The big question about Vornado’s move to stifle its partner Kushner Companies’ plan to redevelop 666 Fifth Avenue as a mixed-use super-skyscraper is: What took Steve Roth so long?
The idea is a nonstarter that should have been laughed off the table long ago. Insiders have long scoffed at the plan to knock down 666 Fifth for an extra-tall tower aimed at the limping condo and retail markets and the overbuilt hotel market.
But Roth, one of the world’s savviest developer-landlords, apparently did nothing to pull the plug on it. Until now.
As Bloomberg reported on Monday, the press-averse Vornado Realty Trust chairman has finally allowed word to leak that publicly traded Vornado doesn’t like Kushner’s campaign to reel in global investors to bankroll a multibillion-dollar tower for which there’s no market demand.
Roth favors a “much more mundane” redesign to keep 666 Fifth as an office building, albeit modernized for a 21st-century leasing environment.
According to Bloomberg, the powerful mogul is quietly signaling to any lenders or investors to “back off” any involvement in Kushner’s pitch for a 1,400-foot-tall tower designed by the late architect Zaha Hadid.
Regarded as a striking skyline addition when it opened in 1957, aluminum-clad 666 Fifth Ave. belongs to a class of functionally obsolescent commercial towers in need of upgrading likely to cost up to $100 million. Its low ceilings and antiquated systems can’t compete for top-tier tenants with modernized towers of similar vintage, such as Rockefeller Group’s 1271 Sixth Ave. and SL Green and Vornado’s 280 Park Ave.
The 30-percent-vacant 666 Fifth faces a $1.2 billion mortgage coming due in February 2019. Bloomberg said it lost $14.5 million in 2016 and would likely lose $24 million this year. Without new investment by Vornado, Kushner could lose control of the tower to its lenders.
Anyone who admires Roth’s brilliant track record can only wonder why Vornado, which owns 49.5 percent of 666 Fifth’s office floors, didn’t raise a stink earlier over Kushner’s pipedream.
My colleague Lois Weiss — who first revealed the possible replacement of 41-story 666 Fifth with a much taller edifice back in 2015 — wrote this past March that Roth was privately “seething” over Kushner’s strategy.
Last April, reflecting the views of numerous landlords and brokers, I termed the need for an unprecedented $4.1 billion construction loan — nearly as much as it took to build the entire new Second Avenue subway — “baffling.”
It would be impolite to suggest that indomitable Roth might have reason to be cautious about not acting sooner. But 666 Fifth isn’t just any property. Its prestigious mid-Manhattan location makes it the pride of Kushner Companies, which was headed by President Trump’s son-in-law, Jared Kushner, until he went to work in the White House last winter.
Although Jared Kushner relinquished his company leadership role to Laurent Morali, his family might not be out of the picture. A Kushner Cos. rep told us in April that supposedly retired company founder Charles Kushner, Jared’s father, was “involved in discussions with potential partners” for 666 Fifth.
Everybody we reached out to in high-end commercial real estate ran for cover, declining even to be quoted anonymously — with one major exception.
“This is a disastrous situation,” the executive said. “The Kushners bought 666 at a ridiculous price [$1.8 billion in 2007]. They made a great move selling off the retail [for $525 million in 2008], but it wasn’t enough.”
He added: “They might have pulled it off if they’d repositioned the office tower and remarketed it, as many landlords have done, but they came up with an incredible redevelopment plan that makes no sense.”
The new tower’s condominiums, hotel and five-story retail atrium would have to command the highest prices to justify a reported need for $2.5 billion in outside equity.
Vornado would not comment.
A Kushner rep repeated a statement given to Bloomberg that Kushner and Vornado are “equal partners” and “all options are still being assessed” for 666 Fifth and “no decisions have been made.”