May 17, 2016 05:04PM
By Konrad Putzier
340 Flatbush Avenue Extension in Brooklyn (inset: Michael Stern and Jared Kushner)
Kushner Companies is a mezzanine lender on JDS Development Group’s and Chetrit Group’s supertall mixed-use development in Downtown Brooklyn, The Real Deal has learned.
JDS
and the Chetrit Group bought the landmarked Dime Savings Bank at 9 DeKalb Avenue last year, and in January, filed plans for a 1,066-foot-tall tower on the adjacent lot 340 Flatbush Avenue Extension. The 73-story mixed-use tower, slated to hold more than 400 apartments, would be the borough’s tallest building by a margin.
Kushner Cos.’ involvement was not previously disclosed, and the size of the loan the Jared Kushner-led firm is providing isn’t immediately clear. JDS and Chetrit also landed a $115 million senior loan from a subsidiary of Fortress Investment Group to finance the acquisition of 340 Flatbush and refinance 9 DeKalb. The partners are yet to secure a construction loan.
Kushner Cos.’ role as a lender is noteworthy because of the firm’s development chops: It is one of the lead developers on Dumbo Heights, a mixed-use complex that includes 963,000 square feet of office space,and also teamed up with RFR Realty on the $700 million purchase of two other Dumbo buildings owned by the Jehovah’s Witnesses. The company is also planning a project in Gowanus at 175-225 Third Street.
A representative for JDS, which is led by Michael Stern, declined to comment. A spokesperson for Kushner Cos. confirmed the firm is a mezzanine lender but declined to comment further.
Kushner Cos. quietly launched a real estate lending platform earlier this year, joining the growing number of New York development firms branching out into the financing business.
The firm plans to issue senior loans, mezzanine debt and preferred equity ranging from $20 million to $500 million in value with terms of up to five years, according to an email advertising the program reviewed by TRD. The company plans to lend on properties in Greater New York, Miami, Los Angeles, Washington, D.C., San Francisco and Boston. Kushner, along with his brother Joshua, is also a co-founder of Cadre, a real estate investment platform.
The Moinian Group also launched a similar platform. The development company is now offering senior real estate loans of $15 million and more, as well as mezzanine debt and preferred equity of $10 million and more. Moinian will initially focus on the New York area, Miami and Los Angeles, and plans to issue loans on all property types with terms of up to five years.
Others in the lending game include Scott Rechler’s RXR Realty and RFR, which is led by Aby Rosen and Michael Fuchs. Lending offers firms a shot at stable returns at a time when high land prices and a slowing real estate market make it harder to earn fat profits as developers or as outright buyers of properties. Banks’ growing reluctance to fund certain types of real estate projects also creates an opening.
“When there’s volatility you want to decouple yourself from broader market trends to try and find investments where you can capitalize on the impact of that volatility,” Rechler told TRD in February, explaining the company’s decision to issue mezzanine loans.