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Kushners' Cadre Startup Benefited from Misleading Rent Filings

Residential buildings with rent controls are worth less than those without and can merit greater oversight by New York City during construction.

(Bloomberg)—Cadre, the real estate investing startup co-founded by White House senior adviser Jared Kushner, was the primary beneficiary of a property-flipping investment that may have been less profitable if it had fully complied with New York City disclosure rules about rent-regulated tenants.

Cadre owned about 60 percent of three rent-regulated buildings in Queens sold by Kushner Cos. in April 2017. The $59 million price tag was an 80 percent premium over what they paid in January 2015, property records in New York show. It was the first known deal that Cadre, then a fledgling company, took from purchase to sale, and the high rate of return in a short time was touted as a proof-of-concept for its web-based investing platform.

Kushner Cos., Cadre’s operating partner at the properties, told the city the buildings had no rent-regulated tenants when applying for construction permits to update the buildings in 2015 but tax records filed later showed almost 100 such residents, according to a report by the Associated Press. The number of tenants fell precipitously prior to the buildings’ sale, the wire service reported.

Residential buildings with rent controls are worth less than those without and can merit greater oversight by New York City during construction.

Jared Kushner divested from some assets when he joined the the White House as an adviser to his father-in-law, President Donald Trump. His stakes in the Cadre entities that owned the Queens properties weren’t among the divested assets, according to a December financial disclosure filed by his wife, Ivanka Trump.

Since joining the government, Kushner has frequently updated his required financial disclosures with new information, and on a different set of disclosures he left off more than 100 contacts with foreign officials. He has been unable to obtain a top-level security clearance. Kushner’s lawyers have repeatedly maintained that he doesn’t mix private business with his government role.

In an email, Kushner Cos. said its government filings are prepared by third parties and reviewed by independent counsel.

“If mistakes or violations are identified, corrective action is taken immediately,” the company stated. “Kushner would never deny any tenant their due process rights. Regarding the specific buildings mentioned, all identified violations or complaints were resolved or are in the process of being resolved expeditiously."

Funding Round

Cadre’s star has soared since the Queens deal. In June, it raised $65 million in a series C funding round led by Andreessen Horowitz. Then, in January, it announced it secured $250 million of client money from Goldman Sachs to invest in real estate deals.

“We take our responsibilities as a steward of our investors capital very seriously, and apply a rigorous due diligence process to all of our investments,” a spokeswoman for Cadre said in an emailed statement. “Cadre has closed more than a dozen investments nationally and relies on its operating partners to manage day-to-day operations, including any administrative filings or work with third parties. The issues raised with these particular filings were not known to us prior to today. We understand that appropriate corrective actions have been taken to swiftly resolve any issues.”

The real estate investing platform is backed by Thrive Capital, the venture investing firm founded by Joshua Kushner, Jared’s brother.

When the buildings were sold, Ryan Williams, who co-founded Cadre with the Kushner brothers, said in a statement that experience and data analytics “allowed us to identify this compelling market opportunity and unlock the value of the portfolio alongside a valued operating partner, Kushner Companies.”

Cadre’s ties to the Kushners has come with blessings and curses. Initially, the connections helped bring in advisers, investors and customers. But since Jared Kushner’s ascent to White House, the company has been entangled in questions about Kushner’s financial disclosures and an investment from Yuri Milner, a Russian-born investor with ties to a sanctioned bank in that country.

Like many real estate companies, Kushner Cos. often seeks funds from investment companies to help finance deals. A Bloomberg report in December found that many buildings popularly known to be Kushner properties are mostly owned by others.

To contact the reporter on this story: Caleb Melby in New York at [email protected] To contact the editors responsible for this story: Jeffrey D Grocott at [email protected] Bernard Kohn, Kevin Miller

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