Kushner in Talks to Buy Back Vornado Stake in 666 Fifth Ave.

Updated on
  • Purchase is likely to require some additional financing
  • Vornado may be tempted, however, by the best deal it can get

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Kushner Cos. says it’s negotiating to buy the 49.5 percent of a debt-laden office tower on Manhattan’s Fifth Avenue that it doesn’t already own from partner Vornado Realty Trust

Christine Taylor, a spokeswoman for Kushner Cos., declined to elaborate on terms for either the purchase or a restructuring of the building’s debt. A Vornado representative didn’t immediately respond to a request for comment. The talks were first reported Tuesday by the Wall Street Journal.

Earlier this month, Vornado recategorized how it accounts for the property, 666 Fifth Ave., because “we do not intend to hold this asset on a long-term basis,” it said in an annual report. That language typically means the company plans to unload an asset within a year, a person familiar with Vornado’s thinking said at the time.

That means Vornado could be interested. The company bought its share for $80 million and the assumption of half the debt. It isn’t clear that there’s a buyer for that stake on the open market, and Kushner Cos., which has invested much more in the building, could be its best chance for recouping that investment while exiting a rocky partnership, a person familiar with the property said.

Financial Stress

The building has been the subject of financial stress. It has recently been 30 percent vacant, and it doesn’t make enough to cover interest payments on a $1.2 billion loan due in February 2019, a deadline that triggered a global hunt for investors by Kushner Cos. The company hoped to knock the building down and put up another, twice as tall and far more luxurious, in its place. It sought funds from investors in Saudi Arabia, Qatar, China, South Korea, Israel and France. No investors were announced for the plan, described by many as prohibitively expensive.

Any plan for Kushner Cos. to purchase Vornado’s stake would need to be greenlighted by lenders, who brought in Vornado as a co-owner during a 2011 refinancing agreement. The refinancing -- which extended the loan’s period and forgave a fraction of the debt -- was needed because Kushner had purchased the building for a record-setting $1.8 billion immediately before the financial crisis and found itself facing steep debt payments.

Some lenders are reticent to give Kushner Cos. a third chance at running the building, according to two people familiar with the property. In similar situations, it’s companies like Vornado -- well-capitalized and more staid -- that lenders turn to, the people said. Kushner would likely have to make a sign of good faith, such as paying down a portion of the debt, before earning an OK, they said.

One way around that would be for Kushner Cos. to find an investor or lender to help it buy out Vornado and the building’s present lenders. But the universe of potential takers is limited by the stressed financial situation at 666 Fifth, three people said.

Jared Kushner, a senior adviser to President Donald Trump, his father-in-law, is the former chief executive officer of Kushner Cos. To avoid conflicts of interest, he transferred some of the company’s assets to close family members upon joining the White House.

(Updates with property details throughout.)
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