Kushner tapped program meant for job-starved areas to build a luxury skyscraper
Jared Kushner and his real estate partners wanted to take advantage of a federal program in 2015 that would save them millions of dollars as they built an opulent, 50-story residential tower in Jersey City, N.J.’s booming waterfront district, just across the Hudson River from Lower Manhattan.
There was just one problem: The program was designed to benefit projects in poor, job-starved areas.
So the project’s consultants got creative, records show.
They worked with state officials in New Jersey to come up with a map that defined the area around 65 Bay Street as a swath of land that stretched nearly four miles and included some of the city’s poorest and most crime-ridden neighborhoods. At the same time, they excluded some wealthy neighborhoods only blocks away.
The tactic — critics liken it to the gerrymandering of legislative districts — made it appear that the site was in an area with extraordinarily high unemployment, allowing Kushner Cos. and its partners to get $50 million in low-cost financing through the EB-5 visa program.
The move was legal, and other developers have used similar strategies in recent years, often aided by state officials who welcome the infusion of cash. But it illustrates how Kushner — who ran his family’s real estate company before he became a senior advisor to President Trump — and his partners exploited a loophole in a federal program that prominent members of both parties say has been plagued by fraud and abuse.
On the south side of Jersey City, which has some of the most entrenched poverty in the New York City region, many people interviewed one day last week were surprised that their neighborhood’s troubles were part of the reason that 65 Bay Street got cheap financing.
“That’s very sad,” said Pastor Shyrone Richardson of the World Outreach Christian Church in the struggling Bergen-Lafayette section of Jersey City. “Unfortunately, the people who are benefiting from this are not the people in this area.”
Richardson’s church is in a five-block area where nearly one in five were jobless and there were three fatal shootings in 2015, according to an analysis of crime and census data.
His neighborhood seems a world away from the gleaming office towers and trendy cafes that surround 65 Bay Street. The Jersey City waterfront saw a building boom after 9/11 that transformed the area into one of the hottest real estate markets in the New York metro region, drawing residents from Manhattan and Brooklyn.
Apartments in the Bay Street building, marketed as Trump Bay Street, rent for up to $4,700 a month and offer sweeping views of Lower Manhattan. A nearby commuter train shuttles passengers to the World Trade Center within minutes. The area within a roughly three-block radius around the building had an unemployment rate of just 2.6% in 2015, according to census data.
Under the EB-5 program, a wealthy foreigner can get a fast-track visa granting U.S. residency by investing at least $500,000 in a project in a “targeted employment area.” To qualify, the area must have an unemployment rate at least 1½ times the national average. For developers, the terms of the investment are more favorable than a bank loan.
The Trump administration is considering whether to adopt changes that would prevent EB-5 gerrymandering. Kushner has said he will recuse himself from any discussions on the program.
Kushner Cos., meanwhile, is rushing to raise $150 million in low-cost financing through EB-5 for a separate project in Jersey City: a pair of luxury towers in an area called Journal Square. Kushner’s sister caused a stir this month when she mentioned her brother in a pitch for the project to investors in China.
For that project, too, the company is linking the development to blighted neighborhoods miles to the south while excluding adjoining neighborhoods that have lower unemployment rates, records show.
An executive at U.S. Immigration Fund-NJ, a firm helping Kushner Cos. raise EB-5 money for both projects, defended the practice. Mark Giresi, chief operating officer, called it a “common sense” approach that reflects the broader economic reality of each project’s surroundings. He also said jobs created by the project could be filled by workers from the depressed areas only miles away.
“In large urban markets like Jersey City these types of real estate development projects create much-needed jobs, particularly in the construction industry across areas of the city that cover multiple census tracts,” Giresi said in a statement. Census tracts are government-defined neighborhoods, sometimes as small as a few blocks.
Giresi said the Bay Street project created more than 1,280 construction and other jobs and that 1 Journal Square is projected to create 6,600. Under the program, each $500,000 investment must create at least 10 jobs.
