The co-owner of a Fifth Avenue skyscraper controlled by the family of Jared Kushner said Tuesday that demolishing the tower to build luxury apartments is not practical and the building will likely remain as offices.
The comments from Vornado Realty Trust CEO Steven Roth suggest that the biggest, most ambitious purchase in Jared Kushner's career will continue to bleed money, tens of millions a year, as a deadline for repayment of the giant mortgage on the office building nears. Kushner sold his personal interest in the building, the family's flagship property and headquarters, before joining the White House as a senior adviser to his father-in-law, President Donald Trump.
Kushner bought the famed aluminum-clad skyscraper at 666 Fifth Avenue for a record $1.8 billion a decade ago when he was CEO of Kushner Cos., then almost lost the building to lenders. Roth swept in with a rescue plan in 2011, offering cash in exchange for a big ownership stake.
The outlook for the office section of the building has not improved lately. Its 1.4 million square feet of office space is nearly a third empty and the Kushners and Roth must pay back a $1.2 billion mortgage in a little over a year.
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While the clock is ticking for the Kushners, the opposite is true for Roth.
The Kushner Cos. is privately held and small compared with the company that Roth heads, the publicly traded Vornado Realty Trust, which has stockpiled hundreds of millions in cash. Roth can afford to wait until the last minute and, some analysts say, perhaps grab a bigger ownership stake in any crisis.
"The worse this thing turns out," said Joe McBride, a project manager at research firm Trepp LLC, "the higher the chance that Vornado can take ownership of the property at lower entry."
In a conference call with Vornado investors on Tuesday, Roth described the building as "overleveraged," meaning it owes too much. Referring to the Kushner plans to tear down the building, he said "it's likely that those are not feasible" and that the building will probably remain offices.
Vornado had no other comment for this article. A spokesman for the Kushner Cos. did not immediately reply to a request for comment.
The Kushner Cos. had hoped to construct a tower where the Mad Men-era offices now stand, a gleaming building about twice as high and featuring luxury condominiums on most of floors.
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The plan looked impressive on paper, with drawings by the late architect Zaha Hadid. But Roth reportedly has never embraced the concept. Among other problems, it would require billions of dollars from outside investors and would allow corporate tenants to leave the building when their leases run out so it can be demolished, leaving less money to pay the bills.
The hunt for billions has turned up nothing so far and, given Roth's comment, it looks likely the Kushners may have to reverse course, leaving the off offices at 666 Fifth Avenue as they are.