At age 33, real estate wunderkind Jared Kushner has reached an unexpected point in his life. The sandy-haired mogul and New York Observer publisher now presides over a New York City property portfolio that’s the envy of his peers, comprised of trophy office towers, a multi-family empire in the East Village and a waterfront site in Dumbo widely-imagined as a future technology and creative hub.
“When I look at where I am today and back at the plan I had for my life growing up, I’d say that things could not have gone less according to plan,” Kushner told The Real Deal last month from his corner office at the crown jewel of his portfolio, 666 Fifth Avenue. “I’ve learned in life that it’s good to be comfortable with uncertainty.”
Kushner said he never imagined himself at the helm of his family company so soon — or maybe at all. And there were many observers who raised eyebrows when the baby-faced Kushner was thrust into a leadership role at the firm when his father, Charles, the former CEO of Kushner Companies, was arrested on charges of tax evasion, illegal campaign donations and witness tampering in 2004.
Jared, Charles Kushner’s oldest son, had interned at real estate giants like SL Green Realty and Square Mile Capital and had a few Boston multi-family deals under his belt, but was still in his early 20s and relatively inexperienced. A few months earlier, he had been interning at the Manhattan District Attorney’s office.
Now, he was making decisions about a portfolio of office, retail, industrial and residential properties totaling 5 million square feet.
A steady stream of New York City deals closed by Kushner in the last several years has largely quieted his detractors and earned him credibility with prospective institutional partners.
The company was one of the most active buyers of multi-family apartments in the country between 2010 and 2013, buying more than 12,000 units, including 60 walk-up buildings in Manhattan. Adding to its commercial portfolio, the company also snapped up two office buildings in 2013, one in partnership with Extell Development Company, the other with private equity firm CIM. And Kushner sold an office building at 200 Lafayette Street in September for $150 million after purchasing it for just $50 million with CIM in 2012.
In perhaps its most high-profile deal last year, Kushner Companies partnered with Aby Rosen’s RFR Holding to buy a $375 million six-building complex in Dumbo from the Jehovah’s Witnesses. The two companies, in conjunction with Asher Abehsera’s LIVWRK, are planning on transforming the buildings into an office hub for tech and creative firms.
Kushner’s active deal making and partnerships with established players have propelled him out of his father’s shadow for the first time, sources said.
His 2009 marriage to Ivanka Trump, daughter of billionaire real estate magnate and TV personality Donald Trump, as well as his ownership of the New York Observer, has only added to his public standing.
“Most people thought he’d do a deal or two here and there, but all of a sudden he’s doing a lot more,” said Robert Ivanhoe, head of the real estate practice at law firm Greenberg Traurig, who worked with Kushner on the acquisition of the Dumbo portfolio. “I think that was a bit of a surprise [to the industry.]”
Kushner grew up in Livingston, N.J., where his father’s largely New Jersey-centric company was based. He spent weekends and summers scoping out garden apartment communities with his dad and worked on construction sites, painting and leasing apartments for the family company.
His grandfather Joseph Kushner, a Holocaust survivor, was the first in the family to enter the real estate business. Joseph worked construction on several sites in New York before his fear of heights took him to New Jersey, where the buildings were shorter.
Kushner, not surprisingly, had a privileged upbringing, attending the Frisch School, a private Yeshiva day school in Paramus. While he was applying to colleges, his dad reportedly pledged $2.5 million to Harvard University, where Kushner eventually enrolled and graduated with honors.
Kushner’s brother Joshua is now the founder of technology venture capital firm Thrive Capital, which invested in — among other companies — the wildly successful photo app Instagram and the crowdfunding website Kickstarter. (Jared is an investor in Thrive.)
As an intern at SL Green when he was 20 and still at Harvard, Kushner was taken under CEO Marc Holliday’s wing.
“He basically sat down with me and said, ‘these are the eight things you need to know about real estate. Let’s go over one every week for the next eight Fridays,’” Kushner said.
