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World’s most expensive tear-down. And the tangled web of the Kushners, the Kremlin and the Russian bank.

This is 666 Fifth Avenue, New York City, world’s most expensive tear-down.


This is what the Kushner family is planning to build in its place.  A gorgeous building with incredible views over Central Park and to contain condominiums selling for an incredible $6,000 per square foot.


I believe that 666 Fifth Avenue, which still stands, is in big trouble, with loans coming due and the Kushner family (a key owner of the building) likely to lose the entire building  — and more. I m guessing there are personal guarantees and other Kushner real estate as collateral.

Hence the urgency to raise money fast.

There are problems raising money. American banks are skittish about lending on this project — for a multitude of reasons, including the family’s association with Trump, Jared Kushner’s father’s jail time, the enormous price the family paid (over-paid) for the building.

The Kushners have tried to peddle loans to the Chinese but the Chinese pulled out…

All that’s left (at least to my thinking) is a Russian bank, with close Kremlin ties, motivated to remove the Obama sanctions imposed after Russia grabbed Crimea and invaded western parts of the Ukraine.

Jared Kushner has recently met with Russian banker, Sergey N. Gorkov, chairman of the Russian bank called Vnesheconombank, which has close connections with Vladimir Putin and The Kremlin. Acording to Wikipedia:

Vnesheconombank (VEB) is a Russian government-owned development bank, meant to provide funding for projects aimed at developing the Russian economy. It is not involved in retail banking activities. Translated to the English language, its name means “Bank of Foreign Economic Activity”, though it is commonly called the “Russian Development Bank”, and it refers to itself as “the state corporation Bank for Development and Foreign Economic Affairs”. From 2005 to 2006, both the assets and liabilities of the bank doubled from around $6 billion to $12 billion, and the income rose from $239 million to $301 million.  VEB has suffered massive losses in 2014-2015, leading to a 330 billion rubles government bailout in 2015, followed by 150 billion rubles in 2016 and a similar amount planned for 2017.

The Russian government uses VEB to support and develop the Russian economy and to manage Russian state debts and pension funds. It is a part in the government’s plan to diversify the Russian economy, and to do so receives funds directly from the federal state budget. The bank was instituted in 1922. The bank has been used to fund industrial and infrastructure projects, as well as off-budget spending on government projects such as the 2014 Sochi Winter Olympics. Another one of its unofficial functions has been to act as a rescue fund for failing businesses.

IN early April, Slate published an article headlined:

This Skyscraper Is a Perfect Illustration of the Trump Administration’s Intractable Conflicts of Interest

Here are excerpts from that piece:

On his 26th birthday in 2007, shortly before the first tremors of the financial crisis, Jared Kushner made a bet that looked wild even through the rose-tinted glasses of New York developers. Kushner Companies, which Jared had helped lead since his father, Charles, was sentenced to prison in 2005 for tax evasion and other crimes, bought the 41-story, aluminum-clad office building at 666 Fifth Ave. for $1.8 billion.

At the time it was the most expensive single building ever sold in the United States. It didn’t make money then. It certainly didn’t make money during the financial crisis. And it doesn’t make money now.

Its travails, from the heady moment of sale through a series of deals to assuage the initial miscalculation, have been the subject of fascination in the New York media. On top of that, for the past year, Kushner Companies has been seeking to assemble more than $7 billion in financing to convert the existing structure into a glass tower of condos, about twice the current height, designed by the late Zaha Hadid. (See photo above.)

 666 Fifth Ave. was supposed to be the crown jewel of the Kushner empire. Instead it’s a 41-story metaphor for the international real estate conflicts that have trailed Jared Kushner, and President Trump, to Washington. It’s a reminder that no matter how much Trump and Kushner make a show out of separating themselves from their real estate empires, the business and the fortunes of their families in New York are closely entwined with the highly scrutinized interactions of global diplomacy.

The Kushners were multifamily developers from New Jersey, and the purchase of 666 Fifth Ave. signaled their intentions in Manhattan — and the “debut” of young Jared, who not long before had been enrolled in a business and law degree program at New York University. “I love New York—it’s the greatest city in the world,” Kushner told the Real Deal after he closed the deal in 2007. “In this particular transaction, we bought really the center of the world, Fifth Avenue and 52nd Street. It doesn’t get any better than that.”

Ten years later, the 1957 building once again feels like it’s at the center of the world. In January, the New York Times reported that the Kushners were in talks with Anbang Insurance Group, a Chinese company with close ties to the Chinese government. In March, Bloomberg reported the details: Anbang would have paid the Kushners $400 million as part of a deal that valued the money-losing, soon-to-be-demolished building at $2.85 billion. The company would also have helped the Kushners procure a $4.1 billion construction loan for the redevelopment, about three times what experts say is typical for the area.

Those talks had lasted for nearly nine months before collapsing in late March. The cause, a Kushner spokesman told the New York Times, was that the speculation surrounding the deal had become a distraction.

You can see why. Jared Kushner divested from the building in January, but Kushner Companies is still a family business. And while the firm courts foreign banks and investors, Jared Kushner maintains a nebulous, wide-ranging role in the Oval Office. Kushner is considered a key figure in diplomatic relations with China — he orchestrated, in February, a conciliatory phone call between President Trump and Chinese President Xi Jinping. (Kushner also met in December with the Sergey Gorkov, the head of a Russian state–owned bank, in a meeting that was arranged by the Russian ambassador to the United States and not disclosed on Kushner’s application for security clearance.)

