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666 Fifth Ave. Vornado to exit and Brookfield to enter an ownership interest at 666 Fifth Ave.

NEW YORK CITY—Following much industry buzz and a handshake deal, Vornado Realty Trust has entered an agreement to sell its 49.5% stake in 666 Fifth Ave. to its partner, the Kushner Companies. Vornado issued a release stating it will receive $120 million in net proceeds from the sale.

The asset owner, manager and developer stated with the sale of its interest, the existing mortgage loan will be repaid and it will receive net proceeds of approximately $58 million for its participation in the mortgage loan. Vornado’s release noted the financial statement gain is estimated to be $134 million and the tax gain is estimated to be $244 million. Vornado will continue to own the retail space on-site at 53rd Street having 125 feet of street frontage. Tenants include Uniglo, Tissot and Hollister. Vornado declined requests for additional information regarding the buyer or clarification on proceeds received.

In May 2018, The New York Times reported that Brookfield Asset Management had plans to purchase the 49.5% interest in 666 Fifth Ave., and was engaged in advanced talks with the Kushner Companies.

On Friday, in The Real Deal interview, Charlie Kushner who heads the eponymous family business, and the firm’s president Laurent Morali said that in May, Brookfield agreed to buy Vornado’s 49.5% stake in the building. Kushner also told the publication that the firm will close over $2 billion in financing by the end of June 2018.

In explaining the financing’s details, a professional accountant interprets the released statement to mean that Vornado will receive $120 million net from the sale, plus $58 million for their participation in the mortgage, totaling $178 million in net proceeds. The accountant states the gain is higher most likely because when the owners refinanced the property they had received a distribution in excess of their investment. The accountant also tells GlobeSt.com the financial and tax gains could be different due to valuation adjustments made, or more likely different depreciation methods used for tax versus for books.

In 2007, the Kushners bought the 1.5 million square-foot, 41-story, aluminum-clad tower, making a splash in Manhattan, paying a record $1.8 billion. Subsequently the building was marked by financial, political and public relations troubles. The New York Times had reported that fearing default the lender had appointed a “special servicer” to the building. The paper also noted the property had a $1.4 billion mortgage including accrued interest due in February 2019. Thus, adding to the building’s drama–the deals seem to have come just in time.

Back in April, Kushner told The New York Times the company had tossed out its plans to tear down the 1957 building. The company once envisioned replacing it with a multi-billion dollar Zaha Hadid-designed, 80-story, retail and luxury condominium tower. However, in Kushner’s interview with The Real Deal, he describes renovations much more matter-of-course for repositionings: adding floor-to-ceiling windows and HVAC units, recladding the building exteriors and upgrading the elevator and lobby.

Betsy Kim

Betsy Kim is the bureau chief, East Coast, and New York City reporter for Real Estate Forum and GlobeSt.com. As a lawyer and journalist, Betsy has worked as the director of editorial and content for LexisNexis Lawyers.com, a TV/multi-media journalist for NBC and CBS affiliated TV stations in the Midwest, and an associate producer at Court TV.

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