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bump bump bump it up
Why? The thread isn't even a day old
because I lack patience
I try to avoid "Kushner Drama," but according to this, Vornado may selling their interest back to the Kushners while keeping ownership of the retail and the Kushners won't be tearing down the building to build something new and are generally unclear about what to do next. They might be in financial straits because of it.
Would this be a big story if it wasn't for Kushner?
The high vacancy rate makes it more challenging...
At this point, I don't know how you could reposition the building. Tearing it down would perhaps seem to be the only choice - albeit that is seemingly out of the equation now.
I'm not fascinated because it's Kushner per se, but rather that he did this deal at such a young age (yes it's daddy's money but still daddy let him do it!!!) Albeit it is not going as well as they have planned he's finessed it to some degree so far. This Colombia GSB case study gives a really detailed look at the ever-evolving capital structure of 666 5th Avenue:
http://www.cacq.com/images/site_images/666%20Fifth%20Ave_Case%20Study.p…
The problem is that case study is 5 years old. In the five years since, the building hasn't performed and all the plans to reposition it have fallen through, because the Kushner's overpaid for an asset that wasn't worth as much as they thought. Moreover, they've now sold off all the value.
The case study cited doesn't say it in as many words, but it's clear the play was a repositioning, with a sale of the undervalued retail spaces as a Plan B to keep the building afloat and limit their exposure for as long as possible. Well, they did that, and it got them through the crisis, but now they're staring down the barrel of a building they can't sell and can't afford to reposition.
This is an awesome read! Many thanks...
I am surprised that there is no interest from foreign entities looking to park their capital...
With Hudson Yards soon coming online, there will be an excessive supply of office stock in the city. I'm curious to see what happens with the building, as an overall economic indicator.
Even at the time of the purchase the building was dated, the ceilings were low, and the floorplan was not ideal for modern office users. They've cannibalized all they can from it by selling the retail and half the office, but they still have the overhang of half of the $1.4B in debt that matures in early 2019.
Steve Roth said they have a handshake agreement to sell their interest to Kushner - on the surface that makes sense as it would probably be Kushner assuming Vornado's half of the debt. The thing that made no sense is that Roth claimed the entire debt would be repaid and Vornado would make a "mezzanine" level return on their invested cash (~$80M). The deal then is predicated on someone coming in and taking out the entire debt and refinancing, which is weird because the building is almost certainly not worth the mortgage.
There's a question of how much this actually hurts the Kushner family given the opacity of how much they have in the building. My guess is that their overall equity investment isn't that high, though again who really knows.
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