A transaction of that size would likely have been subject to review by the Committee on Foreign Investment in the United States, which has stalled Anbang’s efforts before. The deal for 666 Fifth Ave. also called for $850 million in financing from EB-5, a program that gives visas to Chinese investors in U.S. real estate projects and businesses. Designed for distressed areas, the program—which is also subject to federal oversight—has been used extensively for tony projects by the Trumps and the Kushners, among others.

Finally, observers believed the terms of the Anbang deal were unusually generous, raising the concern that the prospect of influence in Washington might have sweetened the terms for the Chinese firm. Anbang has a reputation for overpaying for New York real estate. But even so, the valuation of $2.85 billion, which seemed high, was more than three times what the property was supposed to be worth in 2011 and about 40 percent higher than its (overinflated) 2007 valuation, even though office rents in midtown are no higher now than they were then.

That deal is dead. But the Kushners find themselves in an increasingly desperate position.

Over the past decade, to stave off default, the Kushners have sold off bits and pieces of their prize asset: They sold the retail space, the most valuable part of the building, in 2010. The next year, they sold half of the building to Vornado, a publicly traded real estate trust. And they restructured the debt under terms that gave them a short-term reprieve but have lately become more onerous. An escalating series of fees kicked in last month, Bloomberg reported, and interest on the loan jumps in December. The rest of the $1.2 billion mortgage loan is due in less than two years.

Normally, an owner would then take out a larger loan based on the building’s increased value, pay off the old one, and carry on making money. But 666 Fifth Ave. doesn’t make money and hasn’t for at least two years. Interest rates are higher now. Banks are more conservative. More than a quarter of the office space is vacant. The building is likely worth less than what they paid for it—unless a foreign investor like Anbang decides to make an extremely optimistic assessment.

To make matters more complicated, Esquire reported this summer that Vornado CEO Steve Roth, who owns half the building, does not share the Kushners’ vision of luxury condos and believes the building is better off as office space.

Charles Kushner, by contrast, reportedly thinks the building’s true value is in the “dirt”—its choice midtown location. It is supposed to be the site of his dream building. But the price of that dream is far beyond the scope of anything that has ever been built in Manhattan.

The construction loan alone is unprecedented, experts said, and no bank in America would take that kind of risk. And so if Charles Kushner is confident he can put together a deal for an 80-story residential tower, with condos selling for $6,000 per square foot, and a megamall at the base—and he says he is—he’ll need to look for financing from abroad.

Which means his son’s job (in the White House) could be both an asset and an obstacle.

You can read the entire Slate article here.

Now to some questions.

Why is Harry Newton publishing this story?

Simple, it fascinates me. I’m heavily invested in real estate. I study the field daily.

Did the Kushners really wildly overpay for the building?

We’ll know the answer twenty years from now. New York City real estate — especially Manhattan real estate — is unique. First, there’s limited space. Manhattan is an island. Second, every oligarch and their uncle looking to move money out of Russia has bought $50 million to $100 million apartments for themselves (or their children). Third, Manhattan real estate over the long-term goes up. I bought my first apartment in New York for $55,000. I sold it for $4.3 million — around $800 a square foot.

Do I know for a fact that Jared Kushner is trying to borrow money from Vnesheconombank?

No I don’t. The White House says he was trying to establish a back channel for communications between The White House and the Kremlin. But there’s no evidence that the bank’s chairman has that role now, or ever. That’s been written in several places. I know Jared needs the money. And I know there are few places left to borrow it. Getting rid of the sanctions would be a powerful part of the deal to borrow several billion dollars from Russia.

The New York Times recently reported:

During the Trump administration’s first week, administration officials said they were considering an executive order to unilaterally lift the sanctions, which bar Americans from providing financing to and could limit borrowing from Mr. Gorkov’s bank, Vnesheconombank. Removing the sanctions would have greatly expanded the bank’s ability to do business in the United States.

As of June 2, 2017 (i.e. today) the sanctions have not been removed.

Marriage – 1

Wife: ‘What are you doing?’

Husband: Nothing.

Wife: ‘Nothing? You’ve been reading our marriage certificate for an hour.’

Husband: ‘I was looking for the expiration date.’

Marriage – 2

Wife : ‘Do you want dinner?’

Husband: ‘Sure! What are my choices?’

Wife: ‘Yes or no.’

Marriage – 3

Girl: ‘When we get married, I want to share all your worries, troubles and lighten your burden.’

Boy: ‘It’s very kind of you, darling, but I don’t have any worries or troubles.’

Girl: ‘Well that’s because we aren’t married yet.’

Marriage – 5

A newly married man asked his wife, ‘Would you have married me if my father hadn’t left me a fortune?’

‘Honey,’ the woman replied sweetly, ‘I’d have married you, NO MATTER WHO LEFT YOU A FORTUNE!’

Harry Newton, who’ll play tennis in the nice warm weather this weekend. Try not to fall down (or up) stairs this weekend. I have friends who’ve done both in the last couple of weeks. Oh yes, try not to spend all the money you’ve made recently in the stockmarket. Remember, it’s still on paper.

  • Yellow journalism at its worst

    I see you can dish it out but you can’t receive. Your censorship shows a lot about your character. You are a very thin skinned man.

  • Dman

    Harry you need to google Seth Rich.

    Liberals believe in man made global warming because: If you believe in NOTHING, then you’ll believe in ANYTHING.

    ……simple as that.