Like Father Like Son (In Law): Ivanka Trump's Husband About To Experience His First Real Estate Default

Tyler Durden's picture

Over two years ago, when discussing the absolutely top ticked purchase of one 666 Fifth Avenue by under-30 real estate mogul extraordinaire, NY Observer owner and now Donald Trump son in law, Jared Kushner, we said: "Looks like the commercial mortgage apocalypse is about to claim its next victim, this time in the form of the appropriately numbered 666 Fifth Avenue building, home to such previously flourishing tenants as Citi Private Wealth Management...the building's DSCR
has fallen to an abysmal 0.69. Even when taking into account
the $98 million (or much less) reserve fund the building has set aside
to cover rent shortfalls, one can assume it won't be long before the 666
insignia again prominently graces the roof, especially since it would
have to replace a laughable Citi sign." Ah, the good old days of 2009, when news mattered, data actually flowed through models, hedge funds traded on constant inside information, markets actually dipped, POMO was a clown, and central planning was merely a drop of unrecycled ink in Ben Shalom Mugabe's toner cartridge. But we digress. As usual Zero Hedge may have been just a little bit ahead of the curve, though still better late in our prediction than never. With little surprise we read in the WSJ, that after an artificial delay of over 2 years, the inevitable is about to catch up with reality, confirming that no amount of Vissarionovichian market manipulation can make up for the complete absence of cash flows. "As of March, the aluminum-panel-clad skyscraper was about $3.5 million-a-month short on debt
service, say people familiar with the matter. Only $10 million remained in a
reserve fund used to service the property's $1.22 billion mortgage, which is
tied to the office portion of the building. Its revenues are only one-fourth
the amount forecast in 2007." Next steps: technical and/or full blown default.

More from the WSJ, which describes what in a normal world would have happened lliterally years ago:

Mr. Kushner is now facing off against a set of lenders that include private-equity heavyweights Starwood Capital Group and Colony Capital LLC. Talks have accelerated recently, with Mr. Kushner offering to put in tens of millions of dollars to recapitalize the property in exchange for some form of relief, people familiar with discussions said.

The Kushner family appears to have significant financial resources, and lenders don't expect other backers, including Mr. Trump, to come to Mr. Kushner's aid.

"The Kushners are ready and willing to invest more money into the property as soon as they can come to mutually satisfactory terms with the servicing agent," a spokesman for Mr. Kushner said.

Talks are fluid, but several people familiar with the talks say that outlines of a deal could be agreed upon within weeks.

New to the New York office market, Mr. Kushner, then 26, took the lead in buying 666 Fifth Ave., at 52nd Street, from landlord Tishman Speyer. The price—paid for with $1.75 billion in debt and $50 million in equity and $100 million in reserves from the Kushner family and family business partner George Gellert—assumed that a string of below-market expiring office leases would be replaced with companies paying far higher prices, according to loan documents. They also planned to sell a stake in the retail portion of the building and paid off junior debt.

The retail sale turned out well. In 2008, Mr. Kushner sold a controlling 49% stake in the space in a deal that valued it at $525 million. Earlier this month, Spain-based Inditex Group agreed to buy a portion of that retail at a significantly higher price, valuing it at about $8,300 a foot. It used to house an NBA store and will soon house the clothing brand Uniqlo's flagship store.

Once projected to take in nearly $120 million in annual office rent, the 39-story building will post income of close to $30 million this year, down from $60.1 million in 2007, people familiar with the rents said.

But the higher office rents haven't materialized and vacancies have increased. If Mr. Kushner were to miss a payment after the fund is depleted, he would be in default and representatives of the lenders could eventually attempt to seize the building if a deal isn't worked out, people involved with the talks said.

