A Kushner Cos. plan to salvage its indebted marquee Manhattan office tower by replacing it with one twice as tall doesn’t make sense, the building’s co-owner said, dealing a likely death blow to the idea.
“There have been rumours in the marketplace – more than rumours – that have been published in the marketplace about tearing the building down and doing all manner of fairly grand development schemes,” Steve Roth, chairman and chief executive officer of Vornado Realty Trust, said on the company’s earnings call Tuesday.
“It’s likely that those are not feasible. So it’s likely the building will revert to an office building,” he said.
The family of presidential son-in-law Jared Kushner bought the aluminum-sided building at 666 Fifth Ave. a decade ago for a record $1.8 billion when he was running the company and it has spent years seeking a way to prevent it from haemorrhaging cash after the financial crash saw real estate prices plummet.
After financing for the latest approach leaked in March, experts deemed it prohibitively expensive, and a proposed deal with Anbang Insurance Group, a company with close ties to the Chinese government, contained terms that some said were unusually favourable for the Kushners.
The deal later fell apart. Roth’s feelings about the project had earlier been telegraphed by Vornado executives to brokers of New York offices, previously reported by Bloomberg.
Rendering by Methanoia; courtesy Zaha Hadid Architects
The raze-and-replace plan was designed to salvage the Kushners’ investment in the debt-laden crown jewel of their real estate empire. Charlie and Jared Kushner and company executives sought investment for the 80-story redevelopment across the globe, approaching investors in China, Saudi Arabia, France and South Korea.
The family’s proposal, designed by the late architect Zaha Hadid, would have involved a five-story retail mall, a hotel and record-breakingly expensive condominiums. The efforts raised concerns about conflict of interest because of Kushner’s powerful role in the administration.
The office portion of the tower is encumbered by a $1.2 billion mortgage, which is due in February 2019. Roth, whose company helped refinance the building in 2011, described the offices as over-leveraged. It is also under-occupied and losing money.
A failure of the teardown plan probably means Kushner, Vornado and their lenders will have to renegotiate the debts, which could result in Kushner Cos. losing control of the building, people familiar with the property previously told Bloomberg.
Jared Kushner divested his stake in the building to relatives in connection with his White House role.
Representatives for Kushner Cos. didn’t respond to requests for comment.
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