The program’s critics say that cobbling together multiple census tracts to push up the average unemployment rate too often benefits developers and areas that do not need the government help. They point to EB-5 projects in prosperous areas of Manhattan, downtown Washington and in Beverly Hills.
“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.”
The government caps the number of EB-5 visas it issues each year, and most of the resulting investment goes to high-profile projects in prosperous areas.
A spokeswoman for Kushner Cos. declined to comment, as did Jared Kushner’s spokesman.
Jared Kushner has sold his interest in 1 Journal Square but maintains an ownership stake in 65 Bay Street. The KABR Group, a partner in the luxury tower on Bay Street, also declined to comment.
Kushner’s prominence is drawing renewed attention to the practice, which has been the subject of years of debate in Congress and furious lobbying by the real estate industry. In interviews along Martin Luther King Drive in Jersey City last week, there was a common reaction.
“It’s like we’re being used,” said Helen Gathers, a registered nurse who has lived in Jersey City for 38 years.
Down the block, Laville Penn, a 54-year-old who was released from prison in early 2016 after a drug possession conviction, was looking for employment. He had been searching for steady work in construction for more than six months, he said, but had found only temporary day jobs.
Now, hoping to pick up some hours, he stopped by a lot where a friend was doing contract demolition work. Penn said the high-rises built in Jersey City are typically union jobs. “It’s difficult to get into the union if you don’t have certification or experience,” he said.
The EB-5 program was initiated in 1990 to help attract foreign investment to rural and poor, urban areas that have trouble drawing conventional financing or investment.
But developers are free to string together an endless number of contiguous census tracts until they reach the unemployment threshold. In the years since the Great Recession, this has often meant finding the nearest poor area and drawing a line to it.
Documents obtained from New Jersey through a public records request show just how easy that was for Kushner Cos. and KABR Group as they sought to build the Bay Street tower.
On May 6, 2015, Michael Evans, a consultant working on behalf of the project, sent an email to an official in the New Jersey Department of Labor asking that the Bay Street area be deemed an area with high unemployment. Individual states are responsible for reviewing unemployment data and issuing letters certifying that projects qualify for the federal program.
Evans wrote that such an area could be created by combining 26 census tracts in Jersey City that stretch more than two miles to the northwest and three miles to the southwest.
“The client as always is in a great hurry so if you can e-mail me the letter as soon as it is finished it would be appreciated,” Evans wrote. Evans did not respond to a request for comment.
There was a problem, though. The census tracts weren’t contiguous — and didn’t include the the project itself.
Three weeks later, the state, wrote back that the project qualified under a different but similarly attenuated configuration that achieved the same goal. New Jersey’s state website says it will help developers “perform a special tabulation for the area” of their project using census data.
The state-approved map strung together 16 census tracts that went nearly four miles to the southwest, crossing the New Jersey Turnpike and heading south to the Bergen-Lafayette and Greenville areas. Together, those neighborhoods had an average unemployment rate that edged just higher than 9.3%, the qualifying rate at the time.
That probably saved Kushner and his partners millions of dollars.
Developers typically pay only 4% to 8% interest annually on money raised through EB-5, experts said. Conventional financing can carry an interest rates of between 12% and 18%. On the $50 million for Bay Street, that difference amounts to millions of dollars annually over the life of the loan.
On Jan. 5 of this year, a little over two weeks before Trump was to take office, another consultant working on behalf of Kushner Cos. got in touch with New Jersey state officials again. This time, it was about 1 Journal Square. The census tract where it is located had an unemployment rate of 2.9% in 2015, but the consultant suggested adding five neighborhoods to triple that unemployment rate.
The approval came four days later, records show. Kushner’s sister went to China in May seeking the $150 million in EB-5 financing.
The Trump administration will decide in the coming months whether to enact rules, proposed by the Obama administration, limiting the census tracts that can be considered for EB-5 eligibility to only those directly adjacent to the tract containing the development.
The proposal is being considered by Secretary of Homeland Security John Kelly. Under the proposed rules, neither the 65 Bay Street tower nor the proposed 1 Journal Square project would be in a “targeted employment area.”