The commentary from the future presidential candidate now is oddly comparable to that uttered by young Master Kushner back then. Compare: "He is a very smart young man," Mr. Trump said of Mr. Kushner in an interview Tuesday. "I think it will come out well for him and everybody" (as of March 29, 2011) with: "We are well capitalized and conservative and feel confident that we
will do well
with this over time.” Kushner said (as of January 15, 2009). At least one has been proven wrong. Of course, sooner or later, everyone else who bets on the fortuitous alignment of the stars (ahem Gideon Bernanke) will end up bankrupt. The only question is how much of other people's money will be used up in the process- the Kushner cash legacy is about to find out first hand. "The bulk of the mortgage, $929.5 million, was securitized and sold off to investors as bonds. Private-equity firms Starwood Capital, Colony Capital, Area Property Partners and Paramount Group each bought stakes of the remaining $285.5 million in debt at a roughly 30% discount over the past two years, according to people familiar with the deals. Loan special servicer LNR Property Corp. has been taking the lead for all debt holders in the talks." And all will demand a piece of the pie.

Then again, with Kushner investing virtually zero equity in the project (thank you idiot CMBS investors), we are fairly confident he will promptly walk away leaving Starwood et al fight over who gets to defect next.

This is especially true if the updated remittance report indicating that 666 Fifth is now a ghost town, is true, and where Izzy Englander's Millennium Partners may be the largest tenant left.

Comment viewing options

Select your preferred way to display the comments and click "Save settings" to activate your changes.
Mr Lennon Hendrix's picture

On a long enough time line, the survival rate for everyone, including the Trumps, drops to zero.

Howard_Beale's picture

Well yeah that, and every girl wants to marry the image of their daddy. Looks like she was spot on.

Mr Lennon Hendrix's picture

Hmmm...good point.  Really says something about Dick Cheney then, doesn't it?

willien1derland's picture eyes!!!! Where is my Xanax?!!!

Michael's picture

I see a shit load of financial services sector workers sweeping streets in NYC before the complete and total economic collapse is said and done.

bonddude's picture

Jet flies into building in 3...2...1...

"luckily the building was just insured..."

Popo's picture

... unless of course he gets a bailout.

jeff montanye's picture

speaking of survival rates, the vissarionovich reference above has an interesting irony.  it's the middle name of a minor russian/finnish official and of his executioner, stalin.

Hedge Jobs's picture

with these credentials he will either get a bailout or access to the discount window:

"Jared graduated from the Frisch School, a private, yeshiva high school. He graduated from Harvard University in 2003. Prior to his admission, his father had donated $2.5 million to the university, in what The Boston Globe claimed was an "egregious example of pay-for-Crimson."[2] In 2007, Kushner graduated from the New York University Stern School of Business and the New York University School of Law where he earned both JD and MBA degrees. Prior to admission, the family donated money to create NYU's Seryl Kushner Deanship, named after his mother.[4]

Kushner married Ivanka Trump, daughter of Donald Trump, on 25 October 2009. Kushner is an observant Jew"

YouBetYourLife's picture

Haaaavard and NYU.  Success assured, right? 

Then he entered the real world, stepped off the curb without knowing enough to look both ways, and got hit by a bus.

Sadly, it happens all the time.

Maybe the family can donate money to build a new wing on the US bankruptcy court for the Southern District.

Yancey Ward's picture

Maybe the family can donate money to build a new wing on the US bankruptcy court for the Southern District.



cbaba's picture

I think he is successful, his aim was to screw the investors and he did a good job for that.

That's all he learned in ivy league.

bonddude's picture

The guy selling dirty waters and pretzels on the corner knows more about business.

FOC 1183's picture

Met the Donald a few times on bond selling road shows back in the nineties. Pure ass. How many chapter 11s does a feline get, anyway?

Howard_Beale's picture

That is a terrible insult to felines of all sizes. The Donald is closer to the lizard variety although fishface was a name for him for many years.

Dr. Porkchop's picture

He did invent the comb-forward. Not only is he the president, but also a client.

Harlequin001's picture

I can't see what women see in him to be honest...

LowProfile's picture

The lizard lobby is forming a picket line outside your door as I write.

Yen Cross's picture

Low pro. Hope all is well. I'm still over seas. I like 7777. I owe you an appology. Thanks.

MarketTruth's picture

Agreed, the guy is scum!

"He is a very smart young man," Mr. Trump said of Mr. Kushner in an interview Tuesday. "I think it will come out well for him and everybody"

Trump meet Jim "con man & manipulator" Cramer, Cramer meet "all glASS, no juice" Trump.

