Trump just took a lifeline out of his debt hole – or did he? – Mother Jones
Donald Trump likes to brag about his empire of upscale hotels, golf resorts, and condos, but much of his wealth actually comes from another source. Of Trump’s estimated $ 2.5 billion net worth, around $ 780 million is linked to a partnership with Vornado Realty Trust, one of the country’s largest commercial real estate companies. Together, Trump and Vornado own two high-profile office buildings on opposite coasts: 1290 Avenue of the Americas in New York City and 555 California Street in the heart of San Francisco’s financial district. Trump owns a 30% minority stake in the company, and he has no say in how the buildings are operated, nor are they named after him. But the former president may be on the cusp of a hefty and desperately needed salary from this endeavor.
Earlier this week, Bloomberg reported that Vornado had successfully refinanced the California Street property with a $ 1.2 billion loan from JPMorgan, removing $ 617 million in equity. This could be great news for Trump. In his four years in the White House, almost all of his businesses’ revenues have declined, his business has made a few new deals (and no new overseas deals), and luxury condo sales that have declined. had previously provided it with a steady flow of cash, but ceased (with some notable exceptions). And the pandemic has made matters worse.
Meanwhile, Trump has a lot of debt. He came to power with as much as $ 640 million, according to his personal financial statements. And, with his presidency over, many of these loans are now expiring. Trump owes up to half a billion dollars to various lenders over the next four years. If Trump were virtually any other businessman, he could probably easily refinance or extend some of these loans, but Trump is no other businessman. His long record of corporate bankruptcies, stiffs and lawsuits against lenders, made him an outcast to most banks – and that was before his presidency made him even more toxic.
Yet, as long as he was no longer president, Trump probably would not have had too much very difficult to find someone to refinance their loans, even though the terms may not be ideal, commercial real estate insiders have said Mother Jones. Then January 6 arrived.
The insurgency, which Trump openly encouraged, has changed the math for many companies that deal with Trump. In the aftermath of the attack, nearly every financial institution Trump has dealt with said they would no longer do business with him. In fact, a number of his financial partners, including a small Florida bank that was his last lender, announced that they would close his accounts and return his money. Even the PGA pulled its 2022 championship away from Trump’s golf course in Bedminster, New Jersey. Meanwhile, many tenants of Trump’s properties have said they will be moving, meaning his building will no longer be as attractive to investors who don’t care about partnering with Trump.
In other words, after January 6, the question of how to repay those pending loans became much more acute, as the likelihood of finding someone to refinance the debts – even on bad terms – decreased dramatically. If he cannot refinance the loans, Trump will have two options: pay off the loans himself or default. Barring a sudden infusion of cash, the first option would likely require him to sell one or more of his iconic properties. So if Trump could getting his hands on a big pile of money would really help him right now.
Vornado’s refinancing of 555 California could provide that big infusion of cash – and if Vornado refinances 1290 Avenue of the Americas in New York City, as is believed, he might receive more money. Could is the key word.
Only Trump and Vornado know how much Trump is expected to receive from refinancing from 555 California. This is all dictated by the terms of their partnership agreement, says Kevin Riordan, a commercial real estate investor and professor of commercial real estate at Rutgers University and Montclair State University. “Can he get money out of it?” Yes. But we can’t say how many, ”he said.
It could be as simple as Trump receiving 30% of the money, due to his 30% stake, but it’s not likely. Riordan says that for a number of reasons – either because of the original terms of the partnership agreement or if Trump did not live up to his end of the deal, not to contribute his part when money was needed, for example – Vornado able to claim most of the refinancing cash and has the upper hand in deciding how the money will be divided.
Trump has been an even less equal partner in the relationship than his 30% stake already implies. He more or less fell on the arrangement. In the 1980s, he bought a large piece of property on the West Side of Manhattan, with the idea of building a huge “Trump City” on top of what had been the old Penn Central stations. This project was a huge flop and Trump defaulted on the loans he took to buy the property. But he took a chance when some Hong Kong investors agreed to buy back the whole mess, and even let him remain a partner – on the condition that he only owns 30% of the shares and has none. power of decision. Investors eventually sold what was left of Trump’s development and reinvested in 555 California and 1290 Avenue of the Americas. They later sold the properties – partnership with Trump and all – to Vornado.
Steve Roth, a billionaire real estate mogul who runs Vornado, has been friendly with Trump over the years, but recently there have been rumors that Vornado was less than happy with Trump as a partner.
After the November election, with Trump still disputing the results, Vornado began shopping at both buildings, hoping to cash in. There were no lessees, although the properties are considered “trophy buildings,” says Riordan. the the Wall Street newspaper reported that Vornado executives concluded that it was Trump’s involvement that made the properties unsaleable. After the insurrection of January 6, the Newspaper reported that Vornado was looking for a way out of their partnership with Trump.
There is no indication that this refinancing excluded Trump from the deal, but Riordan says major events like a refinancing are often an opportunity for partners to reset their partnership agreements.
Since leaving office, Trump has reportedly been aloof from his business and concerned about settling political scores and controlling the fight against Republican fundraising away from the RNC. There are no major new plans from the Trump organization reportedly in the works and no signs that Trump’s businesses are bouncing back from their pandemic-induced assault and battery. He needs the cash from Vornado’s refinancing more than ever, but it remains to be seen whether he will get it.