Jared Kushner’s father, Charles Kushner, is shouldering the blame for the family’s highest-profile miscalculation.
In 2007, Charles’s firm, Kushner Companies, paid a record $1.8 billion for a New York skyscraper at 666 Fifth Avenue. The purchase was meant to elevate the family’s business from its roots buying middle-income housing in the tri-state area. Jared, who is President Donald Trump’s son-in-law and a senior White House adviser, was the face of the deal.
“I pushed Jared to do the deal,” explained Charles, who said Jared expressed reservations about buying the office tower.
In a wide-ranging interview with CNN at his company’s headquarters in midtown Manhattan, the elder Kushner didn’t mince words, calling the decision “bad timing and bad judgment.”
Instead of being a success, the skyscraper has been engulfed in controversy. The building is not generating enough revenue to cover its bills, and Kushner Companies faces a deadline to refinance at least $1.2 billion in debt, which comes due in less than a year. The elder Kushner said he’s nearing a deal that will resolve questions about whether Kushner Companies keeps control of the gleaming office tower. He said an announcement could come any day but declined to provide additional details about potential partners or investors.
Like other real estate investors in New York City, Charles cherishes privacy. For years, he had no reason to share information about his deals. That changed when Jared left the firm to advise Trump in the White House.
On the transition to the White House, Charles, who said he speaks to Jared every day, declined to say whether he advised Jared to take the job. “Jared thought he could make a positive impact. In the end, I gave him my blessing.”
Kushner Companies has made several adjustments since then.
“The question in our company today is not ‘what’s the best deal?’” said Charles Kushner recently in his office, which he has adorned with wall-to-wall pictures of his family. Among the photos of his parents, children and grandchildren is one of his daughter-in-law, Ivanka Trump, at the Western Wall in Jerusalem. “We shy away from anything that could have a negative impact on Jared,” the elder Kushner said.
Meanwhile, Charles says his other son, Josh – a Democrat who runs a venture capital firm in New York City – is feeling the blowback from peers who oppose the administration.
The firm and family are known as longtime supporters of Democratic candidates. In fact, Josh attended the March for Our Lives rally in Washington, DC, last month, posted photos of his supermodel girlfriend Karlie Kloss at the march on his Instagram account and donated $50,000 to the event.
The elder Kushner believes his family and its real estate business have become convenient targets in a highly-charged political environment. Although that may be true, the lack of a clean break between Jared and his family’s finances has led to allegations that the family sought to benefit from Jared’s proximity to power. Jared Kushner stepped down as CEO of Kushner Companies in January 2017, sold his stakes in some of the firm’s projects to a family trust and recused himself from certain policy issues.
A person close to the family says that Jared, who’s now responsible for policies from prison reform to Middle East peace in the White House, never intended to go into politics. As a result, he didn’t engineer his life in a way that would allow for a smooth transition from the private sphere to the public one. Jared did his best to separate himself from his family’s namesake firm, said the person, stepping away from the business. He sold his stakes in many projects to a family trust that doesn’t benefit him, said another source with close connections to the family.
But ethics watchdogs call his divestiture plan inadequate, and a series of missteps by the Kushners themselves has invited further scrutiny.
One of those mistakes, Charles admits, was meeting with Qatar’s finance minister in 2017 after Jared joined the White House and had left Kushner Companies.
“There’s no margin for error with this arrangement,” said Don Fox, the former general counsel and acting director of the Office of Government Ethics. “It’s human nature to be interested and concerned about assets that are put in trust for family members you love and care for.”
Charles says he only accepted the invitation “out of respect” for the Qataris to tell them there was no way “we could do business.” He now admits that taking the meeting was “stupid,” given how it might be perceived publicly.
Charles knew the White House job would be hard on his son but underestimated the strength of what he called the “opposition” to the administration.
In the past two years, local Democratic officials in New York and New Jersey have either stalled or killed two Kushner Companies projects for political reasons, according to the elder Kushner.
In Jersey City, New Jersey, Kushner Companies had sought local tax breaks to develop a luxury project called One Journal Square. But City Mayor Steven Fulop, who had touted a “terrific friendship” with Jared Kushner in 2014, announced on Facebook that he would not support a tax break for the project.
“That’s discrimination. That’s like me telling you, I’m not giving you a loan because you’re a woman or because you’re Jewish,” said the elder Kushner.
Charles said Kushner Companies was forced to find other ways to reduce cost to keep the project profitable. As a result, the firm will now use non-unionized construction workers to build the development instead of organized labor, which is more expensive.
But Fulop may have a different idea in mind. He recently tweeted that he hopes the project “will now move to a different partner.”
Separately, in New York City, a Brooklyn council member nixed a Kushner rezoning plan to develop a vacant lot adjacent to the Gowanus Canal. The lawmaker told CNN he had concerns about Kushner Companies’ conflicts of interests. Kushner Companies abandoned the project and ended up selling the land to another firm for a profit.
Despite the setbacks, Charles projects strength. He says big banks are still backing his deals. The family-owned business has secured $1.5 billion for construction, acquisitions and refinancing in the first quarter of 2018 alone, said Charles.
But a much larger obstacle looms, casting a shadow over the firm: finding fresh capital to refinance debt on 666 Fifth Avenue. Real estate industry sources say the 666 deal was an effort to raise the company’s status after the family was rocked by scandal when Charles was sentenced to two years in prison for tax evasion, illegal campaign contributions and witness tampering.
Shortly after Kushner Companies bought the building in 2007, the financial crisis struck, hammering its revenue. Midtown office rents in New York plummeted below $60 a square foot – nearly half the rate Kushner Companies had projected it would be able to charge the building’s tenants. Although office rents have recovered, the building’s bottom line has not. That’s because Kushner Companies, anticipating an ambitious modernization of the property, had reduced the building’s occupancy assuming they would find a partner to fund the reconstruction.
Their plan called for a multibillion-dollar conversion of the office space into luxury condominiums designed by the late architect Zaha Hadid. The undertaking would require a partner with deep pockets, and the Kushners targeted several foreign investors with close ties to their governments.
But the plan failed as a series of stories detailed efforts by Jared and his father to seal a deal with a large foreign investor during the home stretch of his father-in-law’s presidential campaign.
In late 2016, Kushner Companies was finalizing a deal to redevelop 666 Fifth Avenue with Anbang Insurance Group, a Chinese holding company with connections to China’s government. Those revelations ignited a backlash following Trump’s election over potential conflicts of interest for Jared, who was then serving as the lead point of contact with foreign governments in his role as a member of the President-elect’s transition team.
To safeguard against similar mistakes in the future, the firm’s lawyer reminds dealmakers weekly of the company’s self-imposed ban on financing from foreign governments. He hopes that will avoid accusations of conflicts or corruption for Jared.
As a father, Charles says, the last thing he wants to do is create more problems for his son.