Kushner Cos. may be calling it quits in the East Village.
In the past few months, the developer has unloaded about a third of its portfolio of three-dozen properties in the Lower Manhattan enclave, shedding prewar walk-up rental buildings on streets including Avenue A, East Fourth Street and First Avenue that it had owned for more than a decade. It’s also put a batch of similar properties on the market.
The East Village, where a young Jared Kushner lived, was the focus of the company’s first major residential push into Manhattan after decades of investing in the New Jersey suburbs. And the firm didn’t just dabble in the area but went in full throttle, becoming one of its largest private landlords in just a few years’ time.
But the company received a mixed greeting. Activists targeted the firm for allegedly trying to clear out lower-rent tenants; officials imposed fines over Kushner Cos. supposedly concealing the existence of rent-stabilized tenants; and tenants launched rent strikes over living conditions.
Company CEO Laurent Morali, who has helped run the firm since Jared Kushner stepped down in 2017 to work as a senior adviser in the Trump White House, has downplayed the problems while adding that its decade-long run in the neighborhood has been profitable.
But some industry observers say Kushner’s exit is understandable.
“Developers often realize that their time is better spent elsewhere. They don’t want to get too bogged down,” said David Ash, a managing director of the brokerage Walker & Dunlop who has handled many apartment sales but is not involved with Kushner Cos. “They may have decided the juice was simply not worth the squeeze.”
The East Village may still bear fruit; the firm maintains a sizable portfolio there for now.
But in size, speed and symbolism, the winter sales spree seems notable for a company that in some ways owes its brand to the neighborhood.
Astor Place origins
As it does for so many young people fresh out of school, the trendy blocks between East 14th Street and East Houston Street beckoned Jared Kushner on a personal and business level soon after he earned a J.D. and an MBA from New York University, which has a major presence in the area.
In 2009, a year out of NYU and newly married to Donald Trump’s daughter Ivanka, Kushner bought a two-bedroom duplex at 21 Astor Place, a prewar conversion whose arched windows offer views of the spinning Alamo sculpture.
Even in the worst of the Great Recession, the not-yet-30-year-old had a knack for making a deal. The unit cost $3.3 million, according to the city register, and managed to sell for $3.9 million in 2011, when some real estate executives were losing their shirts. (The couple moved to a four-bedroom penthouse in a Trump building on Park Avenue.)
Around the same time, Kushner took the reins of his family-owned company. Its founder, Joseph Kushner, had established it as a home-building business in suburban New Jersey, and Jared Kushner took it in a new urban direction. Indeed, though the company had previously owned a handful of rental sites in Harlem and on the Upper East Side, he began snapping up multibuilding portfolios in the East Village in 2012. And selling 17,500 apartments in places such as Maryland nabbed the firm $2 billion, which helped power its New York moves.
“We are upping our presence in Manhattan,” Kushner told The New York Times around that time. “It’s a logical expansion for us.”
Early purchases in the East Village included 318 E. Sixth St., a skinny former tenement on a stretch known for its many Indian restaurants, for $5.1 million, as well as 267 E. 10th St., an Italianate edifice by Tompkins Square Park, for $5.7 million. Kushner Cos. still owns the sites, where renovated two-bedrooms at No. 318 rent for around $5,300 a month.
Bigger deals followed. In 2013 Ben Shaoul sold Kushner Cos. six properties, including four along East Fourth Street between Second Avenue and Avenue B, for $52 million. The firm offloaded the same half-dozen buildings in the winter to Targo Capital Partners for about $58 million, about a 12% return.
Other investments from that era, however, don’t seem to have enjoyed the same upside. Nos. 504 and 508 E. 12th St., for instance, which the firm picked up in 2013 for $21.3 million, sold in the fall to the Sabet Group, a real estate arm of the Sabetfard family, for $19.5 million, according to the city register. (Morali declined to address Nos. 504 and 508 specifically but said that most of the East Village sites have been profitable “with very few exceptions.”)
All told, Kushner Cos. has sold 14 East Village properties in recent months, according to a Crain’s analysis, and still owns 38, a list that includes 143 First Ave., 211 Ave. A and 318 E. 11th St, according to the city register. But that may soon change. Joe Koicim, a broker with the firm Marcus & Milichap, which is marketing the company’s portfolio, said contracts are out on other properties, and closings should happen soon, though Koicim declined several requests for details. And Morali had no comment on the remaining portfolio.
Bumps in the road
Critics of Kushner Cos.’ tenure admit that the firm was not the neighborhood’s worst landlord. Although “construction as harassment” to evict rent-regulated tenants has been a problem in recent decades, Kushner Cos. was more like an “apex scavenger,” coming in after buildings were deregulated to reap the rewards, according to Cooper Square Committee, a tenant advocate group.
Still, Kushner Cos. did experience turbulence at some sites after undertaking large-scale renovations to boost capacity, add high-end finishes and install amenities, court filings and other public records show.
City officials, for instance, imposed a $210,000 fine at 17 properties after the firm apparently failed to mention the existence of rent-stabilized tenants on work permits, which critics say is done to make evictions easier. The firm said the omissions were mistakes.
