor­neys have said he will co­op­er­ate with the fed­eral in­ves­ti­ga­tion and an­swer ques­tions from a special coun­sel ex­am­in­ing al­le­ga­tions of Rus­sian in­ter­fer­ence in the 2016 cam­paign, a probe that could also ex­am­ine fi­nan­cial con­nec­tions Trump ad­vis­ers may have had with Rus­sia. Kush­ner de­clined to com­ment.

Kush­ner’s al­lies said his ex­pe­ri­ence in New York’s ag­gres­sive busi­ness cul­ture pre­pared him to man­age crises and tackle any prob­lem Trump gives him to solve.

But run­ning a real es­tate com­pany, where busi­ness deals and cor­po­rate ri­val­ries stem from the sin­gu­lar goal of turn­ing the big­gest prof­its, is far dif­fer­ent from nav­i­gat­ing the vast fed­eral gov­ern­ment or mas­ter­ing the tricky pol­i­tics of Wash­ing­ton and complexities of over­seas diplo­macy.

Trump has re­lied on Kush­ner as the pres­i­dent makes his own tran­si­tion from the busi­ness world. And just as Trump has strug­gled to adapt, Kush­ner is ad­just­ing with the lessons of the past decade in mind, say­ing pri­vately that he sees a par­al­lel be­tween his old and new ca­reers, be­liev­ing both are blood sports.

Kush­ner’s real es­tate ca­reer be­gan with a fam­ily trauma. His fa­ther, Charles, a ma­jor Demo­cratic Party donor whose com­pany then fo­cused on mod­est apart­ment build­ings in New Jersey, was con­victed in 2005 of fed­eral tax eva­sion, wit­ness tam­per­ing and mak­ing il­le­gal cam­paign do­na­tions, in­clud­ing some in Jared Kush­ner’s name.

The pros­e­cu­tor was then-U.S. At­tor­ney Chris Christie, who said the el­der Kush­ner had not taken re­spon­si­bil­ity for his “vile and heinous acts.” (Christie’s prose­cu­tion scarred the fam­ily, Kush­ner as­so­ciates told The Post. The wound re­opened dur­ing the Trump cam­paign, when White House of­fi­cials said the younger Kush­ner helped quash con­sid­er­a­tion of Christie for an ad­min­is­tra­tion role). Christie did not re­spond to a re­quest for com­ment.

Jared Kush­ner was study­ing law at New York Uni­ver­sity as the case gen­er­ated wide at­ten­tion be­cause of its scan­dalous de­tails. Charles Kush­ner had ar­ranged to se­cretly video­tape his brother-in­law meet­ing with a pros­ti­tute, al­legedly hop­ing to co­erce rel­a­tives to stop co­op­er­at­ing with fed­eral au­thor­i­ties. The judge called it an act of vengeance.

Kush­ner told New York mag­a­zine in 2009 that his fa­ther ar­ranged for the sex tape as a warn­ing to war­ring fam­ily mem­bers who he said were try­ing to hurt him.

“Was it the right thing to do? At the end of the day, it was a func­tion of say­ing, ‘You’re try­ing to make my life mis­er­able. Well, I’m do­ing the same,’ ” Kush­ner said.

With his fa­ther in­car­cer­ated in Alabama, barred from mak­ing busi­ness deals, Jared Kush­ner, the el­dest son, took over the em­pire. It had 1,000 em­ploy­ees and owned more than 25,000 apart­ments. The fam­ily’s rep­u­ta­tion was in tat­ters.

“A lot of their friends and busi­ness col­leagues just dis­ap­peared,” said Arthur J. Mi­rante II, a busi­ness con­sul­tant who ad­vised the Kush­n­ers.

Kush­ner went to Alabama ev­ery week to con­sult his fa­ther. He came up with two risky moves. In 2006, he bought an un­prof­itable news­pa­per, the New York Ob­server, for a re­ported $10 mil­lion. The news­pa­per, a broad­sheet printed on pink pa­per, ag­gres­sively cov­ered New York busi­ness and pol­i­tics. It had been es­pe­cially hard on real es­tate ti­tan Don­ald Trump, call­ing him the “prince of swine,” ac­cord­ing to for­mer colum­nist Michael Thomas.

