Trump’s real estate empire pays the price for poisonous politics
By Joseph Tanfani
(Reuters) – Former US President Donald Trump’s sharp rhetorical style and divisive politics have allowed him to essentially take control of the Republican Party. His supporters are so dedicated that most believe his false claim that he lost the 2020 election due to voter fraud.
But the same tactics that inspired fierce political loyalty have undermined Trump’s business, built around real estate development and trademark deals that saw him make millions by firing his name.
Trump’s trademark was once synonymous with wealth and success, an image that now clashes heavily with a political brand rooted in the anger of his largely rural and working-class electoral base. His presidency is now associated in the minds of many with its violent end, as his supporters stormed the United States Capitol on January 6.
These scorching images, along with years of bitter rhetoric, are costing Trump money. Income from some of its high-end properties has declined, vacant office buildings have risen and its lenders warn that the company’s income may not be enough to cover its debt payments, reports show. financial statements as president, Trump Organization files filed with government agencies, and reports from companies that track the finances of real estate companies.
Potential New York tenants are avoiding its buildings, a real estate broker said, to avoid being associated with Trump. Organizers of golf tournaments have removed events from its courses.
Trump’s focus on political branding has increasingly moved beyond his identity as a real estate mogul, says a hospitality industry veteran.
“Before his political career, the Trump brand was all about luxury – casinos, golf courses,” said Scott Smith, former hotel manager and professor of hospitality at the University of South Carolina. “When he entered politics, he took the Trump brand in a whole different direction.”
Trump’s affairs also remain subject to a joint criminal fraud investigation by the Manhattan District Attorney’s Office and the New York Attorney General. The company and its longtime CFO Allen Weisselberg have been accused of a payroll tax evasion scheme, and investigators continue to investigate whether Trump or his representatives committed fraud by misrepresenting financial information in the claims loan and tax returns. Weisselberg and the company deny the wrongdoing and dispute the charges.
As his development firm struggles, Trump has announced his first major deal since stepping down – and it has nothing to do with real estate. On October 20, he announced that he would build a new social media platform aimed in part at providing him with a political forum after being banned by Facebook and Twitter, which said after the U.S. Capitol riots that Trump used their platforms to incite violence.
This deal could prove lucrative for Trump whether or not the platform succeeds. Investors have rushed to buy shares of Digital World Acquisition Corp, the publicly traded blank check acquisition company that is considering merging with the recently announced Trump Media and Technology group. Digital World shares surged and are now worth around $ 2 billion. Trump’s new media company will own at least 69% of the combined company, but Trump did not disclose his level of ownership in Trump Media.
Trump has also raised money for his political operation, which said it had $ 100 million on June 30, as he hints at a 2024 presidential bid.
Eric Trump, the second son of the former president and an executive of the Trump Organization, said in an interview that the company is now in “a phenomenal situation”. He cited a refinancing of a loan on San Francisco office buildings that gave the Trump company about $ 162 million in cash, according to loan documents and a statement from Vornado Realty Trust, the majority owner of the company.
“We are sitting on a huge amount of money,” Eric Trump told Reuters.
In an email, a spokesperson for Donald Trump denied that the company has collapsed since entering politics.
“The real estate company is doing extremely well, and this is evident in Florida and elsewhere,” Liz Harrington said in an emailed statement. “Given the coronavirus pandemic, in which the hospitality industry has been particularly affected, Mr. Trump’s business is doing very well. “
Financial records show Trump’s real estate business has declined. Income from family farms, heavy on golf courses and hotels, took a hit in 2020 amid the coronavirus pandemic. Revenues at his Las Vegas hotel, for example, have grown from $ 22.9 million in 2017 to $ 9.2 million in 2020 and the first 20 days of 2021, according to Trump’s financial information.
Trump is now making a second attempt to sell his lease on a prominent property, the Trump International Hotel, located in a former federal building in Washington, DC, after failing to find a buyer at the original asking price of $ 500 million. Meanwhile, the company pays the federal government $ 3 million a year in lease payments, according to documents released earlier this month by the House Oversight Committee in the U.S. Congress. These records show that Trump’s Washington hotel has lost more than $ 73 million since 2016.
The damage to Trump’s business image began early in his presidency. A Trump consultant, arguing at a public hearing in 2017 for a reduction in the tax bill at his Doral golf resort, said Trump’s policies had hurt his business model.
