From the New York website: The White House recently confirmed that Jared Kushner, President Trump’s son-in-law and perhaps his closest adviser, would hold on to some of his real estate assets. Kushner, who stepped down as head of Kushner Companies, has so far declined to provide a comprehensive list of what he will and will not keep. But a loan document reviewed by real estate attorneys for The Real Deal suggests that he is still tied up in at least one major piece of the Kushner Companies property empire: a retail condo at the base of the former New York Times building for which the firm paid $295 million.
Kushner Companies purchased the 250,000-square-foot retail condo at 229 West 43rd Street from Lev Leviev’s Africa Israel Investments in 2015. In October 2016, the firm refinanced the property with a $370 million loan package, consisting of a $285 million senior note from Deutsche bank and an $85 million mezzanine loan from SL Green Realty, loan documents show. That Deutsche loan was later assigned to a Deutsche subsidiary, German American Capital, which currently holds the debt. And according to a recent securities prospectus obtained from Trepp, Jared, along with his brother Joshua, is expected to continue as a guarantor of that loan, even though Jared has joined the Trump administration.
“It is currently anticipated that Jared Kushner will be replaced by Joshua Kushner as the manager of the indirect owner of the borrower,” the January prospectus reads “and the 229 West 43rd Street Retail Condo Loan documents will be amended to provide that both Jared Kushner and Joshua Kushner will be guarantors under the non-recourse carveout guaranty and will individually and collectively constitute key principals for purposes of such documents. However, such proposal is not final and may be subject to further change.”
The prospectus also shows that Jared had previously requested that he be replaced by Joshua as the new guarantor. Despite this, the sponsors of the CMBS offering “anticipate” both brothers will have to personally guarantee a special carveout of the loan agreement.
Attorneys who reviewed the prospectus language for TRD said that if the proposal held, Jared’s guarantor status would allow the Deutsche subsidiary to sue him for so-called “bad boy acts,” which depending on the terms of the guaranty can include things such as criminal actions committed by the property’s managers, attempts to declare bankruptcy, or even transactions made that require the consent of the lender but are done without that consent.
“Most loans are non-recourse, meaning the lender can only go after the collateral,” said one real estate attorney, speaking on condition of anonymity. “But the exception to the non-recourse nature of this loan is they can sue Jared Kushner or Joshua Kushner if one of them or the borrower or anyone else that’s involved with the loan does anything on the list of really bad things.”
This type of arrangement is very common, sources said. What is more unusual, of course, is that a guarantor of a $285 million loan works at the White House and advises the president on matters ranging from national security to financial regulation.
The 229 West 43rd Street loan language indicates that Jared has resigned from his management position in the operating company, consistent with his January announcement that he would resign. But the language says nothing about any change in Jared’s ownership in the property or in the borrowing entity.
“It’s likely that he’s still an owner because it’s just saying he’s being replaced as the manager,” said another attorney, requesting anonymity to comment on a specific company and landlord. “The manager is not necessarily an owner. A manager is more like a president or vice president or secretary.”
While it’s possible that lenders could still want Jared to guarantee the loan even if he no longer owned any of the underlying property, if Jared has no economic interest – such as an ownership stake – in 229 West 43rd Street, it might be difficult to enforce such a guaranty, attorneys said.
“You would think that if he’s staying on as a guarantor that he intends to have some interest, but there’s no way you can know that for sure,” one attorney said.
Attorneys also said it was not clear what it meant that Jared would remain a “key principal” for loan purposes.
A spokesperson for Jared and Kushner Companies declined to comment. Representatives for Deutsche Bank did not respond to a request for comment.
As TRD has reported, personal loan guarantees make it tricky for the president to disengage from his real estate assets, too. Non-recourse loan agreements sometimes come with a list of “prohibited transfers” which can prevent debtors such as Trump or Jared from selling significant stakes in a borrowing entity or giving up control of a borrowing entity.
In December, Deutsche Bank announced it was working on a restructuring of more than $300 million in Trump’s debt, in an effort to avoid potential conflicts of interest. The Guardian later reported that Deutsche had conducted a review of Deutsche accounts tied to Trump, Jared and Ivanka Trump for traces of ties to Russia, but ultimately came up with nothing.
Jared announced his divestment plan in January, declaring he would sell his stake in Kushner Companies’ trophy 666 Fifth Avenue and in more than 35 other assets, including some sales to his brother Joshua and to a trust controlled by his mother, Seryl. The White House later clarified that these 35 would not include all of Jared’s real estate holdings, meaning he will keep some of them, as ProPublica reported. In February, Jared announced he would recuse himself from policy discussions of low-income rental subsidies due to Kushner Companies’ 17-building apartment portfolio in Maryland, which includes properties that receive government money in the form of housing vouchers.
As for Trump, he has placed the majority of his New York assets in a revocable trust of which he is the exclusive beneficiary – an arrangement that many ethics experts and estate attorneys do not consider a real divestment.