Kush­ner’s news­pa­per own­er­ship gave him en­tree to the city’s pow­er­ful. Kush­ner by then had re­lo­cated the com­pany to Man­hat­tan, and he added to his al­lure by an­nounc­ing in Jan­uary 2007 a deal that shocked many real es­tate an­a­lysts.

He agreed to pay $1.8 bil­lion for a 41-story of­fice build­ing at 666 Fifth Ave., only blocks from Trump Tower, the high­est price paid at the time for a U.S. of­fice build­ing. Kush­ner called it “a great ac­qui­si­tion,” but some real es­tate vet­er­ans saw it as an act of hubris. In­come pro­jec­tions sug­gested that Kush­ner had vastly over­paid — and that was months be­fore the Great Re­ces­sion fur­ther soft­ened the mar­ket.

Within three years, Kush­ner’s project was drown­ing. A 2010 ap­praisal placed its value at $820 mil­lion, about half of what he paid, and well be­low his debt to banks, ac­cord­ing to fi­nan­cial records. As the re­ces­sion set in, of­fice rents plunged, and his build­ing’s oc­cu­pancy rate dropped from nearly full to 77 per­cent in 2011, ac­cord­ing to lend­ing doc­u­ments.

Bankers turned to LNR, a Florida firm that han­dles dis­tressed real es­tate debt as a pre­cur­sor to pos­si­ble fore­clo­sure. LNR rep­re­sented the banks in their ef­fort to col­lect Kush­ner’s obli­ga­tions.

That cre­ated ex­tra­or­di­nary pres­sure on Kush­ner to ne­go­ti­ate with LNR to re­duce his debt bur­den. But that, in turn, meant some banks and in­vestors might be paid less than ex­pected. A bat­tle be­gan be­tween Kush­ner and the com­pa­nies that helped fi­nance his risky pur­chase. LNR de­clined to com­ment.

One of the big­gest debt hold­ers was Colony Cap­i­tal, which owned $72.2 mil­lion, ac­cord­ing to an­a­lysts’ es­ti­mates. The comWash­ing­ton pany was run by Thomas J. Bar­rack Jr., a Trump friend. Bar­rack had worked for an oil baron who sold the iconic Plaza Ho­tel to Trump for $410 mil­lion, which Trump later ac­knowl­edged was too high, even­tu­ally forc­ing him to put the prop­erty into bank­ruptcy. The two men none­the­less re­mained close; Bar­rack had a speak­ing role at the Repub­li­can Na­tional Con­ven­tion and headed Trump’s in­au­gu­ral com­mit­tee.

Kush­ner men­tioned to his wife, Ivanka Trump — whom he mar­ried in 2009 — that Bar­rack was go­ing af­ter him on the debt. She told him that her fa­ther was close to Bar­rack, and so Don­ald Trump in­tro­duced Kush­ner to Bar­rack, ac­cord­ing to a per­son with knowledge of the mat­ter.

Bar­rack was con­cerned, but Kush­ner ar­gued that low­er­ing his obli­ga­tion was bet­ter than fore­clo­sure. “I’m ask­ing you to make more money for your­self than you’ll make oth­er­wise,” Kush­ner told Bar­rack, ac­cord­ing to the per­son fa­mil­iar with the con­ver­sa­tion. Bar­rack did not re­spond to a re­quest for com­ment.

com­pany run by an­other Trump as­so­ciate, Steven Roth, chief ex­ec­u­tive and chair­man of of­fice gi­ant Vor­nado Realty Trust, bought 49.5 per­cent of the project and helped run it. Roth is part­ners with Trump on other build­ings and was cho­sen by the pres­i­dent to run a com­mit­tee that will rec­om­mend how to spend fed­eral money on in­fras­truc­ture projects. Both Vor­nado and Roth de­clined to com­ment.

At the same time, one of Kush­ner’s most se­vere chal­lenges was deal­ing with a New York com­pany called AREA Prop­erty Part­ners, which held $105.4 mil­lion of Kush­ner’s debt, ac­cord­ing to in­dus­try es­ti­mates based on lend­ing doc­u­ments. Its chief ex­ec­u­tive, Richard Mack, ob­jected to Kush­ner’s debt-re­lief re­quests. Mack de­clined to com­ment.

