Kushner's Cadre Is in Talks With Saudi-Backed SoftBank Fund

(Bloomberg) -- Cadre, a real estate technology startup co-founded and partly owned by White House senior adviser Jared Kushner, is discussing an investment of at least $100 million from a private fund that receives much of its capital from the governments of Saudi Arabia and the United Arab Emirates, according to people familiar with the discussions.

A top executive of Cadre, the people said, has met privately in recent months with representatives of the SoftBank Vision Fund, a technology investment vehicle that gets almost half of its $100 billion from the Saudi government’s Public Investment Fund. The United Arab Emirates has put at least $15 billion into the Vision Fund through its sovereign wealth fund as well.

Kushner doesn’t play an active role in Cadre’s operations, company officials say when asked about the president’s son-in-law. But he hasn’t divested his Cadre stake, valued at $5 million to $25 million on his most recent financial disclosure form. People close to Cadre -- whose founders include Jared’s younger brother, Josh, and his Harvard classmate, Ryan Williams -- said that neither Kushner had taken part in the recent funding discussions with SoftBank. It was SoftBank that approached Cadre, they added.

The discussions are sensitive, and a funding deal might not materialize, the people familiar with the matter said. Representatives of Cadre declined to comment when asked about the status of the talks. Andrew Kovacs, a spokesman for the Vision Fund, said SoftBank declined to comment on the matter.

Dual Roles

Jared Kushner’s role as both a pivotal government figure and a potential beneficiary of the deal could create the appearance of conflicts of interest on a range of policy issues before the Trump administration. SoftBank Group Corp. Chief Executive Officer Masayoshi Son, who created the Vision Fund in 2016 to invest in transformative technologies, is especially eager to complete a merger of his Sprint Corp. with T-Mobile US Inc., an industry-consolidating move that would require the approval of Trump’s regulators.

The involvement of Middle Eastern money also could be problematic given Kushner’s leading role as a policy adviser for the region -- visible in his recent appearance in Jerusalem to herald the relocation there of the U.S. embassy. He has been involved in extensive diplomatic discussions with Saudi and Emirati leaders, supporting initiatives that benefit their countries and that punish rivals like Qatar, which had for years been a U.S. ally.

Shortly after Kushner joined the White House team in January 2017, his family’s real estate business, Kushner Cos., announced that it wouldn’t accept investments or loans from sovereign wealth funds to avoid creating even the appearance of conflict.

When Cadre company officials were asked why they hadn’t adopted a similar policy, a company spokeswoman provided a written statement.

“Cadre is a private, independently operated real estate technology platform focused on our mission to improve people’s financial futures by expanding access to quality investment opportunities,” the statement said. “While we do not comment on hypothetical deals, we are grateful to have such a diverse group of investors and several other potential partners expressing interest in our company.”

Watchdog Groups

Cadre is so closely identified with Jared and Josh Kushner that any financial involvement by sovereign wealth funds is problematic, some government watchdog groups say. The nonprofit Citizens for Responsibility and Ethics in Washington filed an ethics complaint against Jared Kushner last year for failing to report his interest in Cadre on his original financial disclosure form. (Kushner’s lawyer said the omission was inadvertent, and disclosure statements have since been revised to include it.)

“This kind of an arrangement, where a high-ranking U.S. government official can personally profit from a foreign government, is exactly why we filed the ethics complaint and it is exactly what the emoluments clause of the constitution was written to prevent,” said Virginia Canter, a lawyer at CREW. “If a foreign government wants to try to buy favors and influence U.S. policy, this is the way to do it.”

Kushner’s dealings with the United Arab Emirates have also attracted the scrutiny of Special Counsel Robert Mueller, who is investigating Russia’s influence in the U.S. presidential election and related matters. His office’s investigators have reportedly asked witnesses about a meeting in New York in early 2017 that included Kushner and George Nader, an adviser to the United Arab Emirates government who is now said to be a cooperating witness in the inquiry.

That 2017 meeting was also attended by Steve Bannon, then a White House adviser, and Richard Gerson, founder of Falcon Edge Capital. Gerson’s brother Mark is a longtime friend of Kushner, and was an early investor in Cadre. The meeting was previously reported by The New York Times.

"For more than a year and a half, Mr. Kushner has removed himself from the operations and direction of Cadre," Kushner’s lawyer, Abbe Lowell, said in an emailed statement. "Like many others, he is merely a passive investor, and has not taken part in any negotiations for any investments. His passive investor relationship with Cadre was reviewed and approved by the Office of Government Ethics when he entered government and part of his ethics agreement which was written and reviewed by outside attorneys and with which he has complied with every provision."

