So Jared Kushner’s family real estate business is on the rocks, in large part, because they bought a Manhattan office building at a ridiculously high price, and now they’re having difficulty making the loan calls (which is to say, in 2019, shit hits the fan). Happens to everyone, I suppose.
To get out of this jam, Kushner proposed the following Kunning Plan (boldface mine):
As the building’s fate became increasingly bleak, the family, rather than forfeit, decided to go big. Their plan was to raze the structure and replace it with a glimmering Zaha Hadid-designed tower of massive proportions. The scale of the plan stirred the imagination, but the costs were astronomical because they involved repurchasing the property rights they’d sold to keep the original building afloat. That alone would require more than $1 billion. The elaborate renderings of the reconfigured building promised a kind of Time Warner Center on steroids: more than 80 stories with five levels of retail, a hotel and record-breaking expensive luxury condos on top.
For all its inspiring visuals, investors who reviewed the early version of the Kushners’ pitch book noticed a conspicuous omission: numbers. The company circulated a revised pitch, complete with financials, and the scale of the debt and risk involved were jarring. With a $4 billion construction loan and a business model that assumed the condos would sell at the aggressive price of $9,000 per square foot, it was similar to the leap of faith the Kushners had taken by overpaying for the original building a decade earlier, just before the boom went bust. A simple downturn in high-end New York real estate and the colossal new building would be in a hole of titanic proportions.
$9,000 per square foot is insane. To put that in context, a modest two-bedroom apartment of around 1,100 square feet would cost $10 million. A three thousand square foot apartment would run $27 million. Only 24 properties have been sold north of $7,000 per square foot in Manhattan. Ever.
Call me skeptical, but I don’t think Kushner is going to bring us Middle East peace anytime soon…