FOC 1183's picture

My God, what a lethal combo. And 2012 running ticket? Shiver me timbers.

willien1derland's picture

Though I am certain Cramer has dreamed of having that sweet Trump hairstyle -

mynhair's picture

Quit dissing felines, you mofo!

Trump's a bump in the ass of politics.  Looks like herpes.....not that I'd know.

Chumbadumba's picture

The pimples that never really go away, kind of itchy and always leave a mark? SOUNDS LIKE WHAT MY DADDY GAVE TO MY MOMMY!


wisefool's picture

Well he is probably on his first. He claims he has never smoked a cigarette, drank alchohol or taken a sip of caffine. And he has no responsibility to those who did so after he ch. 7, and 13'nd on them. He made his billions honestly. 

Id fight Gandhi's picture

Wont Donald drop his money bags on this and help out?

SteveNYC's picture

I would vouch that Donald has very limited liquidity.

Monkey Craig's picture

Interesting that LNR is servicing this loan.

I wonder if there is a personal guarantee from Kushner? Plus, I bet tenants are negotiating for lower rents.

Seasmoke's picture

Trump has to let Jose Canseco or Richard Hatch or Star Jones help this kid out

Oh regional Indian's picture

Somethign totally weird about the Don "Comb Over" Trump and his RE "suckess".

He's been funded by someone with bottom-less pockets for good reason.

Perhaps the fall guy for the birther controversy? Trump as Obama's bette noir? Who would have thought?

666, it must be devil's own bottomless, infinite printing press, eh?


alien-IQ's picture

beneath that comb-over lays the missing frames of the Zapruder film. If he is not kept in a steady flow of USD's by TPTB...he'll let the wind do it's thing and expose the true killers. And nobody wants that...

Ted Celeste's picture

+666.  I love ORI but that comment needed a response like this.

Isn't it possible that Donald Trump is just a batshit-crazy, megalomaniac shyster who just accidentally happens to bring up a very relevant issue - the birth certificate?

Trump is a real person after all, asking real questions re: Obama.


Mr Lennon Hendrix's picture

A duchebag calling a duchebag a duchebag does not mean a douchebag is anything other than a duchebag.

Ted Celeste's picture

Well I say Trump is a value-add, as he asks a key question: where is the birth certificate?

(That said, he is a stupid asshole.  True 'dat.)

First Alex Jones talking about the Fed and now Don Trump talking about the birth certificate - looks like The View is becoming must-see-TV!


Oh regional Indian's picture

hah. The things I've read about that whole fiasco. Funny reference.


alien-IQ's picture

The family that BK's together stays together...or something like that.

Judge Judy Scheinlok's picture

This family is a piece of work. Did Kushner's dad get out of jail yet? What about the Rabbi? Didn't he get convicted in Feb, 2011?

Throw them all in fucking jail!

Judge Judy Scheinlok's picture

Fukashize every last one of them. If you default, you get to work on the entombment crew.

Rahm's picture


SteveNYC's picture

Comment of the day.

+666 + Trump BK

Blano's picture

Just turn in the keys like Morgan Stanley did.  Problem solved.

Yen Cross's picture

It seems so Anne Hathaway esc... Is the Vatican involved?

jkruffin's picture

I guess Donald got the all-in 250% leverage memo for QE3 and he can't bail them out right now.  LOL

SqueekyFromm's picture

Well, if Kushner has a sense of humor, he will lease some of the spots out at a low rate to very litigious law firms, public charities, ACORN, and several homeless individuals, who each would lose little by either litigation or Chapter 11.

Plus, Donald Trump is right about the Birther stuff, it is just that he isn't parsing his words very well. What he is really asking is for the same thing as Chris Matthews, which is, for Obama to cough up a long form. like I have long said, the REAL Birther question isn't WHERE Obama was born but WHY Obama won't cough up a Long Form and resolve the controversy.

If you ask WHY, then it becomes a lot more interesting controversy.

Squeeky Fromm, Girl Reporter

Yen Cross's picture

You little vote scammer. I say he puts up tent cities on his so called (llc.-llp.) 5% at best golf courses. Put your name where your mouth is. If you can afford to?