Ul­ti­mately, Kush­ner made a deal with LNR to ease his debt bur­den and al­low him to re­tain ma­jor­ity con­trol. The agree­ment al­lowed Kush­ner to pay off some loans im­me­di­ately, low­ered his pay­ment rate and ex­tended the dead­line on the bulk of the debt for two years, to Fe­bru­ary 2019. The ini­tial $1.2 bil­lion mort­gage was split in two, with $115 mil­lion of what he owed sub­ju­gated by Kush­ner’s po­si­tion so that banks may ul­ti­mately have to write it off, ac­cord­ing to fi­nan­cial fil­ings.

Such re­struc­tur­ings are not un­usual for own­ers fac­ing ex­ten­sive real es­tate debt. But Kush­ner’s ne­go­ti­a­tions to pro­tect his fam­ily’s in­vest­ment left some hard feel­ings. A lender in­volved in the ne­go­ti­a­tions, who spoke on the con­di­tion of anonymity be­cause he was dis­cussing pri­vate con­ver­sa­tions, told The Post he was up­set be­cause Kush­ner did lit­tle to pro­tect his lenders. The lender said the var­i­ous rene­go­ti­a­tions could cost banks and in­vestors hun­dreds of mil­lions of dol­lars com­pared with what was orig­i­nally ex­pected.

“They could have taken steps to mit­i­gate the dam­age,” the lender said.

But Kush­ner viewed it as a hard­ball busi­ness deal and showed that he was a tough ne­go­tia­tor, ac­cord­ing to an in­di­vid­ual fa­mil­iar with his per­spec­tive.

Sources fa­mil­iar with the ar­range­ment said the Kush­ner fam­ily got back most of its $500 mil­lion in­vest­ment.

Kush­ner di­vested him­self of his in­ter­est in 666 Fifth Ave. when he joined the ad­min­is­tra­tion, although he kept stakes in about 90 per­cent of his real es­tate hold­ings, val­ued be­tween $132 mil­lion and $407 mil­lion. He re­signed from the fam­ily busi­ness and pledged a clear eth­i­cal di­vide. But ethics ex­perts say his re­main­ing busi­ness ties — many in part­ner­ships and LLCs that can­not be eas­ily traced — call for fuller dis­clo­sure.

His ad­mir­ers in real es­tate say Kush­ner has never made deals in tra­di­tional ways, although he is quick to seek coun­sel.

San­deep Mathrani, the chief ex­ec­u­tive of shop­ping mall gi­ant Gen­eral Growth Prop­er­ties, said he has been pe­ri­od­i­cally of­fer­ing Kush­ner ad­vice since the young de­vel­oper asked to meet with him al­most a decade ago.

“I think Jared got into the real es­tate busi­ness to re­deem the rep­u­ta­tion of the Kush­ner fam­ily, and I think he has def­i­nitely done that in the New York cir­cles,” Mathrani said.

“Jared was al­ways hun­gry for cre­ative new ideas and not say­ing ‘This is the way we’ve done things for gen­er­a­tions.’ Which is cool be­cause a lot of peo­ple in real es­tate fam­i­lies, that’s how they be­have,” said Asher Abehsera, a Kush­ner part­ner in a high-end project un­der de­vel­op­ment in the Dumbo sec­tion of Brook­lyn.

Kush­ner had never shied away from hard­ball tac­tics, and as a news­pa­per owner, he had a me­dia ve­hi­cle to spread neg­a­tive in­for­ma­tion.

One ed­i­tor of the Ob­server, who spoke on the con­di­tion of anonymity be­cause he was dis­cussing a pri­vate con­ver­sa­tion, said Kush­ner wanted a neg­a­tive story on a banker who was at odds with the fam­ily busi­ness. The ed­i­tor re­called Kush­ner say­ing: “We have to do a hit job on this guy. He is a bad guy.”

“I said, ‘Jared, first off, never use the phrase ‘hit job.’ We can’t use that term. And sec­ond, there’s no story here,” the ed­i­tor said.

A sim­i­lar episode oc­curred with Spiers, the for­mer ed­i­tor who said Kush­ner of­fered a tip that cast Mack, the lender from AREA Prop­erty Part­ners, in a bad light.

