Kushners’ New York City Buildings Are Mostly Owned By Others

When Kushner Cos. joined Normandy Real Estate Partners to buy a 40-percent stake in two Manhattan office properties three years ago, most reports of the purchase gave Kushner top billing.

"Kushner, Normandy pick up downtown tech haven," declared the New York Post. Forbes estimated Kushner’s stake in the buildings at 80-90 Maiden Lane to be $75 million, indicating about one-third of the property.

Early this year, the pair sold half their stake to Meadow Partners in a deal that hasn’t been previously reported. The property tours and e-mail exchanges finalizing the transaction involved no Kushner representatives. The reason is simple: The Kushners actually owned less than 2 percent of the buildings.

A public appearance of big stakes, often at odds with a more modest reality, turns out to be typical of the Kushner portfolio, according to a Bloomberg analysis based on loan documents, agency ratings, deeds filed with New York and interviews with eight people familiar with the deals who asked not to be identified discussing private transactions.

Kushner Cos. has a stake in more than 60 buildings in New York City, including Greenwich Village apartments and tony Brooklyn offices. In 60 percent of the properties, the Kushners own less than half of each, the analysis shows. In nearly half, they own less than 20 percent. In some high-profile cases, such as Brooklyn’s Watchtower Building, their ownership is in the single digits.

There’s nothing unusual about being a minority partner that manages or develops properties for others. But Kushner Cos. often projects a different image. On its website, for example, the company lists 80 and 90 Maiden Lane as a “key asset” despite its tiny, non-controlling share. In public statements, it sometimes conflates its own stakes with those of its partners. A release from last year describes the firm as having done $7 billion in acquisitions since 2007, a figure that can only be reached by including their partners’ funds. A similar release describes “reach” of more than “20,000 multifamily apartments, as well as 12 million square feet of office.” Those figures require compilation of properties where Kushner Cos.’ ownership is marginal.

Bloomberg shared its data with Kushner Cos. President Laurent Morali two weeks ago. He declined to comment.

Ownership isn’t the only way to make money in real estate. For companies that act as a general partner, as Kushner Cos. often does, management and other fees are common, as are clauses that allow operators to capture outsize gains if they exceed investment targets.

Still, the story of Kushner Cos.’ New York City expansion seems to be one of soaring ambition, international deal-making, and savvy public relations. In some ways, it is a Trumpian tale: a young man arrives in Manhattan and, with a little “truthful hyperbole,” as Trump once phrased his style, crafts a success that is larger than life. In the gap between image and reality, however, lurks a frequent reliance on investors and an ongoing risk of political influence.

Jared Kushner and Ivanka Trump

Photographer: T.J. Kirkpatrick / Bloomberg

When Jared Kushner ascended to the White House, he presented a dazzling image: nattily dressed, publisher of a New York newspaper aimed at chummy high-flyers, husband to Ivanka Trump, and pupil to men of means like Fox News boss Rupert Murdoch.

Much of that allure grew from his high visibility in a real estate empire that was not as grand as advertised. The public image helped attract investors, who count on the expertise of Kushner Cos. to make complex transactions a success.

For several of them, Kushner’s swelling profile, coupled with discretion, was an asset—granting them access to New York’s soaring real estate market while shielding them from the spotlight that comes with big purchases.

The finding that the company is most often a junior owner heightens concern over conflicts-of-interest a year after Kushner entered the White House. As his family has hunted for investors overseas in countries as far-flung as China and Saudi Arabia, many inside and outside of government worry about the potential for quid-pro-quos—public policy driven by private business. In the partnerships where the Kushner Cos. have minor stakes, there’s pressure to make returns for the investors who put up most of the money.

Kushner Cos. says there is no interplay between politics and its business. Jared Kushner has divested from some assets and says he has no involvement in the business any more, although ethics experts say his divestment to close family members is still cause for concern.

"Jared Kushner had a very significant role in the company,” said Virginia Canter, a former ethics adviser to the International Monetary Fund who is now the executive branch ethics counsel with Citizens for Responsibility and Ethics in Washington. “He apparently did many of these deals and built relationships with these investors. That may give him a sense of responsibility that you really can’t just sever. And we don’t know what their priorities are. The investors may have their own agenda which could act as influences on him in an official capacity."

The Kushners began their march into New York a decade ago with a record-setting purchase, paying $1.8 billion for 666 Fifth Avenue, a Manhattan office tower along the world’s most expensive shopping corridor. They sold two-thirds of an apartment portfolio cobbled together over two decades to finance it (many of the remaining units were co-owned with others).

Jared Kushner described the move as “part of our strategic shift,” saying his father had started without much capital and built a great company, adding, “Now we’re looking to take his company to the next level.”

The financial crisis hit, and it became apparent that the Kushners had overpaid for 666 Fifth. Four years later, drowning in debt payments, they forked over half their ownership to stave off a bankruptcy. The deal allowed them to save face as 50.5 percent owners of their new crown jewel.

