Developers, as a rule, don’t mind making a splash in a big real estate market, but none would seek notoriety of the type achieved by Charles Kushner.
When the principal owner of the Kushner Companies returns to the Florham Park, N.J., firm on Sept. 5, after early release from a two-year prison sentence for campaign-finance and tax fraud violations, the company will be well-known, but not for its properties.
Kushner was also prosecuted for hiring a prostitute to seduce his brother-in-law and creating a videotape of the affair in an alleged effort to silence his sister, Esther, a criminal witness.
Kushner, who spent the last 100 days of his incarceration living in a Newark halfway house, was released Aug. 25, according to the Federal Bureau of Prisons inmate locator Web site. He plans to hit the ground running, said the company’s acting chairman, Alan Hammer.
“He intends to take a very active role in the management of the company,” added Kushner’s lawyer, Benjamin Brafman.
In June, the company put out feelers for bids on its $2 billion portfolio, then withdrew the offer. Hammer said the family withdrew its intent to sell the properties because of lack of housing stock in New Jersey. “To acquire 17,000 apartments again in New Jersey — that would be difficult,” said Hammer.
Although the company has reportedly done well in Kushner’s absence thanks to its commercial properties and rental apartments, other executives face criminal charges and make its prospects uncertain.
In April, Richard Stadtmauer, 47, who is another of Charles Kushner’s brothers-in-law, and three company accountants were indicted on federal tax charges. The U.S. Department of Justice charged the quartet with setting up a scheme to create false partnership tax returns for the Kushner Companies properties.
Company keeps growing
Though the Kushner Companies is a private company and its income cannot be verified, Brafman maintained Kushner’s absence did not affect company performance since he went to federal prison last May.
“The company has continued to grow in Kushner’s absence because it has a very strong foundation,” Brafman said.
Did people leave because of Kushner’s sentencing? “We have people coming and going all the time,” said Hammer. “That’s normal in any big firm.”
More than 60 percent of the company’s holdings, about five million square feet, is retail, industrial and office space. Those sectors have performed very well in the past two years, said Lloyd Lynford, CEO of Reis, a research firm covering real estate. He declined to comment specifically on the Kushner portfolio.
An ongoing escalation in property values likely played into Kushner’s decision to hang onto the company’s residential portfolio, even if prices may be headed down soon. The rental market has picked up and Kushner claims a 97.3 percent occupancy rate. Revenues are “up substantially,” said Hammer.
Hammer said the company has several development projects in the works, including the recent groundbreaking at Cedar Gate in Livingston, a 54-unit upscale community that will be completed in the next two and a half years.
The company is also building 2,300 units in Perth Amboy and 740 units in Asbury Park, as well as several smaller developments in New Jersey.
Hammer said the company is also building at a strong pace outside of New Jersey, with single-family homes going up in Pennsylvania and freestanding homes in Milford, Pa., and in the Poconos. In New York, it’s working on housing developments in Fishkill and Peekskill. Two other developments are approved for construction in Monmouth County, N.J., and in Barnegat, Lacey Township, Hammer said.
The past is past, say supporters
Despite the case’s sordid details, some people interviewed by The Real Deal had a sanguine attitude about Kushner’s crimes. Some ascribe political motivations to the messy business: New Jersey’s U.S. Attorney, Chris Christie, is a Republican, and Kushner is a major Democratic Party campaign donor. Some said privately that the case rested on flimsy evidence and may have been politically motivated.
It may rest on something even more basic — family squabbles. In quiet asides, industry observers said the federal case against Kushner mutated out of a 2001 civil lawsuit against him by his brother through the involvement of Murray Kushner’s civil lawyer Herbert J. Stern, who is a colleague and mentor of Christie’s.
“The Kushner prosecution was a combination of bad facts, family vindictiveness and the underbelly of New Jersey politics,” said one source close to the case.
Kushner referred to his “big mistake” prior to sentencing in May 2004, in which he made a plea for leniency to Judge Jose L. Linares and asked his family and the U.S. government for forgiveness.
“I could go on for pages to tell your honor about the acts that [my brother] Murray and even [my sister] Esther at Murray’s insistence have done to my own family but there is no point,” he wrote. “I chose not to because it is not helpful and whatever conduct was taken against me, however mean-spirited, does not excuse my actions.”
Whether having a convicted felon back at the helm of the company — think Martha Stewart — will hurt its performance remains to be seen, but one broker who spoke anonymously said the value of the company’s underlying real estate won’t be an issue.
“We’re talking about real assets that haven’t lost their value,” he said.