Kushner Used Loans For Poor Areas To Save $50 Million On Real Estate

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editors
Critics have likened the loophole Jared Kushner used to save millions in development cost and interest loans to gerrymandering.

Jared Kushner

President Donald Trump’s son-in-law and trusted adviser, Jared Kushner, indulged in some creative mapping to save millions of dollars on one of his luxurious condos in a booming waterfront area in New Jersey in 2015 — and he wants to employ the same tactic yet again.

Kushner and his real estate partners wanted to take advantage of a federal employment-based preference programs that could save them $50 million on a deluxe 50-story residential tower across the Hudson River from Lower Manhattan in a high-end area.

However, there was a problem: the EB-5 visa program is designed to benefit development projects in poor areas with high unemployment rate.

So with a bit of judicious mapmaking with state officials in New Jersey, Kushner came up with a map that defined the area around 65 Bay Street aka Trump Bay Street (a highly affluent area) as a stretch of 4-mile long land by including 16 of the city’s most crime-ridden areas a few blocks away. Clumped together, these neighborhoods had an average unemployment rate of slightly more than 9.3 percent — the eligibility rate for the program at the time.

They also simultaneously excluded the wealthiest part of the neighborhood — the area surrounding the tower which had an unemployment rate of only 2.6 percent — from their mapmaking.

Critics liken this loophole to gerrymandering and the ensuing project received millions from wealthy oversees foreigner — however, it hardly created as many direct jobs (for a $500,000 foreign investment, at least 10 jobs must be created) as expected.

Developers also have to typically pay a tax of 4-8 percent on money raised through EB-5 visas. Conventional financing can increase interest rates to 12 to 18 percent and on the $50 million discount for Bay Street, the saving amounts to millions of dollars each year over the loan’s lifetime for Kushner.

Many people interviewed by The Washington Post expressed surprise that their communities’ problems created cheap financing opportunities for 65 Bay Street.

“That’s very sad,” said Pastor Shyrone Richardson of the World Outreach Christian Church in the struggling Bergen-Lafayette section, where one out of five people are jobless. “Unfortunately, the people who are benefiting from this are not the people in this area.”

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Another resident, 54-year-old Laville Pen, who was released from prison after drug related charges, has also been looking for unemployment for the past half-a-year. However, he has been unsuccessful because, according to him, high-rise buildings like Kushner’s tower typically have union jobs.

“It’s difficult to get into the union if you don’t have certification or experience,” he said.

Critics say the program, by stringing together census tracts to push up the unemployment rate, not just benefits developers but also areas that do not need government help. In addition to that, other more deserving projects, which come with the likelihood of more job prospects, are deprived of the federal program as government caps the number of EB-5 visas each year.

“Many of these affluent-area projects would have been built and jobs created without the infusion of EB-5 capital,” said Gary Friedland, a scholar in residence at New York University’s Stern School of Business. “Consequently, deserving projects can’t be built and the resulting jobs are lost because the projects are deprived of the essential capital to proceed.”

Meanwhile, Kushner Companies is running to raise $150 million in low-cost financing through EB-5 for a separate new project in New Jersey called One Journal Square. Trump’s son-in-law is employing the same tactics for these luxury towers as well. Although the census tract of the area came up with an unemployment rate of 2.9 percent, Kushner’s consultant suggested looping in five job-starved neighborhoods to triple the figure.

The approval of the project came just a few days after Kushner’s sister, Nicole Meyer Kushner, visited China seeking investments.

Jared Kushner

Currently, the Trump administration is debating whether to adopt reforms that would prevent EB-5 gerrymandering while Kushner has said he will recuse himself from any discussion of the bill.

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