Main­stream me­dia or­ga­ni­za­tions gen­er­ally try to main­tain ed­i­to­rial in­de­pen­dence from their own­ers, so Spiers was con­cerned that Kush­ner was hop­ing to use the news­pa­per to pun­ish an an­tag­o­nist.

Spiers said Kush­ner urged her to pur­sue the tip, which in­cluded in­for­ma­tion about Mack’s busi­ness af­fairs. Spiers, who pre­vi­ously had founded the web­site Gawker, told The Post she had al­ready de­ter­mined that KushA ner seemed to want to use the news­pa­per to ad­vance his busi­ness in­ter­ests.

“Jared didn’t buy the pa­per be­cause he was in­ter­ested in jour­nal­ism. He bought the pa­per be­cause it was a mech­a­nism to gain in­flu­ence in New York,” Spiers said. “He was an­gry at the me­dia be­cause he thought the me­dia was partly re­spon­si­ble for his fa­ther go­ing to jail.”

She said she told Kush­ner that “you re­al­ize if we did this story, if any­thing is wrong, even by ac­ci­dent, he has a mal­ice pre­con­di­tion, and Jared didn’t know what I was talk­ing about.” A pub­lic of­fi­cial who sues for li­bel must show that the pub­li­ca­tion had “ac­tual mal­ice” against the sub­ject of the story.

Spiers gave the tip to two re­porters, but they could not sub­stan­ti­ate it. Kush­ner in­sisted on meet­ing with the re­porters twice and brought in a source to speak with them, ac­cord­ing to Fos­ter Kamer, one of the re­porters. Still, it could not be con­firmed.

Kamer said that Kush­ner had put him in an im­proper po­si­tion.

“To Jared, it was such a be­nign thing, and to my­self, it was just one of the most deeply of­fen­sive . . . things that had ever hap­pened to me pro­fes­sion­ally,” Kamer said.

In the end, the re­porters and Spiers con­vinced Kush­ner that the tip did not check out, and no story was pub­lished.

“I think it took a year off my life to pur­sue that story,” Spiers said. “Ev­ery meet­ing I had with him, he asked, ‘So how’s that story com­ing?’ ”

Kush­ner was asked in March 2016 at a fo­rum how he man­aged con­flicts be­tween his real es­tate busi­ness and the Ob­server. He brushed off the ques­tion.

“If you don’t want con­flicts, just go into your apart­ment and lock the door, don’t go to work, don’t do any­thing,” he said. “But as it comes up, you trust peo­ple to do the right things, and we found that we re­ally haven’t had any is­sues.”

An as­so­ciate de­fended Kush­ner by say­ing the news­pa­per owner spent less than 1 per­cent of his time on the Ob­server and was not in­volved in daily op­er­a­tions. As Kush­ner gave less at­ten­tion to his news­pa­per, he hired a close friend, Ken Kur­son, to be­come ed­i­tor in 2013.

Kur­son, who an­nounced this past week that he was step­ping down from his Ob­server job, said in an in­ter­view that those “who poke fun at the enor­mous port­fo­lio” Kush­ner has at the White House fail to ap­pre­ci­ate what he has gone through dur­ing the past decade — and what he means to Trump.

“It over­looks, first of all, the com­plex­ity and depth of what he has achieved in his busi­ness ca­reer,” Kur­son said of Kush­ner. “It over­looks the ma­jor fac­tor of how lead­ers se­lect their teams. It is trust.”

RICHARD DREW/AS­SO­CI­ATED PRESS

Peo­ple walk near the 666 Fifth Ave. sky­scraper in Man­hat­tan. Jared Kush­ner agreed to pay $1.8 bil­lion for the 41-story of­fice build­ing in 2007, call­ing it “a great ac­qui­si­tion.”

JABIN BOTSFORD/THE WASH­ING­TON POST

Kush­ner and his wife, Ivanka Trump, greet oth­ers be­fore Vice Pres­i­dent Pence’s speech dur­ing an event cel­e­brat­ing mil­i­tary fam­i­lies in the Eisen­hower Ex­ec­u­tive Of­fice Build­ing in Wash­ing­ton on May 9.

PETER KRAMER/GETTY IM­AGES

Kush­ner, owner of the New York Ob­server, at­tends the city’s pre­miere for the film “The Hunt­ing Party” in 2007.

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