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For­get the in­ter­na­tional part­ner­ships and the D.C. ho­tel. The surest way to put money into Don­ald Trump’s pocket is through his core real es­tate as­sets. More than 150 ten­ants—from for­eign gov­ern­ments to big banks—throw him some $175 mil­lion a year with­out

Forbes - - CONTENTS - By dan alexan­der and maTT drange

For­get the in­ter­na­tional part­ner­ships and the D.C. ho­tel. The surest way to put money into Don­ald Trump’s pocket is through his core real es­tate as­sets. More than 150 ten­ants—from for­eign gov­ern­ments to big banks—throw him some $175 mil­lion a year with­out an ac­count­ing of who they are or how much they pay. Un­til now.

The largest Amer­i­can of­fice of China’s largest bank sits on the 20th floor of Trump Tower, six lev­els be­low the desk where Don­ald Trump built an em­pire and wrested a pres­i­dency. It’s hard to get a glimpse in­side. There do not ap­pear to be any pub­lic photos of the of­fice, the bank doesn’t wel­come vis­i­tors, and a man guards the el­e­va­tors down­stairs—one of the perks of fork­ing over an es­ti­mated $2 mil­lion a year for the space.

Trump Tower of­fi­cially lists the ten­ant as the In­dus­trial & Com­mer­cial Bank of China, but make no mis­take who’s pay­ing the rent: the Chi­nese gov­ern­ment, which owns a ma­jor­ity of the com­pany. And while the land­lord is tech­ni­cally the Trump Or­ga­ni­za­tion, make no mis­take who’s cash­ing those mil­lions: the pres­i­dent of the United States, who has placed day-to-day man­age­ment with his sons but re­tains 100% own­er­ship. This lease ex­pires in Oc­to­ber 2019, ac­cord­ing to a debt prospec­tus ob­tained by Forbes. So if you as­sume that the Trumps want to keep this lu­cra­tive ten­ant, then Eric Trump and Don­ald Trump Jr. could well be ne­go­ti­at­ing right now over how many mil­lions the Chi­nese gov­ern­ment will pay the sit­ting pres­i­dent. Un­less he has al­ready taken care of it: In Septem­ber 2015 then­can­di­date Trump boasted to Forbes that he had “just re­newed” the lease, around the time he was gear­ing up his cam­paign.

It’s a con­flict of in­ter­est un­prece­dented in Amer­i­can his­tory. But hardly unan­tic­i­pated. The Found­ing Fathers specif­i­cally built this con­tin­gency into the Con­sti­tu­tion through the Emol­u­ments Clause, which pro­hibits U.S. of­fi­cials from ac­cept­ing gifts, ti­tles or “emol­u­ments” from for­eign gov­ern­ments. In Fed­er­al­ist 75, Alexan­der Hamil­ton framed the threat thus: “An avari­cious man might be tempted to be­tray the in­ter­ests of the state to the ac­qui­si­tion of wealth.” Schol­ars have been de­bat­ing what ex­actly con­sti­tutes an “emol­u­ment” since the mo­ment Trump won the elec­tion, and nearly 200 con­gres­sional Democrats sued the pres­i­dent over pos­si­ble vi­o­la­tions in June. Much of the yam­mer­ing in this area sur­rounds Trump’s ho­tels, es­pe­cially the one in Wash­ing­ton, D.C., which has billed $268,000 in ho­tel rooms and cater­ing to the Saudi gov­ern­ment, and his in­ter­na­tional li­cens­ing deals, which al­low for­eign ty­coons and huck­sters, many with con­nec­tions to their lo­cal gov­ern­ments, to pay the Trump Or­ga­ni­za­tion more than $5 mil­lion a year in or­der to profit from the pres­i­dent’s name in far-flung lo­cales.

