How Politics Have Complicated Business For Kushner Companies

Oct 26, 2017
Originally published on October 26, 2017 10:46 pm
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When Donald Trump was elected president, there was a lot of concern that his position in office would enrich his businesses and the businesses of his closest advisers - for example, his son-in-law, Jared Kushner, whose family owns Kushner Companies, a major real estate developer.


Two reporters with Bloomberg News have spent a lot of time looking at one building owned by Kushner Companies to see if that enrichment happened. I talked to them for the latest episode of my podcast Embedded. And the building they looked at is 666 5th Avenue. Buying it meant the Kushners could expand their business from New Jersey to Manhattan. It's fall of 2006. The Kushners want to make an offer on 666 Fifth Avenue. And Jared Kushner's father, Charlie Kushner, has his staff work the weekend after Thanksgiving to put the financial package together. Here is the first Bloomberg reporter you will hear, David Kocieniewski.

DAVID KOCIENIEWSKI: The main people who knew the books of the company, who knew the company's cash position were skeptical and said, look. I don't know that this is the right price. I don't know that we can do the financing. But Charlie told his accountants and his finance people, I make the decisions. You make them work.

MCEVERS: What was the price? What was the final price?

KOCIENIEWSKI: $1.8 billion.


KOCIENIEWSKI: Which was a record at the time.

MCEVERS: $1.8 billion was the most that had ever been paid for a building in Manhattan. The Kushners put down $50 million in cash, and the rest comes from some high-interest loans and a $1.2 billion mortgage. Remember that - a $1.2 billion mortgage. After they close on the deal, the Kushners have this big party at a swanky Manhattan restaurant with a $250-per-person tasting menu.

KOCIENIEWSKI: They went to Per Se, and everyone got these gold cufflinks. And they thought that this was their great moment.

MCEVERS: You mean, like, the people who stayed up late to make the numbers work?

KOCIENIEWSKI: Yes. And some...

MCEVERS: They all got cufflinks out of it?

KOCIENIEWSKI: Some of the other - and the cufflinks were made to look like the metal facing on the side of the building.

MCEVERS: So it's 2007, flying high. Then this happens.


UNIDENTIFIED REPORTER #1: Stocks all around the world are tanking because of the crisis on Wall Street.

MCEVERS: The Great Recession. And suddenly, 666 Fifth Avenue is this huge money suck.

KOCIENIEWSKI: And they started scrambling.

MCEVERS: They sell off half the retail. Then they refinance the mortgage. This other big real estate company, Vornado, buys half the office space in exchange for cash and Vornado assumes half the debt. And in the end they make it. 666 will not go under. And in 2011, there's another company dinner to celebrate. This time it's not at that fancy restaurant.

KOCIENIEWSKI: They go to some little cash-only Italian restaurant, which was a little different ambiance. People were all glad that they made it out by their fingernails.

MCEVERS: The problem is still that $1.2 billion mortgage. The refi (ph) package did give the Kushners some interest forgiveness, says the other Bloomberg reporter, Caleb Melby.

CALEB MELBY: But with each successive year, some of that interest forgiveness went away and the debt got more and more expensive. And even after that forgiveness they were still in the red, which is how we get to their plan to just raze the whole thing and start over, I guess.

MCEVERS: And now we get to something called the megaproject. It's 2014 and Vornado, which owns a lot of 666, says, let's play it safe. Let's rent the building out, hope to refinance again.

KOCIENIEWSKI: And the Kushners go the other direction. They say, well, what if we knock it down and put up a big, gleaming, huge tower and make it twice as big and twice as expensive and bring in other investors? And instead of one floor of retail, which is profitable, we'll have five floors?

MELBY: And a hotel on top of that.

KOCIENIEWSKI: At the end, I think it would take $8 billion to build.

MCEVERS: You know, I think anyone listening would maybe not understand. It's like, if you can't afford the mortgage you have, the $1.2 billion mortgage you have, how on earth could it even possibly make sense to then want to do an $8 billion project?

