NOT NEWS – DJT Is No Big Macher

3EF0A7E9-EF19-4D5E-9B42-FE9AAEEC4569Having worked for thirty years in the highest echelons of the New York City real estate industry, I have a perspective on Donald j. Trump which is, perhaps, not unique but is certainly underreported. I have done deals with Harry Macklowe, Gary Barnett, Steve Ross, Steve Witkoff, Larry Silverstein, Aby Rosen and many other smaller developers in the Manhattan market and I can tell you with certainty that DJT is not only not respected by the development community in New York, he’s not even regarded as a developer. Let’s start with the most important fact – DJT only holds equity in three properties in Manhattan: the retail condominium at Trump Tower on Fifth Avenue, 40 Wall Street (an old FIDI building Trump bought to convert to residential which remains undeveloped and largely unoccupied) and a partial interest in a Sixth Avenue office building. That’s it. All those other buildings which bear the Trump name have been sold by Trump, have been taken by lenders in satisfaction of guarantees Trump lacked the cash to pay, are licensing the Trump name, are managed by Trump or were required to keep the Trump name as a condition of sale. DJT does not have a single penny of ownership in them. Not a penny. And the properties he does own have significant mortgages on them because, as DJT has proudly admitted, he is highly reliant on debt. Not that that’s a bad thing. All development is reliant on debt, usually personally guaranteed or bonded debt, and the most successful developers are admired as risk takers, the swashbucklers of the industry. And they often fail and face foreclosure or bankruptcy but the best ones come back and are even more respected for it. That’s not the DJT story. Every construction project Trump has undertaken was guaranteed by his father Fred. Donald was not taking the risk. Fred was. Fred was very well connected with the Brooklyn democratic machine and City Hall and every one of Trump’s projects benefited by that connection in the form of tax abatements given by the City to encourage the development of housing. Of housing! First the Hyatt Hotel and then Trump Tower were deemed to be housing according to Comptroller, then Mayor, Abe Beame. And during Fred’s lifetime, when Donald had access to his credit line, there were a few successes, including, initially, the Atlantic City casinos. Then came the Taj. It was to be the largest and most luxurious of the Atlantic City casinos. DJT got construction financing, all of which was personally guaranteed and guaranteed by the entities which owned the other casinos. Costs exceeded estimates and the lenders were squeezed into lending new money to protect the old. When the project was finally completed, the debt was too high, and the actual income too low, to support a permanent loan to take out the construction lenders so the Taj defaulted on it’s loans, the lenders called in the guarantees and, in the end, the bankruptcy court left DJT with NOTHING but the aforementioned three properties (and, I believe, Mar-a-Lago) and the Taj, which, despite renegotiation of its debt many times, remains underwater. How, then, does DJT value his worth at $10 billion? He has determined that a bonanza fide purchaser in an arm’s length transaction would pay him $8 billion for the exclusive right to put the Trump name on hotels, residential buildings, golf courses, ties and all the other things DJT is receiving income from. Now, does Trump naming rights have any value whatsoever to someone who is not named Trump? Probably not. Does the current cash flow support a valuation of $8 billion? We won’t know until we see the tax returns, which is undoubtedly why he is so reticent to provide them. Look, DJT’s not worth nothing. He probably has a legitimate balance sheet of a couple of billion which is not chump change. The problem is the outlandish claims he makes for himself. The NYC real estate industry is full of Trumps, loudmouth wheeler dealers trying to make themselves grander, more fabulous than they really are. Dozens of them, many of whom have real assets valued way higher than Trump’s. In the end, Trump has produced not so many successful projects but a whole lot of schadenfreude among the NYC players.

22 Responses to “NOT NEWS – DJT Is No Big Macher”

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    I can’t tell you how much I enjoy reading your blog. You can write. I hope health issues are on the mend. And I loved that you used the word shaudenfraude. It was used repeatedly at my fathers memorial service. I found it a tad offensive? I didn’t see him as someone taking pleasure in others misfortunes but that’s besides the point. I loved how you used it here.

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