The Real Deal National

Kushner closes $1.1B multifamily buy with financing from Berkadia

Arm of Warren Buffett’s Berkshire Hathaway lends nearly $800M on 6K-unit portfolio
By Rich Bockmann | May 23, 2019 03:59PM

Kushner Companies president Laurent Morali

Kushner Companies president Laurent Morali

Kushner Companies closed on its purchase of a $1.1 billion portfolio of Mid-Atlantic apartment buildings with financing from Warren Buffett’s commercial lending company, according to sources.

Berkadia Commercial Mortgage provided Kushner with nearly $800 million in debt to finance the purchase of the portfolio of 6,000 rental apartments in Maryland and Virginia from private-equity firm Lone Star Funds, sources said.

The deal closed yesterday.

A spokesperson for Kushner Companies declined to comment, and representatives for Berkadia could not be immediately reached.

Berkadia, the Manhattan-based lender owned by Buffett’s Berkshire Hathaway and Jefferies Financial Group, provided the 10-year debt through Freddie Mac.

The Mid-Atlantic apartment portfolio is the biggest acquisition for Kushner Companies since the firm purchased 666 Fifth Avenue for a record $1.8 billion in 2007. The company – led by Charles Kushner, Nicole Kushner Meyer and Laurent Morali – sold the ground lease on the troubled asset last year to Brookfield Asset Management, and has since ventured farther outside the high-stakes world of New York City real estate that came to be the company’s calling card over the past decade plus.

The family firm, which at one point owned as many as 30,000 multifamily units, is returning to its roots owning and managing apartments. In addition to the Lone Star deal, Kushner is working on developing a three-phase, $550 million apartment project in a Miami Opportunity Zone with 1,100 units.

Kushner has also bought multiple properties in an Opportunity Zone in New Jersey. A watchdog group earlier this year filed a complaint with the Department of Justice asking the department to investigate possible conflicts of interest that White House advisor Ivanka Trump – who is married to Kushner family scion Jared Kushner – may have by benefitting from the program. (Jared Kushner stepped down as CEO in January 2017, and does not hold a role in the company now.)

Kushner Companies has also been in hot water over some of its rental properties. Tenants in Kushner properties around Baltimore filed a federal lawsuit in 2017 accusing the company of charging improper fees and threatening eviction in order to force payment. A circuit judge last month reportedly denied the tenants’ request to certify for a class-action lawsuit.

In New York City, an investigation by City Councilmember Ritchie Torres reported in March that Kushner buildings in the East Village were operating with expired certificates of occupancy – meaning tenants are not legally allowed to live there. Torres acknowledged that this kind of violation is commonplace across the city and not specific to Kushner buildings. The landlord told The Real Deal at the time that it had inherited issues from previous owners and would work to correct anything further.

The landlord reportedly received a subpoena last year from the U.S. attorney’s office in Brooklyn seeking paperwork concerning its rent-regulated apartments. A Kushner representative at the time said the company was complying with the request.