Kushner in negotiations to buy Vornado’s stake in 666 Fifth Avenue

Lenders would have to approve any deal

TRD New York /
Feb.February 27, 2018 12:00 PM

Charles Kushner, Steve Roth and 666 Fifth Avenue (Credit: Getty Images)

Kushner Companies is negotiating to buy Vornado Realty Trust’s 49.5 percent stake in its troubled office tower 666 Fifth Avenue, according to a new report.

A spokesperson for Kushner confirmed the talks to the Wall Street Journal, but declined to comment on either the purchase or a restructuring of the debt on the Midtown tower, which is losing money and is roughly 30 percent vacant. Vornado did not comment.

The real estate investment trust recently told investors in an annual report that it planned to sell its stake in the building, with experts saying any sale would likely occur within a year. Vornado, led by Steve Roth, bought its share for $80 million and the assumption on half the debt in 2011, a deal that temporarily bailed out Kushner.

A $1.2 billion loan is due in February 2019, and the building reportedly doesn’t yield enough revenue to cover interest payments, the Journal reported.

A person familiar with negotiations told the Journal that Kushner’s plan to purchase Vornado’s minority stake in 666 Fifth would mean a refinancing of the debt on the building. If Kushner were to purchase Vornado’s stake, the deal would need to be approved by lenders, Bloomberg reported.

Kushner, which bought the building for a record $1.8 billion before the financial crisis, has trotted the globe seeking funds to recapitalize the property and embark on an unprecedented, multibillion-dollar repositioning. That plan would feature a tear-down of the current building, with a new tower featuring condominiums, retail and a hotel. Vornado called the $7.5 billion plan, which would have required Kushner to buy out the REIT, “likely not feasible.”

Sources told Bloomberg on Tuesday that some lenders are reticent to give Kushner another shot at turning the building around, adding that Kushner would likely have to pay down a portion of the debt before receiving any approval.

A spokesperson for Kushner told the Journal that 666 Fifth has had a negligible impact on the company’s financial health. The spokesperson said Kushner has written down the value of its stake in the building to less than 5 percent of the family’s net worth.

Jared Kushner, senior adviser to the President Trump, left as CEO of the family firm in January. His father Charlie and Lauren Morali run the company.

When contacted by The Real Deal, a Kushner spokesperson declined to comment.

Earlier this month, TRD examined the major hurdles Vornado would need to clear in selling its stake in the property, namely the high vacancy rate and finding a buyer who wouldn’t be deterred by the political complications. [WSJ and Bloomberg]James Kleimann

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