Kushner, RFR Facing Repeat Dumbo Heights Nightmare

Kushner Companies and RFR narrowly avoided disaster at their four-building Dumbo portfolio in 2024. Two years later, they’ll be looking to pull off another magic trick.

The Dumbo Heights portfolio is back in special servicing, Crain’s reported, citing a Morningstar Credit Analytics report. The landlords are facing a $480 million mortgage and other debt set to come due in six months.

The landlords defaulted on a $180 million CMBS loan back in September 2023 and struggled to repay a B note of $145 million, as well as two mezzanine loans from Korean lenders for $80 million and $75 million. They sought a $435 million refinancing reported in April 2023, but came up short at the time.

But in May 2024, Kushner and RFR closed on a $480 million refinancing package to rescue the four-building portfolio, which includes 81 Prospect Street, 55 Prospect Street, 117 Adams Street and 77 Sands Street. That was said to be a four-year extension.

That’s not the full picture, though. The four-year extension was only guaranteed for two years, according to Morningstar, and a pair of one-year additions were possible, but no sure thing.

While the loan was current as of last month, according to Morningstar, alarm bells are sounding at the 750,000-square-foot portfolio. Last year, the vacancy rate rose from 16 percent to 28 percent. The net operating income of the portfolio, meanwhile, stood at $20 million last year, down from $30 million five years earlier.

The joint venture, which originally included Invesco, bought the 1.2-million-square-foot portfolio in 2013 from the Jehovah’s Witnesses for $375 million and sold a majority stake in one of its five buildings, 175 Pearl Street, in 2017.

In June 2024, Pearl Realty Management developer Jack Guttman purchased a stake in 81 Prospect Street for $33.8 million.

RFR declined to comment on the latest special servicing shift, while Kushner did not respond to multiple requests for comment from the publication.

— Holden Walter-Warner