Holliday said, “Jared stands out.”
“Even at that age, he was different,” Holliday said. “He definitely warranted more attention. You could see the ambition in his eyes and that he was going places.”
While in college, Kushner began acquiring small multi-family buildings in Somerville, Mass. On his first deal, his father put up half the cash and Kushner raised the remainder from family friends. “I’d be in class, and I’d get a call about a broken toilet and have to go work with the super at one of my buildings,” Kushner recalled.
“The funniest part was, I didn’t have a car, so I’d have my contractor, who was this six-foot-five Guatemalan guy named Nelson, pick me up at my dorm in his Dodge Ram pickup truck and take me to the jobs,” he said. “We would go in, and I’d be saying to him, ‘Why is this taking so long? It’s gotta cost less. We’ve got to do this better.’ Then, I’d have to say, ‘Can I have a ride home now?’ ”
Stepping in early
Kushner was forced into his role at Kushner Companies prematurely when his father was arrested. Charles was eventually convicted of the above mentioned charges. The witness tampering charge stemmed from hiring a prostitute to seduce his brother-in-law and capture it on videotape in an act of retaliation against his sister, a witness for the prosecution.
Alan Hammer, an attorney, acted as CEO of Kushner Companies for three years after Charles went to prison and before the younger Kushner officially took over that job in 2008. In those three years, Hammer and other top executives at the company helped Kushner juggle his company role with getting an MBA and law degree at New York University and acting as publisher of the Observer newspaper, which he bought for $10 million in 2006. At the time his dad went to prison, Kushner had been interning at the Manhattan D.A.’s office, where he’d dreamt of becoming a prosecutor.
“My dad’s arrest made me realize I didn’t want to be a prosecutor anymore,” Kushner explained. “The law is so nuanced. If you’re convicting murderers, it’s one thing. It’s often fairly clear. When you get into things like white-collar crime, there are often a lot of nuances. Seeing my father’s situation, I felt what happened was obviously unjust in terms of the way they pursued him. I just never wanted to be on the other side of that and cause pain to the families I was doing that to, whether right or wrong. The moral weight of that was probably a bit more than I could carry.”
Kushner’s appointment as CEO came a year after the company’s biggest-ever deal, the $1.8 billion acquisition of 666 Fifth Avenue. The firm had bought the 1.45-million-square-foot office tower at the height of the market, and then watched as its value plummeted when the recession hit. By 2008, the cash flow was only covering 69 percent of the building’s debt service. Lenders were banging on Kushner’s door.
“He had to grow up really fast,” Mike Fascitelli, the former CEO of Vornado Realty Trust, which eventually came in as a partner on the building, told TRD. “The five years [following his father’s arrest] were like dog years. He might have been young going in, but he came out an adult.”
To rescue the building from impending default, Kushner employed an ambitious strategy: he bifurcated the building’s retail and office components and sold a 49 percent stake in the retail to the Carlyle Group and Crown Acquisitions for $525 million.
Then in 2011, he brought in Vornado to help refinance the rest of the building and restructure the debt. Vornado would take a 49.5 percent stake in the office portion of the property.
The retail has since been sold for a second time.
In 2011, Kushner, Carlyle and Crown sold a piece of it to Inditex Group, parent of Spanish fashion retailer Zara, for $324 million. Vornado acquired the remainder in 2012 for $707 million.
Fascitelli told TRD that while selling the controlling stake in the retail to Crown and Carlyle “may not have been the best move in the long-term,” it was the only logical choice Kushner could have made at the time. It allowed him to keep the building on the company’s books.
“It was the right investment, we just had the wrong capital structure at the wrong time,” Kushner said. “I spent a lot of time on it and left a lot of blood on the floor but I look at the lessons I learned on that deal, who I met through it, and I think that I’ll look back 20 years from now and think it was one of the best deals I ever did.”
Part of the reason Kushner was dealing with the 666 Fifth fallout during this time was because when his father was released from his year-long prison stint in 2006, he didn’t come back in as CEO.
