Brookfield Bails Out Kushner at 666 Fifth Ave. With 99-Year Ground Lease Deal
Kushner Cos. has been given a lifeline at 666 Fifth Ave.
Brookfield Asset Management has agreed to lease the troubled office tower for 99 years and is paying for the lease up front, rather than in the typical yearly ground rent, the Wall Street Journal reports. The financial terms of the deal were not made public, but the New York Times reports that Brookfield is paying $1.1B.
The news of the talks between Kushner and Brookfield emerged earlier this year. Back in June, there were reports that Brookfield was in negotiations to pump $700M in equity and $1B in new debt into the building in a joint venture agreement.
This arrangement, which Brookfield confirmed in a press release Friday, means the Kushner family will be able to pay much of the voluminous debt on the building, which is coming due in February.
Sources told the Times that Charles Kushner — who is back leading the firm after his son, Jared, left to become a senior adviser at the White House — managed to negotiate with lenders to pay off less than $1.4B that it owes. He reportedly admitted the building is not worth that figure.
Kushner will also be able to pay Vornado, which has owned 49.5% of the building, $120M in order to buy it out.
“With its ‘Main and Main’ location, direct transportation access and currently unrefined physical characteristics, 666 Fifth Ave. has the potential to be one of New York City’s most iconic and successful office properties,” Brookfield Property Chairman Ric Clark said in statement. “We are well placed to capitalize on that opportunity.”
Clark has previously said the company could approach 666 Fifth Ave. in the same way it did the repositioning at 5 Manhattan West, a 1960s office building on the Far West Side of Manhattan that is now fully leased to Amazon, Whole Foods and JPMorgan Chase. Brookfield reportedly plans to invest $600M to renovate 666 Fifth property.
The Kushners paid $1.8B for the building in 2007 when Jared served as CEO. Charles Kushner has since said the decision to buy it was based on “bad timing and bad judgment,” but said he pushed his son to make the deal.
Last year, Kushner was said to be in talks with China’s Anbag Insurance Group to come on as partner at 666 Fifth Ave., providing the capital for a $7.5B skyline-altering new development on the site.
The negotiations drew criticism, with some suggesting Jared Kushner could use his influential government position to help his family in the arrangement. The talks ultimately fell apart.
The news of the deal at 666 Fifth Ave. comes just days after Brookfield Property Partners — the real estate arm of BAM — announced it is planning to buy Forest City Realty Trust in an $11.4B deal. Brookfield has also recently bought GGP, the second-largest mall owner in the country.