Kushner land deal enriched Cohen
Business started in contaminated parking lot
The purchase of three properties by President Trump’s son-in-law on the banks of a toxic Brooklyn canal triggered a series of unusual real estate deals and a windfall profit from transactions financed by a bank tied to the Trump family.
The property transactions began in late 2014 and early 2015 and included sales prices well above the assessed value of the parcels, as well as high-risk loans that experts said raise red flags. At the center of each deal is Jared Kushner and Michael Cohen, whose business dealings have attracted close scrutiny from prosecutors and regulators since Trump’s election.
The transactions were financed through Signature Bank, one of three
banks whose ties to Kushner are under review by New York banking regulators. The bank’s board members have included Ivanka Trump and former Republican U.S. senator Al D’Amato, a deal maker and power broker in New York business and politics who has been a vocal supporter of President Trump.
It’s unclear whether these deals are part of the state’s review. These previously unreported details shed light on how Trump’s closest associates conducted business in the high-stakes New York City real estate market and how Cohen benefited personally from his relationship to Trump and his businesses.
USA TODAY asked six real estate, finance and tax law experts to review aspects of the real estate deals and mortgages. Each said the deals could be perfectly legal, but the timing of the transactions and the fact that so many related parties were involved make them highly unusual and raise red flags about the rapid inflation of property values.
Michael Cohen did not respond to questions, nor did Kushner Companies.
Signature Bank spokeswoman Susan Lewis said of the bank’s relationship with Cohen that “senior management did not have any knowledge of him or who he was until he started appearing in the newspapers in the last year.”
Brooklyn deal
The series of deals involving Trump associates started in a contaminated parking lot on the banks of Brooklyn’s Gowanus Canal.
In October 2014, a joint venture led by Kushner Companies paid $72.5 million for three lots of land along the polluted waterway to a company owned by New York developer Herbert Chaves. Jared Kushner’s company was a 5% shareholder in the venture, and commercial real estate company SL Green held the rest. Real estate and lobbying records indicate the Kushner firm was the operational leader of the venture.
Chaves’ firms used cash from Kushner to buy apartments from Trump attorney Michael Cohen. He paid $32 million for four buildings Cohen bought one to three years before for $11.4 million.
The collective market value of the four properties at the time of the sale Dec. 10, 2014, was a total of $6.6 million, according to New York City property assessment records — roughly one-fifth of the purchase price. Chaves did not take out any mortgages for his purchase of the four properties on the Lower East Side and Kip’s Bay area.
The deal was part of what is known as a “1031 exchange,” which refers to a section of the Internal Revenue Code that lets a seller defer tax payments by rolling proceeds from one real estate deal into another within 45 days.
Cohen immediately reinvested his new $32 million in a 1031 exchange of his own, part of which involved Chaves.
In February 2015, Chaves and Cohen partnered on the purchase of a Manhattan apartment building at 330 East 63rd St. for $58 million. Aspects of the swaps involving Cohen and Chaves have been reported by McClatchy.
The earlier deal, between Kushner and Chaves, is similar to the Chaves and Cohen deal under scrutiny.
The purchase price in the Kushner deal far exceeded the assessed market value, which was $3 million at the time of the sale, according to city records. A newly opened Whole Foods in the area served as a sign of the transitional neighborhood’s promise, but the ideal location was on land spoiled from decades of industrial use.
The 3.2-acre canal-front property, used as a parking lot for utility service vehicles, features views of a waterway strewn with debris, including a sideways shopping cart and overturned stroller. Former tenants — including a wagon painter, blacksmith, auto wrecking facility and gas station — left volatile organic compounds in the soil and groundwater. The property was not zoned for residential development, limiting what could be done with the land absent an approved zoning change.
Experts who reviewed details of the transaction said they were struck by the high purchase price, given the level of contamination on the property.