Sources noted it would have been difficult for the business and financial community to accept his father back into the fray. Barclays and UBS, for example, had reportedly agreed to lend the company $1.6 billion for the Fifth Avenue acquisition in 2007 on the condition that Charles would not be the company face.
“It’s interesting to watch when the baton is passed from generation to generation,” Ivanhoe said. “I’ve seen a lot of people fail because they try to be big shots and feel they have to establish their authority. That’s not Jared. He’s never conducted himself with any kind of arrogance. When people see others born into privilege, they expect them to be entitled. Jared’s demeanor undercuts that.”
A new era
In personality and investment style, Kushner’s cut from a different cloth than his father, industry insiders said. While Charles can be jovial and sincere, he’s prone to outbursts of temper. Ivanhoe said it was a “personality of extremes.” Jared, on the flip side, could not be more “straight down the middle.”
“I’ve never seen any kind of erratic behavior from him,” Ivanhoe said.
“Everybody likes him and his lovely wife,” added Extell CEO Gary Barnett.
Kushner’s strategy for expanding the company portfolio also differs from his father’s. While under Charles, the firm’s focus was primarily on New Jersey, Jared turned his attention towards New York City, where about 50 percent of the company’s assets are now located. Kushner told TRD that his father’s involvement in company decisions varies deal-by-deal and that he’s currently focused on design elements for a 447-unit rental tower the company is developing in Jersey City, which will break ground later this year.
And while Charles largely shied away from taking on institutional partners, his son has courted them, and has partnered with firms like CIM, Invesco and OakTree Capital.
The firm has been in growth mode since Jared came on: Of its $7 billion in assets, $3.5 billion has been acquired after 2008, Kushner said. The firm now has 750 employees, up from just 80 in 2008. Key hires include Larry Lipton, the former CFO of Related Companies’ property management business, Patrick Crosetto, from Vornado, and Laurent Morali of French financial firm Calyon Securities.
In the East Village, Kushner has been on an acquisition binge, snapping up 60 buildings since 2012.
Some industry pros have accused him of overpaying for multi-family product, but Kushner said he’s happy to be the end buyer after other companies have renovated the properties and rolled over rent-regulated tenants.
“I don’t need every deal to be a value-add deal,” he said. “I could put my money in the bank and get zero, or I could put it here and get 4 or 5 percent over time. The value of these buildings will do nothing but go up. It’s a desirable, supply-constrained market. When you fast-forward 10 or 20 years, what’s better than that?”
Kushner said he was initially losing money on the management of his East Village portfolio, but once he began buying more buildings, the numbers started penciling out.
Some industry observers said Kushner’s strategy makes sense.
Arik Lifschitz, head of multi-family investment company DSA Realty, said creating an infrastructure and hiring a team to manage Kushner’s East Village portfolio was an “economy of scale.”
“Once you have a sizable portfolio in a given area, it makes it much easier to manage what you have, and manage more efficiently future purchases in that area,” said Lifschitz, who has significant holdings on the Lower East Side.
Kushner is also adding to his multi-family empire outside of Manhattan.
In December, the firm acquired a 46-unit rental at 50 North 1st Street in Williamsburg for $33.8 million from Property Markets Group and Largo Investments.
Meanwhile, on the commercial side, Kushner has shown a knack for buying vacant office buildings, renovating them and leasing them to large tenants. The strategy paid off big time at 200 Lafayette Street, where he installed JCPenney as a tenant before selling the building to General Growth Properties.
And at 80 West End Avenue, a former tank manufacturing facility, Kushner and Barnett bought the vacant building last summer for $84 million, and in December the nonprofit United Cerebral Palsy of New York City inked a deal for 218,000 square feet. The 30-year, triple-net lease is worth approximately $400 million over its full term, a source close to the deal told TRD.
