A Chinese company with ownership ties to some of the Communist Party’s leading families has ended talks to invest billions of dollars in a Manhattan office Tower owned by the family of Jared Kushner, President Trump’s son-in-law and a senior White House aide.
The Chinese financial conglomerate, Anbang Insurance Group, and the Kushner Companies “mutually agreed to end talks regarding the property,” a Kushner Companies spokesman said in an emailed statement on Wednesday. The development came days after Democratic lawmakers wrote letters to the Office of White House Counsel and Treasury Secretary, expressing concern that the possible deal could breach federal ethics rules, and as Mr. Trump is preparing to meet Xi Jinping, China’s president, for their first summit at Mr. Trump’s Mar-a-Lago resort in Florida.
The possible $4-billion deal between the two companies, first reported by The New York Times in January, would have paired a company led by a man who married the granddaughter of China’s late paramount leader, Deng Xiaoping, with the family company of Mr. Kushner, a principal White House adviser on foreign affairs, including China policy.
Any deal faced headwinds on both sides of the Pacific Ocean. In the United States, it was subject to increasing scrutiny by lawmakers, who also called on the government committee that reviews overseas investment to scrutinize the agreement for possible national security issues. In China, government regulators are trying to stanch the loss of foreign exchange reserves, and are wary of signing off on multibillion dollar deals in industries, such as commercial real estate, not deemed to have strategic value.
Plans for the redevelopment, which envisioned gutting the aging office tower and erecting a soaring glass-sheathed tower with luxury residences, a hotel and retail spaces designed by the late architect Zaha Hadid, will now require a new investor.
“Kushner Companies remains in active, advanced negotiations around 666 5th Avenue with a number of potential investors,” the company spokesman said in a statement. A spokesman for Anbang declined to comment.
The end of the talks between Anbang and the Kushner Companies was first reported by the New York Post.
Mr. Kushner was the company president when the plan to redevelop the family’s flagship building, which serves as the company headquarters, was drawn up. On Jan. 19 he stepped down from that role and he has since sold his stake in the building to a family trust.
“Fifth Avenue is synonymous with luxury and opulence of the highest standards in the world,” Mr. Kushner wrote in a brochure for the project. “This design will transform Fifth Avenue in a city that is continuously reinventing itself.”
But the Kushners’ plan to transform 666 Fifth, a 41-story aluminum-clad office tower into a bullet-shaped, 74-story luxury skyscraper required billions of dollars, many years of development and a leap of faith from investors.
The family paid a record-setting $1.8 billion for the tower in 2007, in a move that the Kushners hoped would symbolize their transformation from an operator of suburban garden apartments to a major real estate player in Manhattan, the most lucrative and treacherous market in the country.
But the cash flow from 666 Fifth only covered two-thirds of the annual debt service on the property. The Kushners quickly ran into financial problems; instead of heading steadily skyward, the real estate market and the country fell into a steep recession.
“History has looked back on it as one of the more frothy top-of-the-market deals,” said Jed Reagan, a senior analyst at Green Street Advisors, a real estate research firm.
The Kushners sold portions of the building’s retail space on Fifth Avenue to investors, gave up a 49.5 percent stake in the office space to Vornado Realty Trust and renegotiated the terms of the debt. But the building is still losing millions of dollars a year, in part because the owners were no longer leasing office space as it became vacant in preparation for a complete redevelopment of the property.
Mr. Kushner and his father Charles began showing potential investors a “white book,” which laid out their vision for tearing down the blocky building to make way for the much taller, glassier skyscraper designed by Ms. Hadid.
The book portrayed a tower made up of a 9-story retail base, an 8-story, 150-room hotel, 55 stories of ultra-luxury condominiums, topped by a sky deck. The Kushners also renamed the tower 660 Fifth, casting aside the “666” reference that some people may connect with the number for Satan in the Bible’s Book of Revelations.
The financial summary in the white book described the redevelopment as a $6.7 billion project. It would take at least seven years to demolish the existing building, erect the new tower and sell the condominiums. Using what many real estate experts described as “aggressive projections,” the Kushners estimate that the project would generate $11.2 billion in revenues and leave the owners with a $4.5 billion profit.
But the Kushners and the investors would need to come up with $6.7 billion in acquisition and development costs and wait years before revenue started flowing. And they were asking investors to put up the money at a time when the luxury market for condominiums, retail and hotels has slowed.
Mr. Reagan said the building had a great location, but he described the proposal as a “risky project” headed for an uncertain future.
The Kushners made the case to investors that 666 Fifth was one of the most valuable locations in the city. Real estate executives said the project might appeal to foreign investors with “patient money” and reasons other than economic for buying a piece of Manhattan real estate.
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