It was 2006—the height of the real-estate market boom—when Kushner Cos. agreed to buy 666 Fifth Avenue for $1.8 billion, then a record for a Manhattan building. All of it was borrowed except for $50 million. The company still holds half of a $1.2 billion mortgage, on which it hasn’t paid a cent. The full amount is due in February 2019.
The strain has become increasingly evident across their holdings. One person familiar with the company’s finances describes the tower, with its low ceilings and outdated floor plan, as the Jenga puzzle piece that could set the empire teetering.
The family’s idea of how to salvage its investment requires razing the building to the ground and constructing an 80-story tower with greatly expanded retail areas and high-end condominiums. No short- or medium-term return can be expected from such an aggressive approach. Even a return over the long run would be speculative, though Morali describes the plan as “ambitious and creative.” That narrows the pool of investors to those interested in something other than profit. Real estate experts say this almost certainly precludes U.S. companies. More likely: a foreign firm looking to get capital out of its country or seeking a trophy Manhattan property.
Before Trump began his rise to the presidency and the 36-year-old Kushner became his senior adviser, 666 Fifth Avenue struggled to attract serious offers. Meetings the Kushners requested were often rejected. After Trump’s nomination, billions of dollars in Asian and Middle Eastern money came under discussion. Two potential deals that made it to advanced stages, with China’sAnbang Insurance Group and a top Qatari sheikh, fell apart.
Jared Kushner sitting with other senior White House Staff
Photographer: Andrew Harrer / Bloomberg
The new status meant the Kushners’ calls were more readily answered—but they came with additional scrutiny, not only of the Kushners but also of the investors. Since January, the company has ceased entering into business relationships with sovereign entities, Morali said. Federal investigators want to know if the Fifth Avenue building’s finances came up in a post-election meeting Kushner had with the head of Russia’s state-controlled development bank.
The Kushners have reason to look far afield. Even after selling big sections of 666 Fifth in 2011, they have increased their own vulnerability by borrowing more money for other deals, people close to the company say. After a refinancing, the deed to 666 Fifth sits in an escrow account, ready to be seized by lenders in a default, an action indicating their trust has grown thin. The mortgage will become even more of a burden after a scheduled jump in interest rates in December. Under some dire circumstances, guarantees in the refinancing agreement could even give lenders the ability to go after the family’s other assets—many of which are also underpinned by debt.
Lots more