Kushners’ Indebted Tower May See Vornado Unload Its Stake

(Bloomberg) -- Vornado Realty Trust, which owns 49.5 percent of an indebted Manhattan office tower that is majority-owned by Kushner Cos., said it doesn’t plan to keep its stake in the building for long.

The company recategorized how it accounts for the property, 666 Fifth Ave., because “we do not intend to hold this asset on a long-term basis,” according to Vornado’s annual report, filed Monday.

That language typically means the company plans to unload an asset within a year, a person familiar with Vornado’s thinking said. A divestment could take a variety of forms, including a sale, or even a “lender giveback,” two people familiar with the property’s finances said. Under such a plan, Vornado would hand ownership to holders of the building’s debt, ridding itself of the asset.

A spokeswoman for Vornado didn’t immediately respond to a request for comment. A Kushner Cos. spokeswoman declined to comment.

‘Unpredictable Situation’

The building has been in the spotlight because a $1.2 billion mortgage is due in February 2019, a deadline that triggered a global hunt for investors by Kushner Cos. The company hoped to knock the building down and put up another, twice as tall, in its place. It sought funds from investors in Saudi Arabia, Qatar, China, South Korea, Israel and France. No investors have been announced for the plan, described by many as prohibitively expensive.

Steve Roth, Vornado’s chief executive officer, described the building last year as “an ongoing, complex, dynamic and unpredictable situation,” adding “it is the rare case when we may be sellers,” and said the Kushner raze-and-rebuild plan wasn’t feasible.

Vornado became a co-owner of the building’s troubled office space in a 2011 refinancing negotiation. It paid $80 million and assumed responsibility for half of the $1.2 billion mortgage. Kushner Cos. had purchased 666 Fifth for a record-setting $1.8 billion in 2007, almost entirely with debt, just ahead of the 2008 financial crisis. It was soon drowning in interest payments. Vornado also owns most of the building’s retail space.

The refinancing agreement forgave a fraction of the debt and temporarily lowered interest payments to give Kushner Cos. and Vornado time to improve the situation. Instead, the property became 30 percent vacant and continued to lose money as Kushner Cos. sought investors for its rebuilding effort.

Jared Kushner, a senior adviser to President Donald Trump, his father-in-law, is the former chief executive officer of Kushner Cos. To avoid conflicts of interest, he transferred some of the company’s assets in joining the White House. The effort has drawn criticism because the transfers were mostly to close family members.

To contact the reporters on this story: Caleb Melby in New York at cmelby@bloomberg.net, David M. Levitt in New York at dlevitt@bloomberg.net.

To contact the editors responsible for this story: Daniel Taub at dtaub@bloomberg.net, Peter Jeffrey

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