“It’s actually not about the property, it’s about the brand,” consultant Jessica Vachiratevanurak said during a December 2017 hearing with the Miami-Dade Value Adjustment Board in a video recording reviewed by Reuters. She cited a meeting she attended where top executives of the Trump Organization described “serious ramifications” for her golf business, for example tournaments and charity events canceled by organizations wishing to avoid partnering. to Trump.
The resort saw its revenue drop from $ 92 million in 2015 to $ 75 million in 2017, she said in another hearing the following year. Trump’s presidential financial disclosure listed Doral’s income at $ 44 million last year.
Vachiratevanurak declined a Reuters request for comment.
“This is obviously wrong because Doral is doing very well,” Trump spokesman Harrington said.
In Trump’s New York home port, Trump’s name has become increasingly toxic. A leading property, the Trump SoHo hotel in Lower Manhattan, was renamed Dominick in 2017. New York City in January canceled leases on a golf course, two Central Park ice rinks, and a carousel; Trump sued the city for improper termination of the golf course lease.
At 40 Wall Street, the 72-story skyscraper that was among Trump’s proudest acquisitions, problems that began before the pandemic have worsened, according to reports from companies that track real estate performance. After the Jan.6 riots on the U.S. Capitol, some of Trump’s big tenants, including the Girl Scouts and a nonprofit called the TB Alliance, said they were looking into whether they could break out of their leases. A commercial real estate broker says many potential tenants won’t consider the building because Trump’s name is on it.
The Girl Scouts did not respond to requests for comment and the TB Alliance said it was “exploring all options” for leaving the Trump building.
“Most New York tenants don’t want anything to do with it, and it has been for five years now,” said Ruth Colp-Haber, who said she has placed seven clients in the building over the years. years old, but can’t interest anyone now. . “It’s the biggest deal going on, but they won’t be looking at it.”
The occupancy rate was 84% in March 2021, well below the average of around 89% for this downtown New York office market, according to Mike Brotschol, managing director of KBRA Analytics LLC. The rents Trump was able to charge are also lower – between $ 38 and $ 42 per square foot in a market where the average is approaching $ 50, he said.
Property finances have fallen into risky territory, according to reports.
Trump took out a $ 160 million loan in 2015 to refinance 40 Wall Street – personally guaranteeing $ 26 million. Last year, the building was placed on an industry watch list for commercial mortgage-backed securities at risk of default, according to reports from KBRA and Trepp, which also monitors home loans. In the first quarter of the year, according to the KBRA report, the debt service coverage ratio, a statistic monitored by banks, dropped to a number indicating that the building’s cash flow cannot cover debt payments.
In Trump’s statement, Harrington blamed “the disastrous policies of Bill de Blasio,” the mayor of New York, for the downturn in the city’s office market. “Despite all of these serious headwinds, Mr. Trump has very little debt to value and the business is doing very well,” she said.
The Doral complex and hotel in Washington, as well as a hotel in Chicago, are secured by around $ 340 million in loans from Deutsche Bank AG, Trump’s biggest lender. But the bank has no appetite for more business with Trump and has no plans to extend the loans after they mature in 2023 and 2024, a Deutsche Bank source told Reuters on condition of anonymity. .
Asked about the bank’s reluctance to work with Trump, its spokesperson replied, “So what?
Experts say the prospect of any new Trump brand development faces long chances. A hotel industry executive said hotel developers – worried about cutting themselves off from millions of clients turned away by Trump – will likely think twice before signing branded deals to put Trump’s name on their properties.
“People have choices. You can go to the Ritz Carlton, you can go to the Four Seasons, and not introduce politics there somehow, ”said Vicki Richman, chief operating officer of HVS Asset Management, a advice and real estate management.
The Trump Organization has attempted to take down its brand of upscale luxury hotels with two new brands: Scion, a mid-priced offering, and American Idea for budget travelers. The company abandoned plans for the two in 2019, citing difficulties in doing business in a controversial political environment.
Harrington said nothing was being excluded for Trump’s business.
“We have a lot, a lot of things to study,” she said. “But we also have the policy under review.”
(Reporting by Joseph Tanfani; additional reporting by Peter Eisler, Greg Roumeliotis and Matt Scuffham; editing by Jason Szep and Brian Thevenot)