But that’s all small pota­toes. The real money in the Trump em­pire comes from com­mer­cial ten­ants like the Chi­nese bank. Forbes es­ti­mates these ten­ants pay a col­lec­tive $175 mil­lion a year or so to the pres­i­dent. And they do so anony­mously. Fed­eral laws, drafted with­out en­vi­sion­ing a real es­tate bil­lion­aire as pres­i­dent, re­quire Trump to pub­licly dis­close the shell com­pa­nies he owns—but not the hun­dreds of busi­nesses pour­ing money into them or even the ex­tent of the money in­volved.

“The pub­lic read­ing the [dis­clo­sure] form doesn’t know who is pay­ing the pres­i­dent,” says Wal­ter Shaub, who re­signed as the fed­eral gov­ern­ment’s top ethics of­fi­cial in July. The pres­i­dent likes it that way. Nei­ther the White House nor the Trump Or­ga­ni­za­tion would pro­vide a list of the pres­i­dent’s ten­ants, much less re­veal what they pay. In­stead, Trump Or­ga­ni­za­tion lawyer Alan Garten pro­vided a state­ment: “Fol­low­ing the elec­tion, the Trump Or­ga­ni­za­tion im­ple­mented a rig­or­ous vet­ting process for all trans­ac­tions, in­clud­ing leases, which in­cludes a de­tailed re­view and ap­proval by our chief com­pli­ance of­fi­cer and out­side ethics ad­vi­sor.” In other words, gov­ern­ment ethics of­fi­cials, charged with de­tect­ing con­flicts of in­ter­est, have never seen the pres­i­dent’s rent roll.

So we cre­ated one on our own, iden­ti­fy­ing 164 ten­ants, in vir­tu­ally ev­ery in­dus­try, from all around the world, and then es­ti­mated pay­ments, wher­ever pos­si­ble, based on prop­erty records, debt prospec­tuses and con­ver­sa­tions with real es­tate ex­perts. (See chart, p. 91.) When ten­ants re­fused to say how much space they rented, we made in­per­son vis­its and took rough mea­sure­ments. (There were ob­sta­cles: The day af­ter we sent ques­tions to the Trump Or­ga­ni­za­tion, two se­cu­rity guards kicked a Forbes re­porter out of a shop­ping area of one Trump prop­erty.) When we could not get more de­tailed in­for­ma­tion, we as­sumed ten­ants paid rates com­pa­ra­ble to those for sim­i­lar prop­er­ties in their re­spec­tive markets. We be­lieve we’ve tracked the sources for 75% of the rent flow­ing into the pres­i­dent’s cof­fers.

The numbers are sig­nif­i­cant: $21 mil­lion here, $12 mil­lion there. The names even more so: At least 36 of Trump’s ten­ants have mean­ing­ful re­la­tion­ships with the fed­eral gov­ern­ment, from con­trac­tors to lob­by­ing firms to reg­u­la­tory tar­gets.

How tan­gled is it all? Forbes dis­cov­ered one deal, pre­vi­ously un­re­ported, in which Trump par­tially serves as his own land­lord: The U.S. gov­ern­ment is pay­ing some rent to the per­son who runs it.

Boiled down, the Trump Or­ga­ni­za­tion is more a col­lec­tion of deals than an op­er­at­ing busi­ness. While Wal-Mart and Gen­eral Mo­tors rely on mil­lions of cus­tomers around the world, the Trump Or­ga­ni­za­tion re­lies on a hand­ful of large en­ti­ties. That in­su­lates the pres­i­dent’s busi­ness from con­sumer whims—and lag­ging fa­vor­a­bil­ity rat­ings—while leav­ing him vul­ner­a­ble to corporate (or gov­ern­ment) in­ter­ests.

