Jared Kushner's $7.5 billion plan to transform a Manhattan skyscraper into a mix of high-end residences and retail has been deemed "not feasible" by the project's partner, putting the future of the property — saddled with $1.2 billion in debt — in doubt.
Steven Roth, chief executive and chairman of office giant Vornado Realty Trust, owns 49.5 percent of the offices at 666 Fifth Ave. and said Tuesday that it did not appear that redevelopment plans, hatched by Kushner, President Trump's son-in-law, before he left the company in January to become a senior White House adviser, were likely to succeed.
"There have been rumors in the marketplace, more than rumors, about tearing the building down and doing all manner of fairly grand development schemes," Roth said. "It's likely that those are not feasible."
Roth's statement is a potentially huge blow to Kushner's dream of tearing down the existing building, doubling its height, and creating a high-end hotel, retail and condominium project. The existing building has been losing money — and tenants — for years.
Roth's decision has been much anticipated. He is one of Trump's closest friends and has helped keep the project afloat while Kushner pursued investors. Those efforts have failed, in part because foreign investors appear reluctant to pour money into the project at a time when Kushner's financial dealings are under review by special counsel Robert S. Mueller III.
Among the matters that Mueller may review are Kushner's effort to gain financing from investors in China and Qatar who have strong ties to those nations' governments. In addition, Kushner met with a Russian banker weeks before Trump's inauguration; the bank has said that business was discussed, but Kushner has said it had nothing to do with his company. A White House spokesman referred questions to Kushner Cos., which did not respond to a request for comment.
Tom Barrack, another close friend of Trump's, whose real estate investment company once held part of the building's debt, has said that Kushner's ascension to the White House "crushed" efforts to woo foreign investment. Barrack, who said he had suggested the project to a Qatar-based fund, said prospective investors were skeptical after Kushner moved to the White House. "No way — can't be associated with any appearances of conflict of interest, even though there was none," Barrack said.
Roth, speaking on an investor conference call, said it was likely that 666 Fifth Ave. would "revert to an office building" and that "we are working on capital plans . . . it's a work in progress."
Although Roth long has been sympathetic to Kushner, he runs a public company that must answer to investors. At a time when the stock market has soared, Vornado's shares have decreased this year by more than 11 percent.
A company analyst, Michael R. Lewis of SunTrust Robinson Humphrey, said recently that Vornado stockholders wanted clarity on 666 Fifth Ave., particularly because many investors would be skeptical about Vornado taking on additional costly construction projects.
"I think that something that requires heavy development on the site would be poorly received by shareholders," he said.
If redevelopment plans have indeed fallen through, it could be the biggest blow yet to the Kushner family's project plans and raises pressing questions about how the company will pay off the debt due in February 2019.
With Kushner as chief executive, the Kushner Cos. purchased 666 Fifth Ave. for a record-breaking $1.8 billion in 2007. After the real estate bust, the building did not produce enough revenue to make debt payments, and Kushner brought in Vornado as a partner on the office and retail.
At least two years before Trump became president, Kushner had pitched his plan for tearing down most of the building and turning it into a mix of high-end residences, offices and shops.
The effort included entreaties to a Chinese insurance fund and a former Qatari foreign minister, raising concerns among ethics officials about whether Kushner's company was profiting off his political position.
When Kushner entered the White House as a senior adviser, he divested his interest in 666 Fifth Ave. and resigned from his company positions.
Without the redevelopment plan, it's unclear how the Kushner Cos. will pay off the debt. About one-fourth of the offices are empty, and the lease revenue does not cover monthly interest payments, requiring regular cash infusions.
Kushner Cos. President Laurent Morali has vowed not to seek money from foreign governments to avoid ethical conflicts. He told The Washington Post in September that doing so would not preclude him from finding investors and that he had a number of options for moving forward despite the slow leasing market.
"We happen to be at a point where we've explored a lot of different options and I'm pleased with the progress we've made on them," he said, "so I can anticipate that over the next couple of months, the partnership is going to make a decision."
If the building remains an office building, Vornado could take an interest in acquiring it, with or without Kushner as a partner.
Earlier this year, Roth said the project represented "the rare case when we may be sellers."
But he changed his tune on the call Tuesday. When asked by a stock analyst whether the company might try to up its stake in the project, Roth demurred, saying the situation was "evolving."
"The grand scheme has gone away, and I don't want to speculate," he said.