Kushner Could Sell Land Under 666 Fifth To Brookfield As Part Of Ground Lease Deal

Brookfield Asset Management has locked down the option to buy the land at 666 Fifth Ave. as part of its $1.2B ground lease on the building.

Earlier this month, Brookfield agreed to a 99-year ground lease on the troubled office tower, and is paying Kushner Cos. for the lease upfront.

The deal closed on Thursday for $1.286B, The Real Deal reports. The memorandum of lease includes the option to buy the land “at certain limited times and circumstances during the term of the lease.”

The details of those times and circumstances were not made clear. If Brookfield were to make the purchase, it would take full ownership of the office portion of the building and the land, a full block on one of the world's most prestigious thoroughfares.

As part of the deal, the A-note portion of the securitized debt on the building was paid off in full, and the B-note, or "hope note," was written off with a 100% loss, according to debt research firm Trepp.

The Kushners paid $1.8B for the building in 2007 when Jared Kushner, now a senior adviser to the president, served as CEO. His father, Charles Kushner, who is now back running the company, has since said buying it was based on “bad timing and bad judgment,” and that he had pushed Jared into making the deal.

The building was saddled with debt, and the Kushners had been looking around for partners to bankroll a redevelopment. They had reportedly been in talks with China’s Anbag Insurance Group, with the view of the company funding a $7.5B makeover on the building.

The possible deal was widely criticized over the conflicts of interest it may have raised, and ultimately fell through.

Charles Kushner was able to negotiate with lenders to pay off less than $1.4B that it owed on the property, The New York Times reported, by admitting the building is not worth that figure. The lenders on the B-note — commonly called "hope notes," as a Trepp analyst wrote in 2016, "to reflect their lenders hope [that] they would ultimately recover something" — agreed when they agreed to write down its value by 100%.