Jared Kushner with 100 Pierrepont Street (left) and 38 Monroe Place (Getty, StreetEasy, Leslie Garfield)
When Kushner Companies paid $36.5 million for six law school dorms, it seemed like a savvy deal.
The Brooklyn Law School portfolio, as the dorm buildings were known, had been listed for more than $41 million and two purchasers offered that price, but after the transactions fell through, Kushner swooped in and picked it up at a discount in 2014.
The multifamily developer planned to turn three of the properties into luxury single-family homes and keep the remaining three as multifamily rentals.
Although Kushner sold the three townhomes for $27 million altogether, or $7.25 million more than it paid, that does not account for renovation costs that surely ran into the millions, not to mention transfer taxes and other closing costs, plus property taxes and interest as the homes went unsold for a combined 13 years.
Moreover, the developer underperformed the luxury residential market — and its own expectations.
Kushner planned to sell off pieces of the portfolio for more than $60 million. Instead, after six years, four deep price cuts and one lawsuit, the developer has brought in just over $33 million across four transactions. It also had to pay $100,000 to tenants at one property to settle the suit, which alleged rent overcharges by the firm and earned it unwanted media attention.
The dissonance between Kushner’s results and the Brooklyn market is stark. Prices for luxury single-family homes in the borough have jumped 11 percent this year and the number of sales surged 42 percent as New Yorkers rushed to outbid each other, according to a report by Serhant.
In this frenzied environment, Kushner sold the last two of its redeveloped homes, 100 Pierrepont and 38 Monroe Place, for 43 percent less than its target. Combined, the three homes sold for a third less than their initial combined asking prices of $41 million.
Kushner did not respond to requests for comment. But sources familiar with the portfolio blamed the disappointing outcome on poor home design, internal strife and politics.
A promising start
27 Monroe Place (Corcoran)
The company’s first two luxury houses hit the market in 2015. One of them, at 27 Monroe Place in Brooklyn Heights, was well-received; actor Matt Damon’s wife reportedly visited the property for a showing. It ultimately sold — not to Damon — in 2017 for $12.9 million, a neighborhood record. But the developer had been hoping for $16 million, which at the time would have been an all-time high for the borough.
Kushner followed up with the five-story townhouse at 100 Pierrepont Street. It languished on the market after listing in 2015 for $11 million. The home was marketed by six different agents in as many years before it finally sold in July for a humbling $6.4 million.
The third spec townhouse, 38 Monroe Place, also took years to sell. It was first listed in 2016 for $13.75 million. Then it disappeared from the market for three years, eventually returning with the asking price slashed to just under $8.5 million. Another two years passed before it sold, in February, for $7.65 million to a tenant who had previously rented the home, two sources said.
Leslie J. Garfield brokers Ravi Kantha, Jed Garfield and Matthew Lesser handled the sales at 100 Pierrepont and 38 Monroe. They declined to comment.
To industry insiders and agents, the listings’ under-performing the market points to the problems with trying to make single-family homes out of apartment buildings.
Dogan Baruh, a broker at Compass who handled the 100 Pierrepont listing in 2017, said what gave buyers pause was the sunken entryway to the home in a townhouse market known for stoops, and the kitchen and entertaining space being on different floors.
“The house was really choppy, sort of, quite vertical,” he recalled. “It was a multifamily converted into a single-family.”
Another broker who viewed the house and spoke on the condition of anonymity said the home was devoid of the charming elements and open floor plans buyers typically find in Brooklyn townhouses.
Pricing was another issue. Though renovated single-family homes in Brooklyn Heights can command top dollar, buyers balked at paying $1,570 to $1,910 per square foot for homes they felt needed additional work.
A source with knowledge of the portfolio said disagreements over pricing between Kushner and its investment partners slowed down the process. Ultimately the asking prices at both properties were reduced significantly.
Two sources said the Kushners’ political profile after Jared Kushner joined President Donald Trump’s administration was another factor that drove away buyers. Kushner was running the company when it acquired the Brooklyn Law School portfolio and remained at the helm until 2016 when he became a top White House adviser.
Missing the party
By the time the two spec homes sold this year, Brooklyn’s townhouse market was on fire with buyers racing to outbid each other. A spec house in Brooklyn Heights developed by billionaire Vincent Viola sold in January for $25.5 million, becoming the borough’s priciest residential deal.
Yet Kushner Companies missed the party.
From left: 89 Hicks Street, 18 Sidney Place and 144 Willow Street (StreetEasy)
It sold 38 Monroe for $1,063 per square foot and 100 Pierrepont for $914 a foot, well below Brooklyn Heights’ average price per square foot of $1,260, per Serhant’s market report.
Two of the portfolio’s three multifamily buildings, at 18 Sidney Place and 144 Willow Street, were listed for a combined asking price of $20 million in 2017. Only 144 Willow sold, for $6.65 million to Benchmark Real Estate Group. Kushner had paid $3.2 million for the dorm and an unknown amount to make it a traditional rental.
The other property of the Brooklyn Law School portfolio that Kushner still holds is 89 Hicks Street, which was the property involved in the 2017 rent overcharge suit.
