IF THESE WALLS: Next came the politics

An ambitious $12 billion redevelopment of New York’s 666 Fifth Avenue has hit a stumbling block as negotiations between its owner and a potential Chinese capital partner collapsed last month.

Anbang Insurance Group ended discussions to buy a stake in the New York City office building from Kushner Companies, the New York-based firm owned by the family of President Donald Trump’s son-in-law, Jared. The deal could have seen Beijing-based Anbang provide up to $1.25 billion in equity for the planned redevelopment of the office and retail building.

The redevelopment would have left Kushner Companies with a one-fifth stake, with the firm overseeing the conversion of the retail and office building to a 74-floor luxury skyscraper with condominiums, a hotel and retail space. The redevelopment also would have involved replacing a 1950s office building and adding 40 floors to its previous height.

Design for the new-look and considerably glassier skyscraper was to be undertaken by Zaha Hadid Architects, whose eponymous founder died last year, aged 65. The original building, which features embossed aluminum cladding panels, was designed by New York firm Carson & Lundin and completed in 1957.

Kushner Companies bought the 41-story block in January 2007 for $1.8 billion, the highest price ever paid for a New York office building at the time. But the property had reportedly been losing money for Kushner over the past three years. To compound matters, the firm has to pay increasing loan fees this year, all the while the property is plagued with high vacancy rates. According to analysis by Trepp, a data and analytics firm that tracks bank lending, more than a quarter of the office space is vacant and the property has not generated enough money to pay its debts for several years.

“This building has had financial issues for years now,” Joe McBride, a senior associate at Trepp told The Wall Street Journal. “How much longer can they sustain it? Occupancy is at 70 percent, more leases are expiring, and they’re going into their own pocket to pay the debt.”

The retail section was sold in two separate transactions to retailer Zara and retail REIT Vornado Realty Trust for a combined $1.1 billion. Kushner Companies retained the office condos via separate recapitalization, bringing in Vornado as a joint venture partner in 2011. Vornado has hinted that it is not likely to put the kibosh on any future deal. In his annual shareholder letter the REIT’s chairman, Steven Roth, said: “There has been much press recently about 666 Fifth Avenue…This is an ongoing, complex, dynamic and unpredictable situation… and it is the rare case when we may be sellers.”

Despite the developers also wanting to change the name of the building, from 666 to 660 5th Avenue to avoid associations with the devil, according to architecture magazine Dezeen, it was political scrutiny and not a curse which ultimately caused the deal between Kushner and Anbang to sour.

Last month, five US lawmakers expressed their concerns over the Chinese insurer’s ties to Jared Kushner through the deal.

In a letter to a White House ethics official, the lawmakers called the deal a “highly troubling transaction… [that] would appear to present a clear conflict of interest for Jared Kushner, the son-in-law of President Trump and a senior White House advisor.”

The congressmen added that while Kushner and the White House told media outlets that he sold his personal stake in the building, it was unclear if the divestiture was complete. Even if the White House advisor did not retain an interest in the building, the lawmakers said that an Anbang deal with his family’s company could violate federal ethics laws.

A statement from Kushner said it is still “in active, advanced negotiations… with a number of potential investors” to offload the property. In the meantime, the misfortune this building has suffered is enough to fuel the fires of the superstitious.