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

TRD 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
270 Park Avenue (Google Maps; iStock)

City planning through a pandemic

City planning through a pandemic
(iStock)

UK home prices hit a low not seen since 2012

UK home prices hit a low not seen since 2012
San Francisco Supervisor Dean Preston and San Francisco Apartment Association Executive Director Janan New

Real estate groups challenge San Fran’s permanent ban on coronavirus-related evictions

Real estate groups challenge San Fran’s permanent ban on coronavirus-related evictions
Malls are hemorrhaging retailers left and right. What will happen with all that space? Some could be converted into apartments and condominiums. (iStock)

Retail-to-residential conversions are in cards at America’s doomed malls

Retail-to-residential conversions are in cards at America’s doomed malls
Photo illustration of Gov. Andrew Cuomo, Judge C. Stephen Hackeling and Chief Justice Lawerence Marks (Getty, iStock)

Judge rules evictions guidance unconstitutional, moratorium invalid

Judge rules evictions guidance unconstitutional, moratorium invalid
Related chairman Stephen Ross and Related Companies Portfolio CEO Richard O’Toole withBronx Terminal Market and Time Warner Center (Getty, Google Maps, Wikipedia)

Related lays out $200M debt settlement plan for Tel Aviv bondholders

Related lays out $200M debt settlement plan for Tel Aviv bondholders
Inside a $1.8B new development odyssey

Inside a $1.8B new development odyssey

Inside a $1.8B new development odyssey
The 30-year fixed-rate mortgage averaged 3.07 percent for the week ending July 2 (iStock)

Mortgage rates hit all-time low

Mortgage rates hit all-time low
arrow_forward_ios

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

Loading...