New Brooklyn Luxury Building Welcomes Tenants Despite Lacking Certificate Of Occupancy
Joseph Brunner, described by The Real Deal along with his partner Abe Mandel as one of the “heavyweights” of Brooklyn’s Hasidic Jewish developers, with more than 100 buildings to his name (well, LLCs), bought the former Colonial Laundry building for $6.175 million in 2012.
The process of demolishing the factory and building the sleek residential building in its place was fraught with problems. Neighbors have complained to the city about construction 22 times since January 2015, and a contractor has paid out $12,400 for 12 serious building violations in that time. Infractions included working in hours outside of those allowed by permits, failing to enclose the construction site, failing to safeguard personnel, and failing to notify the DOB that excavation was beginning.
A neighbor, who asked to remain anonymous for fear of retribution, said, “They’ve been such assholes every step of the way. It’s the shoddiest job I’ve ever seen.”
She complained that crews frequently worked late into the night and on weekends, and left debris on the sidewalk. During the final phase of construction, when workers were lining the facade with Styrofoam, her garden filled with balls of the stuff, “And I was picking it out of my five-month-old daughter’s hair.”
The neighbor added that a man from management once confronted her and, intimating that he knew she was calling 311, said, “Why do you care? Your street is already so dirty.” Later, she says he added, “I can deal with a lot of fines.”
The tenants we spoke to all shared stories that, though they diverged in some respects, were consistent on several key points. Specifically, they said that the leasing agents, operating out of an office marked “Bedford Lofts” at 105 Leonard Street in South Williamsburg, refused to give them copies of their leases (“Oh shit, I think we may not have gotten a copy,” one said when told about the others’ stories. His roommates confirmed it.); that management promised the building would be finished by September 1st; and when it wasn’t, that management offered them amounts ranging from $100 to $140 a night to stay in hotels until the inspectors sign off. No one we spoke to has been reimbursed yet.
Several tenants are also awaiting the construction of new walls in their apartments, to partition off an extra bedroom (a text message exchange between an agent and a tenant seems to confirm this arrangement). They say they have been told that the work will be done after inspectors come through and sign off on the building. Such new construction would, of course, only be legal with the applicable permits.
A man named George who answered at a number listed for a brokerage representing the building called Yuri Management told me there is an available “one bedroom-two bedroom flex. It comes as a one-bedroom, but could be flexed as a two-bedroom, meaning they could come in and cut out some of the cabin space.”
Asked why people are saying that there is no certificate of occupancy, George said, “What happened was, during the inspection, they didn’t get one of the signatures.” He said the move-in date has been delayed to September 15th. But three tenants told me that Mittelman, the property manager, informed them this week that the building has passed inspections and is okay to move into.
The tenants whose situations we reviewed—a mix of financiers, social services professionals, and students at nearby Pratt Institute—are stressed. One trio of students is staying with friends and hoping to pocket the money. They are angry about the alleged bait-and-switch, but question how much more they can do to hold Brunner accountable. “We’re all so busy with school already, and it’s so hard just getting ahold of management,” one said. “And besides, we don’t have our lease. Nothing is in writing.”
My guide around the building said the experience for him has been “Actually kind of fun,” given that he works in Downtown Brooklyn and has been sampling the neighborhood’s hotel offerings with his girlfriend. For his roommates, who have more far-flung professional jobs, “It’s definitely more disruptive.”
Another tenant is planning to withhold rent—all incoming tenants we spoke to got September “free”—and consulting lawyers.
The moving in of tenants to an un-permitted luxury development is eerily similar to the case of 120 South Fourth Street, which remains evacuated nearly a year after building inspectors forced residents out when inspectors conducting an audit—the department had previously signed off on the building—discovered 3,000 square feet of structural framing and concrete floor had been built without permits. That building is owned by Abraham Bernat, the brother-in-law of slain Williamsburg landlord Menachem Stark, and a principal of the firm The Bedford Lofts LLC.