David Zimmel, president of Zimmel Associates, a New Jersey commercial real estate company that does business in New York, said he was surprised the Kushner-led team would pay that much for property without guarantees that it would recover its investment. “It’s crazy money,” he said. “To pay that kind of money and not be sure, I’m surprised.”
The property’s environmental issues made it a risky proposition for any bank looking to back a development venture. If the site couldn’t be decontaminated, the property was never going to be much more than it was — an eyesore where Verizon parked vehicles.
The transaction in October 2014 was backed by a $40 million mortgage from Signature Bank. Ivanka Trump was a member of Signature Bank’s board of directors from 2011 to 2013, according to Securities and Exchange Commission filings. She served on its risk committee, which reviewed high-value loans.
Catherine Ghiglieri, a former banking commissioner of Texas and co-author of two books on banking, said banks have policies to make loans, and if there is toxic waste on a site where no cleanup is underway, the “bank will not loan money unless there is some mitigating circumstances.”
“They are lending other people’s money,” she said. “They are not venture capitalists.”
Lewis said Signature Bank “is fully compliant” with Federal Reserve regulations, “meaning any member of the board of directors cannot have any involvement in the approval process for any loans to which he or she is related, including those of family members.” During the 31⁄ years the property was
2 owned by the Kushner joint venture, efforts to develop the land hinged on clearing environmental and rezoning hurdles to unlock its potential value.
Kushner’s company applied in 2015 to the New York State Department of Environmental Conservation’s Brownfield Cleanup Program for funding to remove contaminants from the land, and it was approved that year. The state installed monitoring wells to investigate contamination on the site, and an investigation report is being finalized.
New York City lobbying records show the Kushner venture poured $180,000 in
2015 and 2016 into an effort to lobby city officials to rezone the land.
City Councilman Brad Lander, who was among the lobbied officials, said he began to have serious issues with the Kushner group after the election when Kushner became a White House adviser.
Lander said he became concerned that the White House, which controls the Superfund cleanup programs, could retaliate against the district and not allow the cleanup to continue if the city didn’t go along with the team’s demands. On the other hand, if he and the city voted in favor of the Kushner team, it would look like he and his colleagues were looking to help Kushner, who held a financial stake in the project.
The Kushner joint venture sold the land in April 2018 despite the fact it remains zoned in a manufacturing district and the cleanup is in progress.
The Kushner group’s profit was substantial: The property purchased for
$72.5 million in 2014 was sold to the international property firm RFR Holding for $115 million.
Lander said he’s not sure if zoning issues prompted the team to sell, “or if it has something to do with the Kushner family’s well-publicized need for cash.” The property remains a parking lot.
‘Let them look’
Interactions between Signature Bank and Cohen and Kushner did not end with the property sales in 2014 and 2015.
Cohen used his real estate invest- ments to generate extra cash from Signature Bank last year, according to state records. In May 2017, a financing document was filed with the New York secretary of State by the five corporations through which Cohen and Chaves own 330 East 63rd St.
The financing document, which has not previously been reported, establishes those corporations are offered as collateral for a loan against the equity in the apartment building, according to experts who reviewed the records.
It is unclear how much was extracted from the loan or how any funds drawn from the financing were used.
New York real estate attorney Michael Zuckerman of Warshaw Burstein, who specializes in real estate finance, said it is possible the financing statement indicates a loan was taken out to aid other ventures.
Cohen faced complications in the early months of the Trump presidency, including questioning by congressional committees last year and the seizure of his business records by the U.S. Attorney’s Office in April.
Reached by phone, Cohen asked for written questions but did not respond.
Signature Bank was among the banks that received requests this year from New York’s Department of Financial Services for records of its interactions with Kushner. The department did not respond to a request for comment.
In an interview with the real estate publication The Real Deal this month, Kushner’s father, Charles, called the request “nonsense.”
“Let them look. We welcome them to look,” he said. “What do they want from our files? What do they want from the bank’s files? All of our banks have … called us and said, ‘Give them whatever you have because it’s stupid.’ ”