How, then, to con­sider the back­room dis­cus­sions be­tween fed­eral of­fi­cials and Wal­greens Boots Al­liance, one of the largest phar­ma­cies in the world? Through its brand Duane Reade, it is the high­est-pay­ing ten­ant in Trump’s sky­scraper at 40 Wall Street in New York, with $3.2 mil­lion in an­nual rent, ac­cord­ing to a 2015 prospec­tus. In Oc­to­ber 2015, Wal­greens Boots Al­liance an­nounced a $9.4 bil­lion merger with ri­val Rite Aid, re­quir­ing a sign-off from an­ti­monopoly reg­u­la­tors. Af­ter the deal failed to se­cure ap­proval un­der Pres­i­dent Obama, it then fell to the Trump ad­min­is­tra­tion, which ar­rived in Wash­ing­ton dur­ing the first quar­ter of 2017. Ac­cord­ing to fed­eral dis­clo­sures, that was the same quar­ter Wal­greens Boots Al­liance be­gan di­rectly lob­by­ing the White House on “com­pe­ti­tion pol­icy is­sues.” In Septem­ber, de­spite ob­jec­tions by one of the two com­mis­sion­ers at the Fed­eral Trade Com-

mis­sion, Trump’s ten­ant got the green light for a slimmed-down, $4.4 bil­lion ver­sion of the deal. In Jan­uary, Trump an­nounced he would nom­i­nate the com­mis­sioner who sup­ported the deal, Mau­reen Ohlhausen, to be a fed­eral judge.

How much, if at all, did the busi­ness re­la­tion­ship af­fect the gov­ern­ment’s de­ci­sion? It’s in­her­ently im­pos­si­ble to mea­sure. Wal­greens Boots Al­liance says there was no con­nec­tion what­so­ever and that their lob­by­ing was not spe­cific to the deal. But even if Trump tried to rule with­out any per­sonal fa­vor, or if this was de­cided with­out his di­rect in­put, the ap­pear­ance of a con­flict of in­ter­est is un­avoid­able. The com­pa­nies know their land­lord is the pres­i­dent. And it’s hard to get into the heads of reg­u­la­tors, how­ever well-in­tended or re­moved from the White House, who serve a pres­i­dent fa­mously ob­sessed with per­sonal loy­alty.

Con­sider banks. Cap­i­tal One rents space for an es­ti­mated $1 mil­lion at the bot­tom of Trump’s Park Av­enue condo build­ing— while the Jus­tice and Trea­sury de­part­ments in­ves­ti­gate the bank’s anti-money-laun­der­ing pro­gram. Four years ago, the De­part­ment of Jus­tice reached a nearly $17 bil­lion set­tle­ment—the largest ever of its kind— with Bank of Amer­ica, the big­gest ten­ant (an es­ti­mated $18 mil­lion a year) at the 555 Cal­i­for­nia Street com­plex in San Fran­cisco, where Trump owns a 30% stake. Like all big banks, BofA re­mains un­der scru­tiny by fed­eral of­fi­cials. In De­cem­ber, Trump ten­ants UBS, Bar­clays and JPMor­gan, plus Trump lender Deutsche Bank, got waiver ex­ten­sions from the De­part­ment of La­bor that al­low them to avoid part of their pun­ish­ment for il­le­gally ma­nip­u­lat­ing in­ter­est rates and for­eign ex­change rates.

The over­lap­ping in­ter­ests stretch be­yond the fi­nan­cial world. Take any hot-but­ton is­sue of the past year, and there’s a good chance Trump’s ten­ants lob­bied the fed­eral gov­ern­ment on it, ei­ther in sup­port of or in op­po­si­tion to the ad­min­is­tra­tion’s po­si­tion. Nu­tri­tional-sup­ple­ments gi­ant GNC,

which rents re­tail space from the pres­i­dent in New York City, ad­vo­cated on health care re­form. Nike, which pays an es­ti­mated $13 mil­lion in an­nual rent to Trump, spoke up on the Trans-Pa­cific Part­ner­ship. Star­bucks, with lo­ca­tions in three Trump build­ings, weighed in on im­mi­gra­tion. Mi­crosoft on net neu­tral­ity. Columbia Univer­sity on the fed­eral bud­get. There are even three law firms that are ten­ants and have lob­by­ing di­vi­sions that push var­i­ous client in­ter­ests— while the firms pay the pres­i­dent a com­bined $4.1 mil­lion each year for rent.