It’s not clear that there is a connection, but when the tenant who is considering lawyering up first heard that 10 Lexington lacked a C of O and started to do some research, he encountered a story about Bernat’s foibles and realized his leasing agent was working for a company by a similar name. “I thought to myself, ‘Oh, no, not this guy,'” he said.
The tenant recalled having asked repeatedly for a copy of the lease, but being told by the agents that the owner needed to add a few provisions to the generic lease and would mail him a copy.
“In retrospect, I was probably a little too trusting,” he said. A text exchange seems to verify that he requested a copy of the lease and was told to wait by a leasing agent.
As for the predicament he’s now in, the tenant said, “It’s ridiculous. All of these people have nowhere to stay.”
The Buildings Department spokesman said it audited Brunner’s permits during construction and forced the builders to change certain things to comply with the building code. Now, the spokesman said, the agency is planning to send inspectors once more.
Joel Mittelman, the building manager, did not respond to an email seeking comment or a message left at his Google Voice number. Another number listed for him on a permit application rang to a voicemail that is not set up. The number of a lawyer for Joshua Brunner listed on the purchasing records for 10 Lexington has been disconnected. Abraham Bernat did not respond to a voicemail seeking comment.
Update 4:45 p.m.:
An unnamed representative of the building—it’s not clear if the person works for Bruman Realty, Bedford Lofts, or some other company—sent the following statement from a 10lexington.com email address:
As the leasing office we started signing leases in July with the understanding that our inspections for the certificate of occupancy would be complete in Mid-August. As such, the lease start dates were listed for September. The building did not receive the certificate of occupancy sign off yet as expected even though the building does have all other signoffs needed.
Landlord intends to fully comply with the term of all the leases. No tenant has received permission to occupy space in the building, However, landlord did allow as an accommodation for certain tenants that wanted to store their furniture and personal effects into the building for storage purposes only during the pendency of any ministerial delay.
Further more the Landlord has offered to pay the cost of hotels to every tenant that was not able to move in to his apartment to reduce any inconvenience on the new tenants side.
In terms of accessory spaces, it is correct that the roof deck is not yet built. It will be constructed in the coming months. With regard to the courtyard, since most tenants did not rent parking space it is the intention of the owners to make an application to BSA for a waiver of the parking requirements to include a courtyard area in the existing structure, since there is already enough parking spaces in the basement.
HOW MANY REASONS DO YOU NEED TO VOTE AGAINST ARON WIEDER?
Failed School District
Election Fraud Allegations
anti- Child Victims Act
anti – Monitor
anti – zoning and code enforcement
and then there’s his donor pool…
Aron Wieder, Legislator in Rockland County, announced that he is seeking election for an Assembly seat in the NYS Assembly. We can think of dozens of reasons not to give him an Assembly seat soapbox as a voice of Rockland County. The first and foremost, he is the voice of a smear campaign against anything non-Jewish or non-ultra-Orthodox Jewish, “A Jew in Rockland.”
From the archives of Failed Messiah:
Aron Wieder Yossi GestetnerSatmar hasidic PR hack Yossi Gestetner’s Orthodox Jewish Public Affairs Council (OJPAC) has released a disgusting video that smears opponents of the haredi community as anti-Semites and potential terrorists without ever once mentioning the very real misbehavior of many haredim. It pulls from a tiny minority of opponents who are (or can be construed as) anti-Semitic and smears the vast majority of opponents with that very broad brush. And the video is narrated by the hasidic Majority Leader of the Rockland County Legislature Aaron Wieder.
Above: left, Aron Wieder; right, Yossi Gestetner
Was the fire Payback?
According to our sources, Mordechai Thaler who is an electrical contractor, is the person responsible for setting up Former Lakewood Electrical Code Inspector, indicted for allegedly accepting bribes from contractors . We find it beyond mere coincidence that Mordechai Thaler had his house burned down last week in an electrical fire. Payback?
