Finance  ·  Distress

Value of Kushner’s 229 West 43rd Drops 82 Percent Since Acquisition: CRED iQ

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Valuation woes are being felt from coast to coast, with Kushner Companies’ retail condominium property in Times Square topping one data provider’s list.

The 238,557 square-foot building at 229 West 43rd Street has seen its valuation plummet 82 percent nearly eight years after Kushner acquired the asset, according to recent data from CRED iQ.

SEE ALSO: Deutsche Bank Leads $120M Retail Refi for Miami Worldcenter

The $386 million decline in the property’s value, from $470 million to $84 million, was the biggest valuation dip of the first half, topping a 57 percent drop of Brookfield’s 1.4 million-square-foot Gas Company Tower office property in downtown Los Angeles, the CRED iQ analysis shows. 

The valuation of 229 West 43rd was $109 million in December 2021 two years after a $295 senior million loan tied to the property transferred to special servicing, according to CRED iQ. The loan defaulted in March 2021 with a receiver subsequently appointed. 

The initial $470 million appraisal Kushner received on 229 West 43rd came on the heels of acquiring the 18-story property in the fall of 2015 for $296 million from Africa Israel USA, a U.S. subsidiary of Israeli investment firm Africa Israel Investments, Commercial Observer previously reported.

(Disclosure: Joseph Meyer, chairman of Commercial Observer owner Observer Media, is married to Nicole Kushner Meyer, president of Kushner Companies.)

In October 2016, Kushner received a $370 million debt package to refinance the property in October 2016 that includes a $285 million commercial mortgage-backed securities (CMBS) loan from Deutsche Bank (DB). The deal also involved a $70 million mezzanine loan from Paramount Group and a separate $15 million mezzanine piece from SL Green (SLG) Realty Corp

Mike Hass, founder of CRED iQ, noted that net operating income for the property — according to the latest estimates — was between $10 and $13 million, compared with $21 million when it was underwritten.

“It was pro-forma underwriting and never lived up to it due to tenant issues,” Haas said. 

Fitch Ratings downgraded its outlook on the $285 million loan for the retail space at 229 West 43rd Friday citing a 40 percent vacancy rate, Crain’s New York Business first reported

The property, which housed The New York Times’ offices until 2007, experienced retail tenancy challenges soon after Kushner acquired it with celebrity chef Guy Fieri’s Guy’s American Kitchen closing in 2017 after five years. Gulliver’s Gate, an interactive tourist attraction that displayed miniature world monument replicas, and National Geographic’s Ocean Odyssey have also shuttered over the last few years.

The upper floors of the tower are part of a separate commercial condo unit purchased by Columbia Property Trust in 2015 for $516 million and are not part of the Fitch downgrade, according to Crain’s. BuzzFeed leased two floors in August 2022 comprising around 107,000 square-feet after sub-leasing its space at 225 Park Avenue South.

Officials at Kushner Companies did not immediately return requests for comment. 

Andrew Coen can be reached at acoen@commercialobserver.com