Surviving a Big Risk on Fifth Avenue
January 17, 2012
By: Terry Pristin

The Kushner Companies’ purchase in 2007 of 666 Fifth Avenue, an aluminum-clad office tower in Midtown Manhattan, for a record price of $1.8 billion is considered a classic example of reckless underwriting. The transaction was so highly leveraged that the cash flow from rents amounted to only 65 percent of the debt service...

...But the story may yet have a happy ending for Kushner, a family-owned business that moved its headquarters from Florham Park, N.J., to 666 Fifth, its first major acquisition in Manhattan...

... Instead of foreclosing on the 39-story building, which stretches from 52nd Street to 53rd Street, the lenders agreed last month to reduce the principal and defer some of the interest payments on the interest-only loan and extend its maturity for two years, until February 2019. In exchange, Kushner and its powerful new partner in the deal, Vornado Realty Trust, agreed to pour tens of millions of dollars into the building to improve its leasing prospects. The 1.5-million-square feet office building is currently 30 percent vacant...

...In the near term, office tenants may not be easy to find. Brokers say large financial institutions are reluctant to make long-term commitments right now because of uncertainty over the European debt crisis and the lingering economic downturn. “We’re in a period of anxiety,” said Mitchell S. Steir, chief executive of Studley, a brokerage firm that represents tenants...

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