MELBY: You got to find a partner to pay that loan down before you do anything else.

MCEVERS: And remember; in 2014, New York City is in the middle of another real estate boom. A lot of investors are actually willing to overpay for a building on Fifth Avenue, many of them foreign investors.

MELBY: And that's the part where it gets crazy - right? - is this is just so many magnitudes beyond that that it doesn't even look like a good deal. So the Kushners did go on a global hunt.

MCEVERS: The pitch includes sketches of a building designed by one of the world's most famous architects.

KOCIENIEWSKI: It looks like something from the Emerald City in Oz or Abu Dhabi.

MCEVERS: They go to the richest man in France.

MELBY: He didn't buy it.

MCEVERS: They go to a Saudi mall developer. Nope. They go to companies in Israel run by folks who'd worked on Kushner projects in the past.

MELBY: But not this one.

MCEVERS: South Korea's sovereign wealth fund. Nope. A Qatari businessman. Nope.

KOCIENIEWSKI: They're going everywhere. They're Willy Loman from "Death Of A Salesman." You know, they were liked, but not well-liked, right? They got their briefcase, and no one's going to take it.

MCEVERS: A lot of time the Kushners can't even get meetings. The megaproject is not looking good. But then...


PRESIDENT DONALD TRUMP: I am officially running...

KOCIENIEWSKI: 2015. All of a sudden...


TRUMP: ...For president of the United States.

KOCIENIEWSKI: ...Jared and Donald Trump begin their rise toward the White House.


TRUMP: Make our country great again.

KOCIENIEWSKI: And Jared is the right-hand man of Trump. And by late spring, it's clear that he's going to be the nominee. So all of a sudden it's a little different calculation. Like, do you want to just completely slam the door in these people's face or at least give them a certain amount of protocol?

MCEVERS: The Kushners start getting meetings and some real conversations about possible investments for the megaproject. Then Donald Trump wins the election. And during the transition last fall, the Kushners start making real progress with one foreign company.


UNIDENTIFIED REPORTER #2: Anbang Insurance...


UNIDENTIFIED REPORTER #4: Anbang now has...


MCEVERS: Anbang, the giant Chinese insurance company that has close ties to the country's political elite. So after all this interest from Anbang, Donald Trump is sworn in. Jared Kushner is officially appointed to the White House. And he divests his stakes from some of Kushner Companies and resigns as the chief executive. Then in March of this year, David and Caleb do some new reporting for Bloomberg on this Anbang deal.


UNIDENTIFIED REPORTER #6: Kushner Company stands to get $400 million in a cash payout.


UNIDENTIFIED REPORTER #7: In a real estate deal that many experts are calling unusually favorable...

MCEVERS: And after all this scrutiny the deal falls apart. Anbang pulls out. This is the most interesting thing that David and Caleb have found, that Jared Kushner's being in the White House has actually hurt the family business, not helped it.

MELBY: It helped in getting meetings. It helped get that foot in the door. But in the end, it didn't get him any checks.

MCEVERS: In other words, when you're in the White House, your business is going to get a lot more scrutiny, which can scare away investors and customers. We're seeing a similar thing happening with some of Donald Trump's businesses. Revenues at some of his golf courses are down. The Washington Post reports that charities and sports teams are canceling events and stays at Trump resorts like Mar-a-Lago. We should say business is booming at the Trump Hotel in D.C., where it has exceeded revenue projections.

As for 666 Fifth Avenue, that $1.2 billion mortgage comes due in February 2019. Bloomberg reporters David Kocieniewski and Caleb Melby did talk to the president of Kushner Companies, and he says the building still has a lot of potential investors. But David and Caleb have also reported that Vornado, that other major partner in 666, is signaling to brokers that a much less grand renovation than the megaproject is underway. Vornado declined to comment for this story. All this could mean the Kushners lose control of the building and that their overall business takes a big hit. Transcript provided by NPR, Copyright NPR.