Kushner Cos, disputing remit, claims payments on 666 Fifth Ave CMBS debt are current - Debtwire

Kushner Cos, disputing remit, claims payments on 666 Fifth Ave CMBS debt are current

21 September 2017 - 12:00 am

Kushner Companies is current on all debt backed by its trophy 666 Fifth Avenue Manhattan tower, according to a company spokesperson. The statement contradicts the September remit for GECMC 2007-C1, which classifies payments on two equal-sized USD 112.7m slices of the building’s A note debt as late.

Payments on USD 225.4m in debt in the GECMC deal were made through 5 August, according to the remit, which was published on trustee Wells Fargo’s website on 11 September. The remit states a payment date of 11 September, a record date of 31 August and a determination date of 5 September.

The payments were deemed late but less than 30 days delinquent, according to the remit. Together the two pieces comprise 26% of the GECMC deal, according to Trepp.

“Kushner Companies has been and remains current on all 666 Fifth Avenue debt obligations,” the spokesperson said in a written statement. “Any assertion to the contrary would be incorrect.”

The debt is a portion of USD 929.5m in CMBS backed by the New York City property that matures in February 2019. All of the other debt is current, according to Trepp.

The high-profile property is being closely watched and the remit notation of late payments in September raised some eyebrows, according to two analysts. However, the two analysts and an additional investor weren’t too concerned, as the loans weren’t technically delinquent, and the rest of the debt is current.

The 1.5m sq ft office tower’s securitized debt is split between GECMC 2007-C1 (USD 249m, including two pieces of debt in addition to the late loans), WBCMT 2007-C33 (USD 285.5m) and WBCMT 2007-C31 (USD 395m). In addition, a USD 390m loan secured by a retail portion of 666 Fifth is housed in single-asset/single-borrower CGRBS 2013-VNO5. That piece matures in March 2023.

The building, partly owned by Jared Kushner’s family company and Vornado Realty Trust, is facing multiple headwinds. It is struggling with declining office occupancy amid a Manhattan commercial real estate investment market that has slumped over the first half of the year. The tower also has become something of a lightning rod for political controversies. Among them: federal investigators want to know if the Fifth Avenue building’s finances came up in a post-election meeting Kushner had with the head of Russia’s state-controlled development bank, as reported. Kushner is President Trump’s son-in-law and senior adviser.

Plan decision nears

Among the potential strategies under consideration for resolving the building’s maturing debt are refinancing the property with new investment partners, redeveloping the property, or both, a person briefed said. Kushner Companies has floated an ambitious plan to replace the tower with a supertall building and convert it into a mixed-use luxury destination, as reported.

Laurent Morali, president of Kushner Companies, said earlier in the week that the company is making progress exploring many options for the property. Morali said he can “anticipate that over the next couple of months the partnership is going to make a decision.”

But financing a massive redevelopment of 666 Fifth in this year’s cooling market is unlikely, even without the political “headline risk” that could further damp some investors’ interest, said a New York broker. “It’s a one in 500 shot that the [redevelopment] project gets financed,” he said. “I think they redo the note and it goes back to being a regular office building.”

The building’s office occupancy slipped to 70% as of 1 April 2017, from 80% in 2016 and 98% at securitization, as reported (see story, 16 June). DSCR as of 30 June was 0.53, compared with 0.67 a year earlier.