For Kushner Cos., WeWork could be a problem at Dumbo Heights

The Brooklyn office complex was already running tight margins for the developer before coronavirus struck and WeWork asked landlords for a break on rent, according to a report in Bloomberg

New York /
Apr.April 16, 2020 04:34 PM
Charlie Kushner and WeWork CEO Sandeep Mathrani with Dumbo Heights (Credit: Kushner via Sasha Maslov; Getty Images; Dumbo Heights)

Charlie Kushner and WeWork CEO Sandeep Mathrani with Dumbo Heights (Credit: Kushner via Sasha Maslov; Getty Images; Dumbo Heights)

The coronavirus crisis has ratcheted up the heat on Kushner Companies as it tries to cover the debt payments on a Brooklyn office complex, where one of its biggest tenants is WeWork.

Before the pandemic struck, Kushner Companies was already running tight margins at Dumbo Heights, a four-building property it bought out with RFR Holdings in 2016 for $600 million, according to Bloomberg.

Now, WeWork has been asking landlords to cut its rents by as much as 30 percent, potentially putting additional strain on Kushner Companies, Bloomberg reported. The co-working giant accounts for more than a fifth of rental income there.

Last year, the ratio of cash flow to debt on Dumbo Heights was tight enough that banks put it on a list of potentially troubled properties, allowing its lenders to review new leases and lease changes.

Most of the debt on the property is high-interest held by funds operated by South Korean insurance companies Shinhan Financial Group and DB Insurance Company, according to the Bloomberg report. Kushner Companies and Aby Rosen’s RFR Holdings took out $300 million in financing with the South Korean firms in 2018.

A Kushner Companies spokesperson called the Dumbo Heights complex “a huge success, and any suggestions to the contrary are absolutely false. Of course, rent collections during the pandemic will likely be similar as with all other landlords at this time. The properties are essentially 100% leased at rents far exceeding the initial underwriting at acquisition.” The spokesperson provided the statement to The Real Deal, the same one the company gave Bloomberg.

A representative for the Shinhan subsidiary that provided the loan also said that interest payments are up to date.

But ratings company S&P Global estimated that the loan-to-value ratio for all the debt on the property — including another $180 million issued by other lenders — was around 140 percent, which means its analysts consider the debt on Dumbo Heights to be more than what the property is worth. [Bloomberg] — Dennis Lynch


Related Articles

arrow_forward_ios
660 Fifth Avenue in Manhattan and Macquarie Group's Shemara Wikramanayake (Brookfield Properties, iStock, Macquarie Group, Illustration by Kevin Cifuentes for The Real Deal)
Brookfield signs first tenant at 660 Fifth Avenue
Brookfield signs first tenant at 660 Fifth Avenue
Fortis' Jonathan Landau with Olympia Dumbo (Fortis Property Group, Olympia Dumbo)
Fortis’ Olympia Dumbo on track to be Brooklyn’s most expensive building
Fortis’ Olympia Dumbo on track to be Brooklyn’s most expensive building
205 Water Street and 267 Warren Street (Streeteasy, Corcoran)
Dumbo penthouse asking $4.9M tops Brooklyn’s luxury contracts
Dumbo penthouse asking $4.9M tops Brooklyn’s luxury contracts
From left: Jared Kushner and Crown Prince Mohammed bin Salman (Getty Images, iStock/Photo Illustration by Steven Dilakian for The Real Deal)
Jared Kushner raised $2B from Saudi prince MBS
Jared Kushner raised $2B from Saudi prince MBS
(iStock, Illustration by Kevin Cifuentes for The Real Deal)
Office occupancy hits pandemic high
Office occupancy hits pandemic high
(iStock/Illustration by Steven Dilakian for The Real Deal)
Jobs report brings good news for real estate
Jobs report brings good news for real estate
Unit 16A at 30 Front Street (StreetEasy, 30 Front Street)
Condo at 30 Front Street leads Brooklyn contracts — again
Condo at 30 Front Street leads Brooklyn contracts — again
A photo illustration of 36 Grace Court in Brooklyn (iStock, StreetEasy)
Century-old townhome with Verrazzano view leads Brooklyn luxury market
Century-old townhome with Verrazzano view leads Brooklyn luxury market
arrow_forward_ios

The Deal's newsletters give you the latest scoops, fresh headlines, marketing data, and things to know within the industry.

Loading...