The con­sti­tu­tional is­sues sur­round­ing a land­lord-in-chief tran­scend the for­eign Emol­u­ments Clause. Three months af­ter Trump be­came pres­i­dent, the U.S. Postal Ser­vice, part of the ex­ec­u­tive branch, started a new lease in a Brook­lyn hous­ing de­vel­op­ment where Trump owns a 4% stake, ac­cord­ing to his fi­nan­cial-dis­clo­sure re­port. While he’s in process of sell­ing the stake— his lawyer Garten says that Trump’s busi­ness has no day-to-day con­trol over prop­er­ties where it holds mi­nor­ity in­vest­ments—the pres­i­dent and his part­ners con­tinue to col­lect an es­ti­mated $25,000 in an­nual rent from the fed­eral gov­ern­ment, whose found­ing char­ter, the Con­sti­tu­tion, ap­pears to pro­hibit the pres­i­dent from get­ting any gov­ern­ment com­pen­sa­tion ex­cept for his salary.

Shortly be­fore Pres­i­dent Trump’s in­au­gu­ra­tion, one of his lawyers, Sheri Dil­lon, stood in­side Trump Tower with the soon-to-be com­man­der-in-chief and re­vealed his plans to main­tain his busi­ness in­ter­ests while in­su­lat­ing his pres­i­dency from for­eign in­flu­ence. “Pres­i­dent-elect Trump has de­cided, and we are an­nounc­ing today,” the lawyer said, “that he is go­ing to vol­un­tar­ily do­nate all prof­its from for­eign gov­ern­ment pay­ments made to his ho­tels to the United States Trea­sury. This way, it is the Amer­i­can peo­ple who will profit.”

Left un­said: The Trump Or­ga­ni­za­tion makes more money from the Chi­nese bank alone than it ever could ex­pect from ho­tel vis­its by mem­bers of a for­eign gov­ern­ment. And the pres­i­dent has made no pledge to hand over that money. Or the in­com­ing rent from the state-owned Bank of In­dia, which leases space in San Fran­cisco, part of a deal that ex­pires in 2019.

The point of an­ti­cor­rup­tion laws is to pre­vent the pos­si­bil­ity of out­side in­flu­ence, so that no one has to won­der, af­ter the fact, whether it hap­pened. Yet one of the coun­try’s pri­mary con­flict-of-in­ter­est laws doesn’t ap­ply to the pres­i­dent. By hold­ing on to his as­sets, Trump has cho­sen to test whether the Emol­u­ments Clause fol­lows suit (he got one case dis­missed in Jan­uary; two oth­ers are ac­tive). So the pres­i­dent re­mains in busi­ness with the world’s two most pop­u­lous coun­tries. Even if he tries to avoid a bias, there’s a clear feel­ing in for­eign cap­i­tals that cur­ry­ing fa­vor with his busi­ness can’t hurt. It’s a global per­cep­tion prob­lem, at best. “He does not for­get his friends,” said Emin Agalarov, who helped bro­ker the in­fa­mous Rus­sia cam­paign meet­ing in Trump Tower, ac­cord­ing to Don­ald Trump Jr. When Pres­i­dent Trump an­nounced a travel ban from seven Mus­lim-ma­jor­ity coun­tries, it was hard to miss that the ban ex­cluded Saudi Ara­bia, Egypt, Azer­bai­jan and the United Arab Emi­rates— all places where he had pre­vi­ously pur­sued busi­ness deals. In May the prime minister of Ge­or­gia made a visit to the White House, where, ac­cord­ing to two of Trump’s for­mer busi­ness part­ners, the pres­i­dent asked about his old project in the for­mer Soviet repub­lic.

