Trump facing devastating debt? Experts say not so fast
NEW YORK (AP) – President Donald Trump is expected to repay more than $ 300 million in loans over the next four years, raising the possibility that his lenders will face an unprecedented situation if he wins a second term and could not raise the funds: exclude the leader of the free world.
But financial experts say the idea of Trump going bankrupt anytime soon is far-fetched.
Even with total indebtedness across his entire business empire estimated at over $ 1 billion, they note that he still has plenty of assets he could cash in, starting with a portfolio that includes turns of. offices and condos, golf courses and branded deals that were valued at $ 2.5 billion.
Based on Forbes magazine’s estimates of the value of its buildings, for example, selling its partial interests in just two properties – an office complex in San Francisco and a tower in Las Vegas that houses a hotel and condos – could pay off. alone $ 500 million.
And even if he doesn’t sell, that kind of valuation backing the loans could make it easier for him to refinance.
“He will be able to renew these loans. They have guarantees that back them up. They’re not that risky for lenders, ”said Phillip Braun, professor of finance at the Kellogg School of Business at Northwestern University.
Trump’s true financial picture has come under scrutiny following New York Times report this week, he has declared hundreds of millions of losses over the past few years, which has seen him pay just $ 750 in taxes the year he won the presidency, and nothing for 10 of the previous 15 years .
But the Times report was quick to note that tax returns alone cannot help determine a person’s net worth. And several experts have told The Associated Press that while Trump’s true financial state is unclear due to a lack of public information, he is probably not looking for money.
At stake is the often big difference between what companies report as profits and losses to the IRS and what they actually receive in profits and put in their pockets.
Many real estate investors report large losses under tax accounting rules and pay little federal taxes. It is because the tax code allows them to lower their tax bills through a myriad of loopholes and legal breaks, including sometimes generous depreciation charges that reflect the expected wear and tear of buildings.
Northwestern’s Braun said Trump’s tiny tax payments came as no surprise to him, and neither did the losses claimed. “His accountants really work to make sure he doesn’t pay any taxes,” he said.
A better idea of how Trump is doing, Braun said, comes from Trump’s operating profits.
Forbes, who has valued Trump’s properties for decades for his annual billionaire problem, says Trump’s 40 Wall Street office tower generated $ 18 million in operating profits in 2019, the Trump Tower $ 13 million and Trump’s stake in San Francisco’s 555 California Street tower $ 26 million.
According to Forbes’ latest assessment, even the lower prices during a pandemic leave Trump with $ 2.5 billion in property and other assets after subtracting his $ 1.2 billion debt.
The Times said Trump’s real estate company had $ 421 million in loans he personally guaranteed, with $ 300 million maturing over four years.
The Trump organization did not immediately respond to an email and phone call requesting comment. Asset rejected the Times on Monday as “fake news” and said he was “extremely under-indebted”.
“I have very little debt compared to the value of the assets,” he writes.
Among his lenders listed in his personal financial disclosure are New York-based commercial lender Ladder Capital, which owes at least $ 110 million, and Bryn Mawr Trust Co., a suburban bank in Philadelphia, which held debt from Trump. valued between $ 5 million and $ 25 million for Seven Springs, a New York estate owned by the Trump Organization.
Trump’s biggest lender on his disclosure is Deutsche Bank, his main financier dating back two decades. This helped him purchase and repair several buildings in New York and Chicago and his Doral Golf Club in Miami. He owes him at least $ 125 million, with the loans maturing in 2023 and 2024.
One option for Trump is to get his lenders to refinance his debt or take out a new loan. Deutsche Bank is an obvious candidate to help her because she has been so forgiving to him over the years.
Trump defaulted on bonds the bank helped sell to investors to fund its casinos in Atlantic City, New Jersey, and on a bank loan for his hotel and apartment tower in Chicago, yet the bank continued to lend him.
Mike Offit, a former Deutsche Bank executive who loaned Trump in the late ’90s, said if a loan-backed property was still throwing out good cash, and everything was fine, the easiest solution to a bank with a Trump loan. not likely to be repaid would be to simply postpone the due date.
“If I was sitting at my old job and a Trump loan was due next year and he was president, I would just say we’re going to extend the deadline,” he said.
But several other real estate experts aren’t so sure Deutsche Bank might be willing to help Trump much more.
The bank has been the subject of money laundering and tax evasion investigations in Germany and the United States, and last year concluded with U.S. stock market regulators for allegedly violating the Law on Corrupt Practices Abroad by hiring relatives of government officials in Asia and Russia to stimulate business. for its investment banking division. In addition, its US division had failed a few annual “stress tests” administered by the Federal Reserve in recent years, hampering its ability to lend for some time.
Deutsche Bank declined to comment.
Another problem: Not all of Trump’s lenders are banks and other institutions he can negotiate with across a table.
Nancy Wallace, a professor of real estate at the University of California at the Haas School of Business at Berkeley, said hundreds of millions of Trump’s bank loans were put up as bonds and sold to investors, and that the banks were no longer in charge. If a borrower seems in trouble, there might be less room to cut him or her a break.
Office buildings and hotels have also been particularly affected by lockdowns and travel restrictions. So lenders may not be eager to lend to Trump now, and selling off part of his sprawling empire to raise cash won’t be that easy either, and likely won’t earn him full value.
Still, “the mortgage market is tough at the moment, but for buildings that waste money? This shouldn’t be a problem, ”said Bernard Kent, chairman of Schechter Investment Advisors in Detroit. “For something like Trump Tower, future cash flow would not be greatly affected by COVID-19 or by people leaving New York. Top notch properties there tend to be of value. “
If all is lost and Trump is really in trouble, some experts say there is another way to raise money to pay off his lender: copy rocker David Bowie, who sold bonds that allowed investors to earn money. money on his music royalties.
The “Trump Bonds” would allow investors to share future profits from the sale of his name, for example, to condo builders or suppliers of steaks, colognes or ties.
“Trump has a brand that has value,” Kent said.