Some of those properties were part of the four-building, side-by-side complex Nos. 329-335 E. Ninth St., where Kushner Cos. began adding penthouses within months of purchasing the properties for $20.3 million in 2013.
The work at one building, No. 331, caused ceilings to collapse in the second-floor apartment of Uta Winkler, a longtime rent-stabilized tenant. “Water started gushing like from a waterfall,” Winkler told Crain’s. “I literally still have PTSD from it.” In 2014 she sued Kushner Cos. to recover damages while withholding rent, a suit that is still active. Along the way, six other tenants in the buildings launched a class-action lawsuit alleging the construction has made the building unsafe.
In 2023 Kushner Cos., which denied wrongdoing, won the suit on the state Supreme Court level, though an appeal is in the works.
Construction problems also dogged other properties, such as 500 E. 11th St., a 27-unit rental at Avenue A that Kushner still owns. The firm owes $1,500 in Department of Buildings fines at the sites and has years-long stop-work orders in place for the landlord failing to replace architects and contractors who left midway through renovation jobs, permits indicate. Similarly, 170 and 174 E. Second St. suffered from collapsed ceilings, damaged hallways and water service disruptions allegedly caused by construction work done by Kushner Cos. after it snapped up the sites for $17 million in 2013.
“You have to wonder, did Kushner put its toe in the water here and then decide to get out?” said Brandon Kielbasa, director of organizing and policy for Cooper Square Committee. The tenants’ rights group organized a protest at the Second Street buildings, which he said experienced a suspiciously high turnover rate of 70% because of the harsh conditions.
“I think these kinds of incidents served as an indication that this neighborhood was not going to stand for tactics like this,” Kielbasa added. “It was a major pushback on their business plan.”
A plan comes together
And yet, for all the friction, Kushner Cos. appears to have achieved great success.
Earlier this year it offloaded those same two Second Street buildings, where two-bedrooms lease for more than $4,000 a month, to developer Penn South Capital, which paid $22 million, nabbing Kushner Cos. a substantial 30% profit. Messages left with Penn South managing partner Ray Chera were not returned.
For his part, Morali, who joined the firm in 2008 and helped assemble the East Village portfolio, pushed back on the idea that his firm is beating a retreat. The exits, which were always envisioned as part of a 10-or-so-year plan, he said, have allowed the firm to realize a long-held goal: national expansion. Indeed, the sales freed up capital for investments in Southern states where Kushner Cos. had zero presence until a couple of years ago.
“I do not overthink it. We are investors, and we have to do arbitrage sometimes. I think the motto of going into something and saying, ‘I will never sell it’ may make you feel good at the closing. But I don’t buy it,” Morali said. “If there is an opportunity to sell, we will absolutely do it.”
Yes, tenants often clashed with the developer, but no more so than what happens at other buildings when there’s a changing of the ownership guard, added Morali, who helms the firm alongside Nicole Kushner Meyer, Jared’s sister, who serves as its president.
Fierce anti-Trump sentiment in the East Village also fanned the flames. “We had a target on our back because of our name, because of the high-profile nature of our company,” he said.
Macro-economic factors probably played a part too. Elevated interest rates have made many investors skittish about taking on debt, brokers and landlords say. Plus, the disappearance of dependable multifamily lenders such as Signature Bank, which regulators closed in 2023, has also hurt the sector. And the 2019 state rent-reform laws designed to protect tenants against steep price increases curtailed revenues for some multifamily owners, taking some of the shine out of New York.
“Politicians keep making rules that make it impossible to create new supply here,” said a top investment sales broker who has worked with the Kushner family but asked to remain anonymous so as not to jeopardize their business relationship. “But the Kushners are very smart people.”
“Everybody has different motivations for leaving a market,” the broker added. “And people don’t make money on every single real estate deal they do.”
Fresh start
“Resilience is one of our chief hallmarks,” wrote Morali in the 2024 prospectus of the privately held company. And since its East Village sell-off, Kushner Cos. has directed its attention to multifamily projects in high-growth, lower-regulation states such as Tennessee, Virginia and Texas, as well as Florida, where Jared and Ivanka Kushner live today, in a mansion in the Indian Creek Island section of Miami.
All told, since 2021 Kushner Cos. has acquired 10,000 apartments in the South and now owns 26,500 apartments in 14 states and Washington, D.C., Morali said.
The firm, which continues to have offices in Midtown and New Jersey, also seems to be appreciating its Garden State roots anew. Projects expected to come online this year include a 265-unit rental complex in East Hanover and a 307-unit version in Fair Lawn, according to the company. If suburbs made Kushner Cos., the firm may now be betting on their reinvention. In May the company broke ground on a sweeping $500 million plan to demolish about half of Long Branch’s Monmouth Mall in order to make way for 1,000 new units of housing surrounding a public green.
At the same time, Kushner Cos.’ Manhattan and Brooklyn portfolio now stands at 1,000 apartments, according to the company’s website, though the estimate seems to include some East Village properties that have recently left the fold.
“The city is a terrific place to live,” Morali said. “It’s just a less-hospitable place to do business.”
C. J. Hughes , 2024-05-14 12:03:04
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