In the U.S., Trump’s for­eign ten­ants, even ones with­out of­fi­cial gov­ern­ment ties, can pose diplo­matic com­pli­ca­tions. Gucci rents a Fifth Av­enue re­tail space at Trump Tower for an es­ti­mated $21 mil­lion a year, pay­ing the Trump Or­ga­ni­za­tion more than any other ten­ant in the pres­i­dent’s port­fo­lio. That cre­ates a po­ten­tial headache with the Ital­ian gov­ern­ment, which is re­port­edly in­ves­ti­gat­ing whether Gucci dodged $1.5 bil­lion in taxes. The com­pany said it is work­ing with au­thor­i­ties and “is con­fi­dent” about its op­er­a­tions. French in­sur­ance gi­ant AXA pays an es­ti­mated $41 mil­lion to rent space in a New York sky­scraper in which Trump holds a 30% in­ter­est. Ac­cord­ing to a prospec­tus filed in Novem­ber, the French firm may have to dis­close busi­ness with Ira­nian en­ti­ties, which could open it up to U.S. sanc­tions, at the dis­cre­tion of the pres­i­dent of the United States, who just so hap­pens to take in an es­ti­mated $12 mil­lion from AXA each year. And so on.

De­spite all this, Trump does not seem to think on­go­ing rental pay­ments from for­eign en­ti­ties pose a prob­lem. Quite the op­po­site. “No new for­eign deals will be made what­so­ever dur­ing the du­ra­tion of Pres­i­dent Trump’s pres­i­dency,” his lawyer said in that Jan­uary press con­fer­ence. Ap­par­ently, the Trump team de­fined “for­eign deals” strictly as projects not on U.S. soil, be­cause one year later, with no fan­fare, the signs in the win­dows of a cou­ple Trump prop­er­ties re­vealed new ten­ants: yoga re­tailer Lu­l­ule­mon and sand­wich shop Pret A Manger, based in Canada and Great Bri­tain, re­spec­tively.

It could soon get more com­pli­cated. Just around the cor­ner from Trump Tower sits Nike­town, which, af­ter op­pos­ing Trump on the Trans-Pa­cific Part­ner­ship and NFL protests, an­nounced it was leav­ing the build­ing this spring, even though it still had years left on its lease. The roughly 65,000-square-foot space should com­mand about $13 mil­lion in rent per year, and Don­ald Trump owns it debt-free. Who­ever steps in has the chance to make an­nual pay­ments to the pres­i­dent, at what­ever price they want, and the pub­lic will have no fore­see­able way to know how that com­pares with mar­ket rates.

The tragedy of this $175 mil­lion mess is that it was com­pletely avoid­able. Right af­ter Trump was elected, most as­sumed the sep­tu­a­ge­nar­ian would di­vest his as­sets and en­gage in the big­gest job in the world with clean hands. Since his com­pany ba­si­cally con­sists of as­sets and man­age­ment deals, he could have set in mo­tion a liq­ui­da­tion process. His iconic tow­ers would still carry his name. And when he left of­fice, he could surely take that cash hoard to again buy prop­er­ties or lever­age his higher pro­file to yet more and bet­ter li­cens­ing deals. Shortly af­ter the elec­tion, he tweeted: “Le­gal doc­u­ments are be­ing crafted which take me com­pletely out of busi­ness op­er­a­tions. The Pres­i­dency is a far more im­por­tant task!”

By “com­pletely out,” the pres­i­dent meant let­ting his sons run it, and this crea­ture of habit keeps his full own­er­ship, along with the scores of pay­ments that come with it. Among them: Ru­pert Mur­doch’s me­dia em­pire, which ap­pears to be pay­ing Trump $50,000 a year or so to lease an an­tenna atop a New York sky­scraper and whose farflung as­sets in­clude the New York Post, a news­pa­per founded by the per­son who saw the prob­lem com­ing two cen­turies ago, Alexan­der Hamil­ton.

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