Second Fund

The Vision Fund is one of the world’s largest investment funds, with stakes in more than 30 companies, including WeWork Cos. and Uber Technologies Inc. Early this year, SoftBank said it might invest in up to 100 companies, at a minimum of $100 million each. SoftBank’s Son said last week that a second Vision Fund would soon follow, including many of the investors and institutions in the original.

SoftBank’s evaluation of Cadre is ongoing and a decision isn’t expected for a few weeks, people familiar with the discussions say.

Founded in 2014, Cadre is a online platform that allows investors to buy stakes in commercial real estate. It has drawn significant interest in the financial world. At the end of 2017, the company was valued at $800 million. It has received funding from the venture capital firm Andreessen Horowitz; an infusion from a fund whose partners include Palantir Technologies Inc. investor Peter Thiel; and a $250 million line of credit from George Soros’s Soros Fund Management. Other investors include Ford Foundation, SL Green and General Catalyst Partners.

Cadre has been approached by an array of potential investors this year, according to company officials, and Goldman Sachs Group Inc. has committed to invest $250 million of its clients’ money in properties on the platform.

Financial Disclosures

Cadre is closely linked to the Kushners. While the company has invested in several properties, as of March, it had completed only one full investment cycle from purchase to sale -- a portfolio of buildings managed and 40 percent owned by Kushner Cos. The apartment buildings in Queens, New York, came under scrutiny this year because Kushner Cos. failed to properly disclose the number of rent-regulated tenants. The buildings were renovated and sold for a profit in March 2017, a deal that Cadre then used as a proof of concept for its investing platform.

The number of rent-regulated tenants in the buildings dropped precipitously under the Kushners’ control. The family real estate company said the documents were handled by a third party, reviewed by independent counsel and corrected as soon as the problem was identified.

Cadre’s offices are in the Puck Building in downtown Manhattan, which the Kushners have owned since the 1980s. The building also houses Thrive Capital, Josh Kushner’s separate venture capital firm, which provided early investment in Cadre. This month, Josh Kushner’s girlfriend, supermodel Karlie Kloss, gave a talk at the company about empowering women in tech, an effort she has backed through her nonprofit Kode with Klossy.

In an interview with Bloomberg News last year, Cadre Chief Executive Officer Ryan Williams said he consults at least once a week with Josh Kushner, who has a seat on the board.

“Most traditional VCs are not calling me up, giving me advice, asking questions, talking about product,” Williams said. “He’s a friend and a mentor in many ways to me.”

Kushner Negotiation

During the presidential transition, Jared Kushner negotiated a potential investment in the family’s troubled Fifth Avenue office tower with Anbang Insurance Group Co., a Chinese company allied closely with the ruling party, and Sheikh Hamad bin Jassim al Thani, former a foreign minister and prime minister of Qatar. Those plans fell apart, and Kushner’s lawyers say he hasn’t discussed deals or investments in his family’s businesses since assuming his White House post.

With Kushner’s support, the Trump administration supported an initiative by the Saudis and Emirates to impose an economic blockade of Qatar in 2017.

Separately, Kushner Cos. has turned to a unit of Brookfield Asset Management Inc. to salvage its stake in the office tower on Fifth Avenue. The Qatar Investment Authority is the largest outsider investor in the unit.

Brookfield says the sovereign wealth fund of Qatar is playing no role in the Fifth Avenue proposal. “No Qatar-linked entity has any involvement in, investment in or even knowledge of this potential transaction,” a spokeswoman for Brookfield said.

Jared Kushner has had visibly friendly relations with the Saudis, last year saying that he helped the Kingdom save $10 billion on an arms purchase from a U.S. military contractor. He also made an unannounced trip to Riyadh last fall, where he met with Saudi Prince Mohammed bin Salman and reportedly discussed a wide range of diplomatic matters, including a blueprint for Middle East peace.

The Saudi Public Investment Fund, where the prince is chairman of the board, didn’t return multiple requests for comment about the proposed Softbank investment in Cadre.

In addition, Kushner has had significant contacts with the crown prince of Abu Dhabi, Mohammed bin Zayed Al Nahyan, who is the effective leader of the Emirates. During the presidential transition, the crown prince made an unannounced visit to the U.N. In New York, he met at Trump Tower with Kushner, Bannon and incoming national security advisor Michael Flynn.

The crown prince is the chairman of the Emirates sovereign wealth fund, Mubadala Investment Company, which has invested in SoftBank and didn’t respond to emails requesting comment.

©2018 Bloomberg L.P.

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