Kushner Cos.' East Village apartments

Photographer: Victor J. Blue / Bloomberg

Staying afloat had meant making huge interest payments but, rather than economizing, the company went on a buying spree, purchasing several walk-up apartments the following year. Kushner Cos. made waves as the biggest buyer of apartment properties below 96th Street with fewer than 100 units. Kushner, already a minor celebrity, now had his comings and goings tracked in tabloids and even trade publications like Real Estate Weekly, which dubbed him the “East Village buildings baron.”

But the vast majority of the money behind the purchases didn’t belong to Kushner or his family. Rather, it came from an obscure Israel-based company called Gaia Investments Corp. and related entities. Gaia has almost no public profile in New York real estate. Its principals have held roles in enterprises owned by the diamond-trading Steinmetz family, with close ties to Raz Steinmetz, the nephew of billionaire Beny Steinmetz.

A 2015 deal for 16 apartment buildings had a similar structure. Again, the Kushners were publicly credited with the acquisition, and again, most of the money belonged to someone else. The investors in this case, not previously reported, were C-III Capital Partners, a Texas-based asset manager run by Andrew Farkas, who also invested in Cadre, the real-estate startup co-founded by Jared and his brother Joshua Kushner.

From 2012 to 2015, Kushner Cos. purchased more than 40 Manhattan apartment buildings that they still own. In at least 80 percent of them, they’re minority partners to well-heeled investors.

In a way, this approach mirrors the way the Kushners operated in the past. Before moving to New York, they were known to "club" some deals, bringing in rich New Jersey friends to help them fund purchases. Those included the Gellert family, headed by patriarch George Gellert, a food importer and close friend of Charles Kushner.

“We’ve done many billions of dollars of business together, and everything is always on a handshake,” Charlie Kushner said of Gellert in a Cornell University profile. “He’s never read a legal document I’ve given him, and it’s the same with me.”

The clubbing continued as the Kushners made their way into New York. Gellert is a co-guarantor of the Kushners’ debts at 666 Fifth Avenue, loan documents show. The informal nature of clubbing further complicates attempts to understand the Kushners’ ownership of their New York properties. Even stakes that are nominally owned by Kushner Cos. aren’t necessarily owned by the Kushner family.

In determining the ownership stakes of Kushner Cos. for this article, Bloomberg left out those more informal partnership interests. If included, the numbers in some cases would be even starker.

There are some New York properties that the Kushners own outright. Bloomberg found no outside partners at properties including the downtown Puck Building as well as the first six floors of the former New York Times Building, a portfolio of five residential properties bought from Brooklyn Law School, and a rent-regulated apartment building in Brooklyn’s Williamsburg neighborhood. They’re roughly equal partners with Aby Rosen’s RFR in four Brooklyn office buildings.

Not included in that list is the family’s most iconic purchase since 666 Fifth: The Watchtower Building. The former headquarters of the Jehovah’s Witnesses in Brooklyn sold for an eye-popping $340 million and is slated to become tech-centric offices after a renovation. It’s about 95 percent owned by the Kushners’ partner CIM Group, a fiercely private Los Angeles-based fund manager. The two companies also bought a nearby parking lot for $345 million a year ago with plans to build a 21-story luxury property there. There, CIM is again far and away the dominant owner.

It was a few weeks after Donald Trump’s surprise Election victory when The New York Post, a frequent conduit of good news about Kushner Cos., reported that “Jared Kushner plans to invest $1B in outside business.”

The plan, Morali told the paper, was for the Kushner Credit Opportunity Fund to invest at least $200 million a year by issuing loans for projects owned by others. “We like the opportunity to deploy our capital in a different place in the capital stack,” he said at the time.

The funds are, once again, mostly owned by others, and Kushner Cos. administers them. It isn’t clear who is lending through the Kushner platform, which isn’t subject to many of the disclosure rules of banks. Only one deal has been announced this year, a $24.5 million loan for a redevelopment project in the South Bronx. In a note on the company website, Kushner Cos. says that it lent a total $250 million.

Looming over the entire portfolio of partially-owned properties is the tower that started it all: 666 Fifth Avenue. The Kushners have been unable to find a partner to buy their debt and carry out a plan it has coveted: knock the tower down, and build another twice as tall and far more luxurious in its place. Steve Roth, whose Vornado is their current partner in the building, has recently been blunt: that plan won’t happen.

That almost certainly means the Kushners and their partners will have to return to the negotiating table with lenders. Several people familiar with the company and with similar refinancing talks the Kushners underwent in 2011, say it’s possible that such talks could result in the Kushners losing some, or even all, of their share of the building.

Kushner Cos. has been defiant in the face of the worsening environment at the property, describing it as a small piece of a much broader portfolio that insulates the business and will allow it to sustain any setback.

That portfolio, however, is smaller than it appears. No matter the outcome, the biggest thing at stake at 666 Fifth might be pride: a crown jewel that represented a fresh start for the family, and still harkens to an era when they charted their own destiny.