Opinion |

Thank Heavens It's Kushner and Not Trump Coming to Tel Aviv

Jared's family real estate company is weighing a bond issue on the Tel Aviv Stock Exchange

David Rosenberg
David Rosenberg
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Jared Kushner
Jared KushnerCredit: FADEL SENNA - AFP
David Rosenberg
David Rosenberg

Thank heaven for little blessings. There are two real estate moguls packing their White House bags, but fortunately for Israeli stock market investors, it’s the smarter, more successful one that wants to issue bonds on the Tel Aviv Stock Exchange.

Kushner Cos., the family-owned property company that son-in-law-in-chief Jared Kushner once ran, has reportedly filed to issue about $100 million in debt for trading on the TASE. No other details about the offering are known, but it will probably take place sometime in the first quarter of 2021.

Saying that Kushner Cos. is a smarter and more successful business than the Trump Organization doesn’t really set a high benchmark. Despite Donald Trump’s repeated assertions that he is a multi-billionaire and the most successful property investor since Peter Minuit bought Manhattan Island for $24 from the Lenape Native Americans, the truth is otherwise.

Both the Kusher and Trump companies are privately held, so their financial statements aren’t available to the public. However, an investigation by The New York Times into some of Trump’s tax information, published last September, revealed that in the last two decades real estate has been mostly a money-loser for the president. Apart from the infamous Trump Tower and a pair of Chicago office buildings he got as compensation for an abortive business deal, his empire of golf courses, Washington DC hotel and real estate-services businesses seem to have all lost oodles of money. Even when the U.S. economy was booming pre-COVID, the Trump Organization was, at best, coasting.

What kept the business going (apart from not paying taxes) was revenues from “The Apprentice” reality TV series and licenses paid by others to use the Trump name. The tax records thus not only throw cold water on Trump’s alleged real estate smarts, but illustrate just how much he was the kind of businessman who profits from the airiest bits of the economy. He was never a businessman who created jobs and innovated; he just catered to rich people with open wallets and skimmed off percentages from his name.

By contrast, Kushner Cos. has real estate assets estimated at $15 billion, did $3 billion worth of deals last year and has a payroll of about 1,000.

When Jared ran the company in the years before Trump’s election victory, the company’s record was mixed. He wasn’t yet CEO, but he was reportedly heavily involved in the disastrous purchase of the 666 Fifth Avenue office tower. He was running the show when the company bought another dud, the former New York Times building.

No matter, Jared left for Washington and under the resumed leadership of his father Charles (recently pardoned by Trump) and President Laurent Morali, the company has been bailing out of the New York property market in favor of a portfolio of suburban real estate in places like New Jersey, Virginia and Florida. That is decidedly less glamorous than owning soaring Manhattan office towers, but with urbanites fleeing the cities due to COVID, Kushner senior’s strategy is looking very savvy.

Risky business

The wisdom concerning Kusher Cos.’ plans to sell bonds in Tel Aviv is that it wants to raise cash in order to buy distressed properties in the real estate wreckage left by the coronavirus. It is certainly not the only property company thinking in that direction and, broadly speaking, the strategy makes sense.

The problem is the details. It would be dangerous to be betting on commercial and office real estate right now, since no one can say with any assurance what demand for offices and brick-and-mortar stores will be. Residential real estate is a better bet, but who’s to say that the city exodus is more than a fad? If city apartment prices come down and restaurants and other attractions return to life, a lot of people may have second thoughts.

The other risk is that Jared may rejoin the family business. On the one hand, he made a lot of new, rich and influential friends in the Gulf and elsewhere during his White House years who could give a boost to the family business (we’ll leave the conflicts of interest issues aside, much like Jared himself has). But his track record in the real estate business is spotty.

And that leads to the second half of the risk. If it goes ahead with its plans, Kushner Cos. won’t be the first American property company to sell bonds or stock on the TASE. Somewhere between 25 billion and 30 billion shekels ($7.8 billion-$9.3 billion) of securities have been issued over the years, but alas, not always so successfully. A lot of the companies have had to reschedule debt amid issues of poor governance and transparency and an absence of collateralization to adequately protect bondholders.

It would be nice to think that TASE investors have learned their lesson, but the history of stock markets is that the learning curve slopes downward very quickly. Yesterday’s obvious risk becomes today’s unbeatable opportunity. Factor in the Kushner name (and let’s face it, Trump is popular in Israel and Kushner is regarded as the hero of normalization), and investors may be less discerning than they ought to be.

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