Was Kushner-China real estate deal ‘fake news’?

666_fifth_avenue_by_david_shankbone
This property at 666 Fifth Ave. is definitely worth billions, but how many billions depends on who you ask. The answer might be much higher if you’re asking Bloomberg reporters [David Shankbone]
Earlier this week, we shared a Bloomberg story about a huge real estate deal involving 666 Fifth Avenue, the skyscraper co-owned by Kushner Cos., the real estate firm established by the family of President Donald Trump’s Senior Adviser, and son-in-law, Jared Kushner. Jared Kushner had the firm purchase the building in 2007 in a heavily leveraged deal that almost bankrupted Kushner Cos. after the 2008 recession, although they were bailed out by a trust in exchange for a 49.7% stake in the holding.

The latest development was supposed to be the big payoff for Kushner Cos., a “sweetheart deal” that would net them $400 million as well as the opportunity to pay off $250 million in debt for only $50 million. Their partner was said to be mysterious Chinese firm Anbang Insurance Group, which was little-known in the United States until it purchased the Waldorf Astoria in 2015 for nearly $2 billion.

Here’s the thing: the deal might not happen. In fact, it might not have even been intended to happen.

First off, some editorial background. The afternoon after the Bloomberg story went up, Bloomberg’s editors changed the headline from “Kushners set to get $400 million from Chinese” to “Kushners may get $400 million,” indicating that no actual contracts had been signed and the news was still speculative. Anbang even released a cryptic statement saying that “The information about Anbang investment in 666 Fifth Avenue is not correct, there is no investment from Anbang for this deal.”

Now we have a new story cleverly headlined “At 666 Fifth, the devil’s in the details – and the details don’t add up” from Hiten Samtani and Konrad Putzier at The Real Deal.

Even back in the beginning of the week, it was clear that the building was being aggressively appraised. “The 41-story building is currently valued at $2.85 billion, and after Anbang converts the top floors to luxury condos, it says the entire complex will be worth $7.2 billion. By comparison, the most valuable office building in the United States currently is valued at $3.4 billion or less than half of what Anbang hopes their renovated purchase will be worth,” we wrote.

The comparison point in the last sentence is to the GM building, a.k.a. the building Donald Trump bought in the nineteen-nineties and the home of the ‘glass-box’ Apple Store. The GM Building is slightly larger, both in terms of square footage and height, which makes 666’s all-that-plus-a-few-billion valuation all the more puzzling. How good could Anbang’s renovations be to warrant that?

The speculation at the time was that Anbang might have less interested in the property itself than some of the perks that came with it, namely visa and residency consideration under the EB-5 program.

However, Samtani and Putzier question whether Anbang is sincerely interested in the property at all, especially now that we know that no formal commitments have been made. First, Anbang has a history of making eye-catchingly huge deals and then backing out, having revoked a $14 billion bid to buy Starwood Hotels & Resorts just last year.

The New York Times quoted a Chinese professor, Minxin Pei, who said that Anbang Chairman Wu Xiaohui is “purchasing political prestige” in the deal, but political clout is a funny kind of investment. You don’t need to actually spend your money to get it; a simple tease will do.

For instance, Wu lunched with Jared Kushner and his father Charles back in November to discuss the deal. That meeting made headlines when the public found out about it January, which is presumably exactly what Wu wanted. And he didn’t even have to spend a dollar at that point, though he did provide his guests with some very expensive wine.

If Wu gets something out of the deal, even if no deal happens, so does Kushner Cos.  Outlets like Bloomberg are reporting sky-high valuations of their property, which will help them get a good (but this time earthbound) deal from an actually interested investor.

Since the deal represents a conflict-of-interest, Jared Kushner should not be involved in it in any way, though he maintains significant (and unknown) holdings with Kushner Cos. Regardless of Jared’s direct involvement though, it’s clear that the family company he once helped run and the family campaign he also helped share one other vital virtue–the ability to manipulate the press.

03/17/2017 2:20 PM by David Kinzer

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