Kushner's Real Estate Woes Have NOTHING To Do With His Russian Meetings! NOTHING AT ALL!
Photo Credit: Tablet Magazine
Way back before your Five Dollar Feminist began snarking on this fine Mommyblog, she was just another asshole in real estate. She was never a big macher like Jared Kushner, but still, the late '90s and early 2000s were a pretty good time to be a kulak. By 2005, however, things started to get weird. Banks were lending to absolutely anyone, and inexperienced investors were buying up properties assuming they'd be able to sell in a year for a big profit. One day your 5DF saw a dilapidated house sell to some poor sucker for 250% of what it had sold for only three years prior. It was that day that she knew it was time to GTFO!!!, since the bottom was about to fall out of the real estate market.
Around that time, Jared Kushner was trying to figure out how to trade up from Hoovervilles to fancy high-rises in Manhattan and New Jersey. His family had been in real estate forever, but somehow he looked at the train barreling toward the market and thought, "Now's the time to take the plunge!" Being rich and arrogant, Kushner was sure that the laws of gravity and financial cycles were no match for his prodigious business acumen. Born on third base, thought he hit a home run.
If this fine blog had a soundtrack, it would be here that the happy, major chords would shift into a sinister, minor key. As red-blooded Americans, we would know that something BAD was about to happen. But for today, you'll have to settle for a GIF.
Back to 2007...
So young Jared, who was all of 26, negotiated for his family's real estate company to buy 666 Fifth Avenue in New York for $1.8 billion. As reported in Bloomberg,
The original purchase in early 2007 was his grand entry into Manhattan -- taking the company his father built on suburban garden apartments into a future marked by more prestigious urban properties. Costing a then-record-setting $1.8 billion in early 2007, the building would later become a symbol for a period of irrational exuberance in U.S. real estate, where a belief in forever-climbing rents sent values soaring. The deal was financed with a $1.215 billion loan from Barclays Capital, which was divided and sold in commercial-mortgage bond offerings, data compiled by Bloomberg show.
The deal was a disaster from the beginning. The Real Deal pulled no punches describing how totally out-of-whack the financing was, even after the Kushners brought in Vornado Realty Trust as a partner in 2011.
Critics had slammed the deal for being overleveraged – cash flow at the time of the purchase covered only 65 percent of the debt service – and indeed, Kushner eventually needed to work out a deal with the lenders and bring in Vornado Realty Trust as a partner in order to hold onto the asset.
“The capital stack [for 666 Fifth],” said one luxury condo developer active in the market, “is insane.” The investor documents obtained by Bloomberg estimate that the completed redevelopment will be worth $7.2 billion. For the project to pencil out at those numbers – even assuming very rosy projections for the office and retail components – the partnership would have to be underwriting the condos at an average of up to $9,000 per square foot, the developer said. That’s a price not even the most ostentatious of the current crop of buildings has come close to – 432 Park Avenue, for example, was asking an average of $6,894 per square foot, according to an analysis by TRD in January 2014. And it’s had to offer significant discounts to buyers.
Just 24 Manhattan sales have closed at north of $7,000 per square foot between the second quarter of 2015 and the first quarter of 2017, according to data provided to TRD by appraisal firm Miller Samuel. That’s an average of three sales per month.
In plain English, just to pay off the interest on their loan, the Kushners need to convince buyers to pay 25% above the going market rate for their condos. And no one is buying.
But wait, there's MORE! Because, Wonder Boy Jared signed a deal that included escalating interest payments. Like every other idiot during the real estate bubble, Jared figured he'd be able to refinance later. Except that trick only works if prices continue to rise by 10-20% every year -- which they didn't because that bubble popped in 2007. If Jared had asked your 5DF, she could have warned him. But now he's up shit's creek, because no American bank will lend money to a project this far under water. By December, Kushner Company will be paying twice as much in interest as they did in 2011.
In sum, THESE PEOPLE NEED MONEY RIGHT FUCKING NOW. (Also, too they seem to have bought a bunch of brownfield sites in New York that will require billions to clean up and develop, but that's for another day.)
Last month the Kushners' sweetheart financing deal with the Chinese state bank Ahnbang fell through amid public outcry about nepotism. This might explain why Jared's sister Nicole Meyer was desperate enough to use her brother's White House position to shill for Chinese investor visas last month in Shanghai, a move that backfired spectacularly in a wave of bad publicity that forced the company to pull back from the promotion.
Now, we all know that Jared sold his stake in the family business to his relatives. On paper, he is more or less divested from the company. And if you think Jared Kushner is separated from the company he spent his entire life playing in, they the Kushners have a condo in Manhattan to sell you for $9,000 a square foot. Jared IS Kushner Company, and Kushner Company IS Jared. He steered them into this mess, and he's going to get them out.
SO ... when the New York Times causes your beloved Editrix to lose her shit by suggesting that Jared and his buddies Sergei Kislyak and Michael Flynn were having secret meetings to discuss strategies for Syria, WE ARE DISINCLINED TO BELIEVE IT. Because that smarmy little fucker needs money for his family's company, and he can't get it from anyone but Oleg the Oligarch.
Jared had a secret meeting at Trump Towers with Sergei Kislyak and Michael Flynn in December, while he was still head of his family business. Remember, Michael Flynn was the one caught promising his bestie Sergei that those pesky sanctions on Russia were going to disappear once Trump became the Tsar. Jared tried to establish a secret, off-the-record channel of communications with his Russian pals. That same month, Kushner also met with Putin's favorite kleptocrat financing institution, Vnesheconombank. BY SHEER COINCIDENCE, he forgot to list all these contacts on his SF-86 disclosure form to get his security clearance.
Can we all stop screwing around and admit that Jared Kushner is NOT on a quest to find the world's best blini recipe? Kushner was desperate for money, and he had the power to give the Russians access to the American market. How they squared that circle is for Robert Mueller to work out. But we see you, Boychik! Don't piss on our leg and tell us it's raining!
Wonkette would never piss on your leg like a common Donald Trump! But you should tip us anyway!
Liz Dye lives in Baltimore with her wonderful husband and a houseful of teenagers. When she isn't being mad about a thing on the internet, she's hiding in plain sight in the carpool line. She's the one wearing yoga pants glaring at her phone.