Jared Kushner’s Rough Deals

Jared Kushner, President Donald Trump’s son-in-law and senior adviser, was often described during the campaign as a brilliant real estate investor and entrepreneur who has enjoyed remarkable success for his age. But in two of his biggest New York investments, he lost money — a lot of money.

Fresh out of law school at the age of 25, Kushner purchased a newspaper. And it wasn’t just any newspaper: It was the New York Observer, a weekly broadsheet printed on salmon-colored paper that had been the home of Candace Bushnell’s “Sex and the City” column, which inspired the HBO series of the same name, plus two films.

Jared Kusher and his family company may have lost at least $300 million on the deal.

The newspaper’s founder, a former investment banker and philosophy professor, didn’t want to sell it to Kushner, but Kushner offered a high price at $10 million and promised to fund the newspaper’s losses for the foreseeable future. The newspaper, according to former Observer staff writer Gabriel Sherman, had always lost “a couple of million dollars per year.”

Kushner took over the leadership of the family’s business, Kushner Companies LLC, after his father was convicted of several felonies and sentenced to two years in prison. His father was still behind bars when Kushner bought the Observer.

Kushner, who married Ivanka Trump in 2009, cycled through several editors in the space of a few years, with one of them — Elizabeth Spiers, a co-founder of Gawker — writing recently in the Washington Post that the paper had a profitable quarter for the first time in its history under her leadership in 2012, shortly before she quit.

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After Trump’s election in November 2016, Kushner announced that the Observer would cease its print operation and continue only as an online publication. The revenues and overall value of the outlet is not known. But the operating losses — if Sherman estimated them correctly — would have hurt the value of Kushner’s media company.

Kushner announced in January that he would step down as publisher of the Observer and let his brother-in-law take on that role. Kushner’s stake is in a family trust. As of December, according to New York reports,  Kushner had been looking for a buyer for the Observer and had not found one.

In 2007, the year after he bought the New York Observer, Kushner made a much bigger gamble.

As the real estate market reached its pinnacle in 2007, Kushner bought 666 Fifth Avenue — a 41-story office building in midtown Manhattan a few blocks south of Central Park — for $1.8 billion.

It was the most anyone had ever paid for a single building in New York.

“We bought really the center of the world,” Kushner told a estate magazine, The Real Deal, not long after the sale.

And while the property’s location may have seemed attractive, it’s difficult to see where Kushner saw the value in paying such a steep price for it. The building had sold for a little more than $500 million just seven years earlier, in 2000.

The New York Times reported that in 2007, the year Kushner bought 666 Fifth Avenue, rent revenues only covered 65 percent of his loan payment. Thus Kushner was almost guaranteed to lose money on the deal even before the onset of the 2008 financial crisis, which caused rents to plummet.

The $106 million in rental income that research firm TREPP estimated 666 Fifth Avenue generated in 2007 would not have been nearly enough to cover Kushner’s loan payments that year. What’s worse, the annual rental income at the building has dropped and was still, in 2015, $19 million less than it was in 2007.

In 2008, Kushner sold a 49 percent stake in the building’s retail space to the Carlyle Group and another company, Crown Acquisitions, for just over $500 million.

But the cash flow problem continued. In 2011, Kusher worked with the lender to restructure the loan to avoid a default, and sold a 49.5 percent stake in the office building to a company called Vornado. The bank, as part of the restructuring, split off a secondary $115 million loan, called a “hope loan” because it is not likely to be repaid.

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But it still may not be enough.

Jared Kusher and his family company may have lost at least $300 million on the deal, if one takes the total of $810 million in loan payments over the first five years of the loan, prior to the restructuring, and subtracting from it the total rental income over those five years, estimated by research firm TREPP to be $471 million. But in the end, the situation could be much worse. The loan matures in 2019, and Kushner had promised, as a condition of the restructuring, that he wouldn’t fight a foreclosure.

Kushner, now 36, has divested himself of any stake in 666 Fifth Avenue, but his part-ownership is being held by a family trust while he works as a senior adviser to President Trump. And though he stepped down as CEO of Kushner Companies, the family business still has its New York headquarters there.