The Real Deal New York

Paydirt: EB-5 was Kushner’s kryptonite

The industry news you need to know to start your week, and what’s ahead
By Hiten Samtani | May 30, 2017 09:15AM

Clockwise from top left: Jared Kushner, Donald Trump (credit: Getty Images), a condo offering plan and Paul Massey (photo illustration by Lexi Pilgrim)

It took a real estate gaffe for the developer-in-chief to finally sour on his princeling.

Jared Kushner TRData LogoTINY, dubbed “The Secretary of Everything” for his vast and amorphous White House task list, got himself in trouble with President Trump over a stunt Kushner Companies and its associates pulled earlier this month with One Journal Square, according to a new report in the New York Times. The offense? Invoking Trump’s name and Jared’s influence over him to entice Chinese investors into bankrolling the Jersey City project through the EB-5 program.

Trump was livid, according to the newspaper, and made his annoyance clear during meetings in the West Wing. The backlash from the One Journal Square episode, coupled with the heat from the Comey firing (which Jared supported) and the bombshell last week that Jared tried to set up a back-channel with the Russians, has somewhat eroded Jared’s aura of invulnerability at the White House. Every six months, he will review whether to return to “private life in New York,” according to the Times. A life, presumably, that would include a role at Kushner Companies.

But let’s play a thought experiment and assume Jared makes a premature and less-than-triumphant return to New York real estate by Christmas. Does he come back a darling, with peers here seeing him as the closest thing to an Oval Office hotline? Or does he become a pariah, someone who hitched his wagon to Trump’s, offending many in the process, but couldn’t achieve much of note in his brief tenure?

“You mess with the skunk, you get the stink,” one New York political insider told TRD’s Kathy Clarke in September. “And the Trump stink is lasting.” That was, of course, before Trump’s election triumph, and since then many of the industry’s top dogs have fallen in line, at least publicly, with POTUS. It’s more likely that if Jared returns, he gets right back into business. And though it’s not quite tackling Middle East peace or “making government more efficient,” he’ll have an empire to keep him busy.

How the posh have fallen: In two years, the average asking price of a new development condo in Manhattan has fallen nearly $2 million, according to TRD’s analysis of new condo plans filed with the AG. In the first quarter, a new unit coming to market was asking $3.1 million on average, continuing a downward trend from a dizzying average price of nearly $5 million in 2015.

“There’s no forgiveness for overpriced apartments in this market,” Corcoran’s Pam Liebman said at TRD’s forum earlier this month.

Developers are building smaller and less glitzy, focusing on moving product rather than trying to hold out for high-end buyers. Consider that the average sales price of a Manhattan condo last year was $2.2 million, and the move seems likely to open up the new construction market to a wider pool of buyers.

Massey revives 421a: Many in the real estate community see Mayor de Blasio as some hybrid of a gadfly and a train wreck, and never miss a moment to take a crack at him. (For some of the more memorable zingers, check out TRD’s developer panel from earlier this month.) Hizzoner’s smorgasbord of scandals and seeming inability to stand behind his people make him an easy target, and his main rival in the upcoming election, Paul Massey, has certainly capitalized on this. So far, the Cushman exec’s talking points have largely consisted of creative potshots at the mayor — my favorite being (D-Corruption) — and promises that he’d do better. But last week, Massey made a major blunder of his own, one that is particularly embarrassing for a real estate man. He vowed on Twitter to restore the 421a tax credit. This was repeated on his campaign website, where he pledged he would “on day one, reach out to the Governor and Legislature to restore the 421a tax credit for New York City so that we can start building housing again.”

Problem is, 421a has been back since April, and in a very public way. Massey’s team tried to do some damage control, saying that his tweet meant to convey that he wants to revive the tax break for more than five years and cut a deal that is better for the outer boroughs. After TRD’s story, the language on his website was updated to “improve and extend.” But the spin and clean-up doesn’t erase the underlying issue: Paul Massey, a universally liked and respected figure in the industry, doesn’t have a substantial policy platform and has struggled with messaging. He’ll need more than “I am not de Blasio” to win this.

Bonus: TRD’s Rich Bockmann has a fun read on NDAs, the dreaded rider to the majority of commercial real estate deals in the city. They can range from boilerplate “don’t share this unless necessary for the deal” agreements to draconian ones, which spell out specific penalties if they’re violated. “In general, these agreements are the bane of the industry’s existence,” Studley’s Woody Heller told Bockmann. “They don’t really serve a function, yet we all use them. They’re a pain in the neck.”

(Paydirt is a weekly column that riffs on the biggest NYC real estate news of the moment, providing analysis and historical context on the deals and players that make this town tick. Read more from Paydirt here.)