Kushner Corporation to Benefit from Freezing Federal Mortgage Payments

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Because Kushner Companies, like many real estate companies, establish buildings as a network of individual LLCs, it may be possible for it to obtain federal assistance for certain buildings even if it has enough money to cover mortgage payments. said Shekar Narasimhan, an expert. in real estate financing and managing partner of Beekman Advisors.

“Could he take advantage of it?” Yes, his business could, ”said Narasimhan. “They’re supposed to have deep pockets, but most owners have configured each building into LLC. So, in theory, he doesn’t have to write a check. “

Jared Kushner, the 39-year-old husband of Trump’s daughter Ivanka, is a senior adviser to the White House and has no role in the management of the Kushner companies. But he maintains a large portfolio of real estate investments through the firm, which controls 23,000 housing units in total.

Neither the Kushner Companies nor the White House responded to requests for comment on the mortgage program, if Kushner Companies can use it, or on the details of Kushner’s involvement in his business.

In recent weeks, Jared Kushner has become a central player in the Trump administration’s response to the coronavirus, bringing together executives from the private sector to help address the challenges of helping states get enough Covid-19 tests, while stimulating manufacturing and distribution. desperately needed medical supplies. It should continue to do so in the coming weeks, as policies regarding relief for property investors and homeowners could be extended and revised if the economic crisis continues to worsen.

Like most real estate investment companies, Kushner companies are expected to be hit hard by the economic fallout from the coronavirus, although the stimulus bill provisions are generous to federal mortgage holders on low-income and low-income buildings. moderate, and should be widely used by them.

“It will be a national problem and almost everyone will be affected. Not just low income or modest income, even at the upper end of the market … So yes, Kushner’s properties are going to be in trouble, “said Narasimhan.

In addition to the big investors, the stimulus bill also relieved individual homeowners whose mortgages are backed by federal loan giants Fannie Mae and Freddie Mac. There is no similar overall relief for tenants, who are also the people most likely to lose their jobs during the crisis. But real estate companies that take advantage of the possibility of temporarily stopping paying their mortgages must also accept certain protections for the tenants of their buildings, in particular by agreeing not to evict them during this period. Building owners can abstain for up to 90 days and later make up for missed payments, although this period can be extended if the economic crisis worsens.

The rules can help stabilize the market and ensure that property owners are not foreclosed if tenants stop paying, said Luise Barrack, managing partner of New York real estate law firm Rosenberg and Estis P.C.

“What this is trying to accomplish is to support” the real estate industry, said Barrack.

But the option to freeze mortgage payments shows how members of the Trump family who have not left their businesses will be financially involved in the government’s economic stimulus efforts, which will total billions of dollars. These tangles persist despite an eleventh hour push last week from Democrats in Congress to place a restriction on the bill banning Trump family members from receiving aid.

The restriction applies only to a $ 500 billion loan program to be administered by the federal government, not to mortgage programs that may be used by the Kushner family.

Several other provisions of the bill could still provide valuable assistance to Trump family members in the coming months, including a $ 350 billion small business loan program for which Trump hotels and hotels operated by the Kushner’s family could potentially be eligible, and a tax provision that allows homeowners to use their losses to offset gains in other investments such as the stock market, as reported by the New York Times.

It is also unclear whether the Kushner companies would be disqualified from the $ 500 billion in recovery loans, despite Jared’s partial participation in the business, real estate and ethics experts told POLITICO. The provision prohibiting corporations whose family members are in the highest levels of government from benefiting from recovery loans only applies when these members hold a participation of at least 20%. The percentage of Kushner’s ownership in his family’s business is unknown, but in real estate, where businesses need significant capital, it is common to have outside investors and individuals own less than 20% of the property. capital.

“The Trump family ban only applies to part of this bill,” said Jennifer Ahearn, policy director of the Washington-based Citizens for Responsibility and Ethics watch group. “And there are questions about how Kushner’s interests are structured in his businesses. We have no visibility on his interests. “

When he took office in the White House, Kushner sold and divested of a number of investments, including his ownership of shares and his interest in 666 Fifth Avenue, the main property of his company. He also resigned from his post as CEO of his company and has pledged to recuse himself from government business that would directly affect his remaining assets.

But it retained a stake in more than 150 real estate investments, financial information covering the 2018 fair, including many apartment buildings. Kushner’s financial information for 2019, when Kushner Companies contracted the $ 800 million loan, has yet to be released by the White House. Overall, Kushner’s net worth was $ 324 million at the end of 2016, the vast majority of his wealth being held by real estate, according to documents obtained by the New York Times.

The company’s housing portfolio includes upscale one-bedroom apartments in New York’s East Village that rent more than $ 3,000 a month, says its website, but the bulk of its apartments are rentals mid-range in Ohio, Pennsylvania, Maryland and other states with many rents starting at less than $ 900 per unit.

In recent years, Kushner Companies has entered into several major leases, the largest of which was concluded in 2019 when the company purchased more than 6,000 apartments at 16 different locations in Maryland and Virginia for $ 1.1 billion. dollars, thanks to an 800 million dollar loan guaranteed by the federal mortgage giant Freddie Mac.

The $ 800 million loan involved Senators Elizabeth Warren (D-Mass.) And Tom Carper (D-Del.), Who wrote a letter to federal mortgage company Freddie Mac asking for more information.

“Although there is currently no specific indication of any wrongdoing by Freddie in this case, the trend of the facts in this case – of the Kushner companies receiving his biggest loan in a decade, Mr. Refusal Kushner’s complete and clear divestiture of his former company, and the recent history of the Kushner’s companies of engaging in transactions that appear to raise conflicts of interest for Mr. Kushner – raises important questions about the circumstances in which Freddie approved and the Kushner companies received this loan, “wrote the senators.

Kushner Companies has in the past received other loans guaranteed by the federal government. A 2012 unit purchase with other investors in Maryland was finalized with the help of $ 371 million in loans from Freddie Mac, but the total volume of loans guaranteed by the company’s government is not clear, no more than the share of these loans that have been repaid. Kushner Companies did not respond to questions about the company’s total loan volume.

Since Kushner companies, like the rest of the economy, will face instability in the months ahead, freezing payments on federally guaranteed loans could offer valuable benefits. flexibility.

Under the law signed by Trump last week, in order to freeze payments, a company must show that it is experiencing financial problems as a result of Covid-19.

Property experts expect the bar – financial difficulties – not to be difficult for homeowners, especially as unemployment rises and tenants find it increasingly difficult to rent.

“It hits everyone,” said Barrack.

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