The Kushner Companies, the real estate firm owned by the family of President Donald Trump’s son-in-law Jared Kushner, is facing a mountain of a challenge.
According to an investigation by Bloomberg’s David Kocieniewski and Caleb Melby, the Kushner Companies is facing a staggering set of financial complications and has been actively seeking substantial foreign investments in order to boost the real estate company.
Most of the issue arises over the 2007 purchase by the Kushner Companies of 666 Fifth Avenue, a massive skyscraper in New York City. The $US1.8 billion price tag for the building was paid for with a $US50 million down payment, $US535 million in short-term high interest loans, and a $US1.2 billion mortgage.
Due to the dramatic downturn in the New York real estate market (not to mention the global economy) soon after the purchase, the Kushner Companies has been working to pay down the high interest loans by selling off portions of the building and large parts of its other portfolio, while not putting any money toward the long-term mortgage.
According to Bloomberg, the Kushners have sold off all of the retail space at the bottom of the building and a 49.5% stake in the tower above to Vornado Realty Trust. The sales have helped pay off the short-term loans and split the ownership of the tower, but the Kushners still must pay roughly $US600 million — more than the short-term loans the company has grappled with for a decade — when the mortgage comes due in February 2019.
While the loan is substantial in size, according to a source familiar with the matter, the success or failure of the 666 building is not a threat to the survival of the larger company. In addition, the rest of the Kushner Companies’ portfolio is performing well, the person said.
In order to pay back this substantial obligation, according to Bloomberg, the Kushner Companies has developed an ambitious plan to tear down the existing 666 tower and replace it with a new mixed-use skyscraper with a five-story mall and high-end condos.
To finance the existing loan and the new complex, the Kushners have been looking to partner with outside investors on some or all of the space. According to Bloomberg, a good number of the conversations the Kushner Companies representatives have held since Trump entered the presidential race in 2015 have been with foreign investors.
So far, however, no partner has been willing to sign on to the plan.
Here’s a rundown of some of the investors the Kushner Companies held meetings with regarding the building over the past few years, according to Bloomberg:
- Sheikh Hamad bin Jassim Al Thani, a Qatari businessman, who agreed to an investment if others came on board in 2016. The deal eventually fell apart.
- The Korea Investment Corporation, a sovereign wealth fund run by the South Korean government, held talks regarding the investment but ultimately walked away.
- Anbang, a massive Chinese insurance company with close ties to the Chinese government, held talks but backed out in 2017 after reports of the talks were revealed.
All of these investors, said Bloomberg, have either not commented or denied that they took interest due to Kushner’s connection to Trump.
The Kushner Companies did, however, get into hot water in May when it was reported that some of the family members were apparently encouraging Chinese investors to go in on a separate real estate venture in exchange for US visas, using Jared’s name as a selling point.
Federal prosecutors subpoenaed the Kushner Companies regarding its pitches in China following the revelations, according to a report form The Wall Street Journal.
As late as July, reports indicated that some companies working with the Kushner Companies were still using Jared’s name to entice Chinese investors.
In a statement to Business Insider, a spokesperson for the Kushner Companies took issue with the Bloomberg story.
“The Bloomberg article this morning about the Kushner Companies and its property at 666 Fifth Avenue contained many factual errors and drew unsupported conclusions,” the statement said, without elaborating on what those factual errors were.
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