The investigation began after the New Jersey State Police received information that Perkins allegedly had been accepting bribes from contractors. It is alleged that, between May 1, 2015 and Sept. 30, 2015, Perkins accepted four separate payments of $300 from an electrical contractor as consideration for preferential treatment. The contractor was working as a cooperating witness for the State Police at the time and requested that Perkins inspect his work more quickly. Perkins returned the first payment, but he allegedly kept the three later payments. It is alleged that, after the first payment, Perkins, who previously had inordinately delayed inspections of the contractor’s works sites, began to conduct timely inspections of his work sites. On one occasion, Perkins allegedly approved electrical work performed by the contractor without first inspecting the work. Afterwards, Perkins allegedly accepted the fourth $300 payment.
In connection with those four alleged payments, Perkins is charged with bribery, official misconduct, and acceptance or receipt of an unlawful benefit by a public servant for official behavior. He is charged with a second count of official misconduct and a second count of acceptance or receipt of an unlawful benefit by a public servant for official behavior based on multiple instances dating back to 1997 when he allegedly accepted other payments from contractors to influence the performance of his work as an electrical sub-code official and inspector for Lakewood Township. The charge of pattern of official misconduct relates to that conduct as well as the conduct involving the cooperating witness in 2015.
“Government inspectors are supposed to safeguard the public from improper work and potential fire hazards, not line their own pockets,” said Acting Attorney General Porrino. “When inspectors like Perkins allegedly take bribes, large or small, from contractors for preferential treatment, trust in government is undermined and public safety can be compromised.”
“Bribes, at any level of government, undermine public confidence in government,” said Director Elie Honig of the Division of Criminal Justice. “We will continue to aggressively prosecute any officials who corruptly use their public positions for personal gain.”
“There are few assets more valuable than a person’s home, and homeowners have a right to expect that government inspectors will focus exclusively on ensuring that homes are safe, not on satisfying contractors who pay bribes,” said Colonel Rick Fuentes, Superintendent of the New Jersey State Police. “The arrest and indictment of Perkins will send a message that the state will not tolerate any illegal behavior that could endanger its citizens.”
Deputy Attorney General Pearl Minato presented the case to the state grand jury for the Division of Criminal Justice Corruption Bureau. Acting Attorney General Porrino commended the detectives who conducted the investigation for the New Jersey State Police Official Corruption Bureau South Unit.
Each of the charges in the indictment carries a sentence of five to 10 years in state prison, including a mandatory five-year period of parole ineligibility, and a fine of up to $150,000.
The indictment is merely an accusation and the defendant is presumed innocent until proven guilty.
The indictment was handed up to Superior Court Judge Mary C. Jacobson in Mercer County, who assigned the case to Ocean County, where Perkins will be ordered to appear in court for arraignment at a later date.
Touring what’s left of his home after a devastating fire, Lakewood resident Reb Mordechai Thaler kept saying one thing – “Baruch Hashem nobody was injured – a home can be replaced.”
The fire on Erev Shabbos completely destroyed his home, and nearly all of its contents, and this morning he was still rummaging through the ashes to see what he could salvage – which wasn’t much. Clothing, furniture, books, a Talis and Tefillin – everything was burned or destroyed by water.
Among the ashes, he found some family pictures, though most were destroyed.
“We’ll be like the couple who married in the 50s and 60s who just have a couple of photos,” he said.
Nearly every inch of the recently-renovated home was covered in ashes, including the bedroom a family member was sleeping in at the time the fire started.
“This is where he was sleeping,” Reb Mordechai pointed out to us. “There used to be a cabinet here – there’s nothing left of it.”
Luckily, a fire safe containing valuables were saved, and other documents which he removed for use, were also saved.
This morning Reb Mordechai came out publicly to thank the Ribono Shel Olam, and the entire community for the tremendous amount of support he and his family received following the fire.
Continue reading, here.
Those who claim that over 93% of their population is poor own huge tracts of land surrounding Kiryas Joel.
Again we ask a very simple question.