On the residential front, Kushner is primarily focused on rentals, but he’s also completing a condo conversion on the top floors of the famed Puck Building, at 295 Lafayette Street. The first of five units reportedly went into contract for the full asking price of $27.5 million in December.
Kushner told TRD that he and his wife plan to move into the building this year with their two children, Arabella and Joseph. But Trump said they’re still discussing staying in their current home, at Trump Park Avenue, which is closer to their offices and where their children will eventually attend school.
There’s little separation, it seems, between the couple’s work and personal lives. In between time with their children, Trump said the couple often walks construction sites and talks shop.
“At 10 p.m. on a Saturday night, we’ll be walking through units at the Puck Building that are under construction because he’s showing me their level of finish,” Trump said. “Jared is able to transition seamlessly from a call about a deal he’s working on to building magnetic tiles with Arabella.”
One of Kushner’s best traits, according to his wife: his sense of calm in the face of a crisis. She witnessed that when he was dealing with the collapse of the company’s Fifth Avenue deal.
“Jared does not show stress, almost to the point where you might think he doesn’t experience it—but that wouldn’t be human,” she said. “He doesn’t react in an emotional way to circumstances; he’s thinking about solutions. I’m in awe of him in that regard.”
Residential broker Raphael De Niro of Douglas Elliman, who is marketing the penthouses at the Puck Building alongside colleague Dennis Mangone, said Kushner has been “passionate” and “hands-on” throughout the designing and marketing phases.
“Most developers supervise from 30,000 feet and have a couple of underlings that do all the work. Jared is much more hands-on,” he said. “He views himself as the steward of the Puck legacy.”
Betting on the boroughs
Kushner’s biggest deal of 2013 was a $375 million Dumbo acquisition.
The properties will be renovated and converted into a tech-office hub, with a residential component. The office buildings will accommodate up to 5,000 bikes and will have outdoor roof space.
LIVWRK’s Abehsera, a former executive with Dumbo-based development company Two Trees, orchestrated the partnership between Kushner and RFR and brought in institutional equity partner Invesco.
“Jared connects very well to the fund and start-up and tech and creative worlds,” Abehsera said. “He’s a landlord that’s very palatable to those types of tenants. I saw him as someone who could really add a lot of value.”
The endeavor also aligns with another of Kushner’s projects, WiredNYC, a rating platform he worked on with the city that evaluates the broadband connectivity and infrastructure of office buildings and establishes a new Internet connectivity benchmark.
Ivanhoe said that despite the involvement of Invesco and RFR, Kushner has been largely leading the exchange of ideas for the project, and has attended every meeting.
Gregg Popkin, COO at RFR, said Kushner “has got a quiet demeanor, but he’s got a very strong bite.”
“He’s contemplatively assertive,” Popkin said. “He thinks carefully, and then has no hesitation about expressing an opinion.”
Meanwhile, Kushner said he doesn’t “get that emotional” about deals.
“Somebody screws me? Ok, I won’t do business with them again, but I won’t say, ‘How dare you?’ I’ll just say, ‘Okay, I don’t need to do business with them,’ ” he said.
Sources said the significance of the Dumbo deal for Kushner cannot be overstated because it illustrates that institutional players are keen to work with him, despite his dad’s past legal woes.
“That’s a big statement given what befell Charlie,” Ivanhoe said. “I would not have thought that would have happened as quickly or as easily.”
When helping Invesco do its due diligence on RFR and Kushner, Ivanhoe said he received questions from the investment firm about Charles Kushner’s jail time.
“I got a lot of questions about the whole Charlie situation, but I was able to tell them, ‘Jared’s as clean as a whistle,’ ” he said.
“My father made a mistake and he paid a big price for it, but he’s my father,” Kushner said. “He’s given me everything I have in terms of the skills and the training and taught me about being a man. I feel extremely lucky to have him in my life.”
CORRECTION: In an earlier version of this story, The Real Deal incorrectly stated one of the charges that Charles Kushner had been arrested for. He was arrested on charges of tax evasion, illegal campaign donations and witness tampering.