Jared Kushner’s Chinese Miracle
by Judd Legum –
Kushner’s family firm scores a miraculous deal with a secretive Chinese company.
President Donald Trump has made his son-in-law, Jared Kushner, the administration’s primary point of contact with the Chinese government.
Now a Chinese firm with mysterious ownership structure and suspected ties to the Chinese government has made an “unusually favorable” deal with Kushner’s family real estate company. The deal, an investment in a Manhattan office building, includes a $400 million cash payout to Kushner Companies.
The exceptional transaction between the Chinese firm, Anbang Insurance Group, and Kushner’s family has the appearance of a serious conflict: an effort to buy favor and influence with the Trump administration.
In addition to being his son-in-law, Jared Kushner is one of Donald Trump’s closest and most trusted advisers. On issues of foreign policy, Kushner is widely seen as more influential than the Secretary of State.
Kushner’s shell game
Like his father-in-law, Jared Kushner ran a large real estate business before entering the White House. And just like his father-in-law, he has not fully divested his assets.
In the case of the building involved in Anbang transaction, 666 5th Avenue, Kushner “sold” his assets to his brother and a trust controlled by his mother.
A lawyer told the New York Times that Kushner appeared to be engaging in a “shell game.” By transferring assets to his family members, he could easily re-acquire them at the conclusion of his government service. Absent that, Kushner still has an interest in financial transactions that could benefit his mother or siblings.
An ethically sound divestment strategy would involve transferring the assets to a blind trust where an independent third party administrator would sell the assets. That process, however, would make it virtually impossible to resume ownership.
Moreover, Kushner retains “some real-estate holdings associated with Kushner Companies.” In other words, he retains significant connections to the family business.
Although his spokesperson said he sold his interest in 666 5th Avenue, he otherwise “declined to say what Kushner is keeping and what he has given up.”
Prior to moving into an official government role, but after it became clear he would be a key figure with the administration, Jared Kushner personally negotiated the deal with Anbang. He met with Wu Xiaohui, the chairman of Anbang, at the Waldorf Astoria hotel in Manhattan just a week after the election. They reportedly discussed the deal over “$2,100 bottles of Château Lafite Rothschild.”
Kushner is the Trump administration’s primary liaison to China
Jared Kushner is 35 years old and has no government or diplomatic experience. Nevertheless, he has assumed the role of the administration’s primary point person to top Chinese diplomats.
Kushner has “met regularly” with “China’s ambassador to the U.S., Cui Tiankai.” He also met with “State Councilor Yang Jiechi, China’s top diplomat” in late February to discuss “bilateral cooperation and the possibility of arranging a meeting between Trump and [Chinese President] Xi [Jinping].”
China has actively sought to cultivate a relationship with Kushner and his wife, Ivanka Trump, in order to soften the administration’s position on China.
Ivanka Trump has also taken in an interest in China, visiting the Chinese embassy with her daughter, Arabella, for the Lunar New Year celebration.
Chinese firm gave Kushner a sweet deal
Kushner purchased 666 5th Avenue, his most ambitious deal, right before the financial crisis. It quickly became an albatross and almost sunk his entire company until he was rescued by an experienced developer, Steve Roth of Vornado Reality Trust.
The new deal is to convert the office building to condominiums and retail space. Roth opposed the deal, calling the existing property “a perfectly good performing office building.” He also noted that the conversion would require the building to be vacant for an extended period of time and the market for luxury condos is softening.
That when Anbang, the mysterious Chinese firm, stepped in to the rescue.
Anbang is buying out Roth from the troubled property and giving him a 10-fold return on his investment. The Chinese firm is also making a $400 million cash payout to the Kushner family business, an extremely large figure even for a deal of this size.
Kushner’s debt on the property, now valued at $250 million, will be settled for $50 million. In other words, $200 million will simply be forgiven.
After all of this, the Kushner firm will retain a sizable stake in the new property’s valuable retail space.
Joshua Stein, a New York real estate lawyer, described it as “a home run of a transaction for Kushner and his group.”
Firm suspected of ties to Chinese government
Anbang was created in 2004 as an insurance company in China. It’s ownership is opaque and it’s is currently on a spending binge, buying real estate throughout the world.
The firm’s activities created suspicion and concern in the Obama administration. The Committee on Foreign Investment in the United States (CFIUS) objected to Anbang’s bid to buy Hotel del Coronado near San Diego, citing national security concerns. The hotel shares a peninsula with a Navy base.
After Anbang bought the Waldorf hotel in New York, Obama broke tradition and stayed elsewhere when he visited the city due to “security, counterintelligence and cybersurveillance concerns.”
Trump promised to be tough on China, hasn’t followed through
Trump spent a lot of time talking tough on China during the campaign but, since assuming the office, has broken his campaign promises.
Most notably, Trump called China “the single greatest currency manipulator that’s ever been on this planet” and vowed to officially label China a currency manipulator his first day in office.
Weeks later, Trump has not followed through. Treasury Secretary Steven Mnuchin has said the Trump administration has no immediate plans to do so and will follow standard procedure.
Trump himself has benefited from favorable treatment from the Chinese since taking office. After a fruitless 10-year legal battle, the Chinese government recently granted Trump 38 trademarks.
Some believe the president is getting special treatment.
“For this many marks to all sail through to preliminary approval this quickly, with nary an issue in sight — that is unheard of to me, and I have been doing this for 16 years,” said Dan Plane, an intellectual property consultant in Hong Kong.