Where is the money coming from that allows rich landowners to receive public assistance while buying up massive amounts of additional land where they intend to put up brand new multifamily housing for future additional families to claim that they are also living in abject poverty?
How can this massive population expansion occur in an area where there is no infrastructure, and no manufacturing businesses to offer any form of employment?
This article is from 2014 but now in 2016 Rockland County is apparently being subjected to aggressive blockbusting. Are areas of Orange County and Rockland County subject to some form of a land grab forcing property fire sales and if so why is this happening?
Kiryas Joel annexation attempt: Map shows Hasidic inventory
Posted Feb. 7, 2014 at 2:00 AM
Updated Feb 7, 2014 at 10:14 AM
The blunt title says it all: “Map of Hasidic Jewish land owners Surrounding Kiryas Joel.”
It’s dated Jan. 14, and it was drawn by the same engineering firm that mapped the 507-acre annexation request delivered to Monroe Town Hall a few weeks earlier. It appears to represent the broader territorial ambitions of Kiryas Joel’s leaders and landholders.
The map, provided to the Times Herald-Record with no information about who commissioned it or why, shows neighborhoods outside Kiryas Joel that are largely occupied by Hasidic families, and large, undeveloped tracts with Hasidic owners, stretching from the former Lake Anne Country Club in Blooming Grove to Larkin Drive in Monroe. Most of the vacant land was scooped up years ago, presumably to await the next expansion push.
The entire inventory of Hasidic-owned tax parcels take up a total area of 6.25 square miles, including the 1.1 square miles of Kiryas Joel at its core, according to the map made by the Monroe office of AFR Engineering and Land Surveying.
Kiryas Joel leaders have long weighed various strategies for commandeering more territory, whether through annexation or by forming another village or town. Neighboring communities, meanwhile, have taken preemptive steps to protect their zoning by forming the villages of Woodbury and South Blooming Grove in 2006.
For now, the petition to move 507 acres of Monroe into Kiryas Joel is the only proposed border shift under consideration. No such requests have been made in Woodbury or Blooming Grove, although Woodbury Mayor Michael Queenan said he expects to see one soon.
“We’re anticipating some kind of annexation attempt in the near future,” he said. “We feel it’s going to be coming fairly quickly.”
AFR’s map indicates that Hasidic-owned properties outside Kiryas Joel total 900 acres in Monroe, 1,100 acres in Woodbury and 1,300 acres in Blooming Grove.
Two-thirds of the Blooming Grove land consists of the former Lake Anne Country Club, an 851-acre property that Hasidic investors bought for $15 million in 2006. The ownership group, whose development plans have never materialized, filed for bankruptcy in November to stave off foreclosure. In court papers, the owners say they’ve clashed with South Blooming Grove officials “over the scope and density of the proposed development,” but are now formulating “a more workable development plan” to win village approval.
Mayor Robert Jeroloman said in response Thursday that the owners have never submitted a formal subdivision plan and have given no indication what they are considering now.
“The hangup is that they keep filing litigation after litigation, trying to change the zoning for this property,” he said.
Two lawsuits to undo Woodbury’s zoning are pending in state Supreme Court. One was filed in 2011 by Kiryas Joel and affiliated plaintiffs, who demanded that multi-family housing be permitted in an area where Hasidic Jews have bought homes and vacant land.
A similar suit was brought a year earlier by a group called United Fairness. A judge initially dismissed that case, but an appeals court panel reinstated it last month and allowed developer Ziggy Brach to substitute himself as the plaintiff.
For First Time, Frum Monsey Residents File Lawsuit Against Frum Developer
In the first action of its kind in Rockland County, New York, a group of frum residents in Monsey have brought a lawsuit against a frum developer with the approval of daas Torah, seeking a stop work order, an injunction against further building and other relief, Matzav.com has learned.
The action was brought in New York Supreme Court in Putnam County against Town of Ramapo Supervisor Christopher St. Lawrence, Chief Building Inspector Anthony Mallia and the owner/developer of the property, Viola Gardens, LLC.