The Price of The Pres­i­dency

Don­ald Trump’s White House ten­ure—and his po­lar­iz­ing pol­i­tics—has ac­tu­ally dented his net worth. But it’s not for a lack of try­ing to cash in.

Forbes - - FORBES 400 - BY DAN ALEXAN­DER AND CHASE PETER­SON-WITH­ORN

When Don­ald Trump opened Trump Tower in 1983, it marked a sem­i­nal mo­ment in Amer­i­can re­tail, as six sto­ries of glitzy shops like Harry Win­ston and Cartier beck­oned lux­ury buy­ers who strode past a live pi­anist and a 60-foot in­door wa­ter­fall. “We got the high­est rents ever, any­where,” says for­mer Trump Or­ga­ni­za­tion ex­ec­u­tive Bar­bara Res, stand­ing in the pink atrium four decades af­ter she helped build it.

Times have changed. Gaz­ing around, al­most all the ten­ants are now gone. The hol­low­ing-out be­gan years ago, but it has only got­ten worse since Trump en­tered pol­i­tics. Nike aban­doned its at­tached flag­ship store ear­lier this year, and Ivanka Trump’s ac­ces­sories busi­ness closed up shop as well. What’s left is ba­si­cally noth­ing but Gucci, Star­bucks and The Don­ald, wall-to-wall. Trump Bar sits atop Trump Grille, next to Trump Café, the Trump Store and Trump’s Ice Cream. It is un­likely Trump pays him­self rent for any of them. “Things are all dif­fer­ent now,” Res says.

That dif­fer­ence in­cludes prof­its. Net oper­at­ing in­come dropped 27% between 2014, the year be­fore Trump an­nounced his run for pres­i­dent, and 2017, his first year in the White House. When the real es­tate mogul de­scended the es­ca­la­tor to launch his cam­paign, in this very build­ing, no one could have pre­dicted the chain of events that would lead to this point. Even among those who gave his moon-shot pres­i­den­tial bid a chance of suc­cess, the as­sump­tion was that Trump would dump his as­sets be­fore tak­ing of­fice.

By re­fus­ing to di­vest, Trump raised an un­prece­dented ques­tion: How would the most di­vi­sive pres­i­dency in mod­ern Amer­i­can his­tory af­fect a com­pany built on the pres­i­dent’s per­sona? Forbes has been work­ing to an­swer that ques­tion since the mo­ment Trump got elected, in­ter­view­ing nearly 200 col­leagues, part­ners and in­dus­try ob­servers. While the ex­per­i­ment con­tin­ues to un­fold, in real time, the early re­sults are in. Much as he’s try­ing—and he’s def­i­nitely try­ing—Don­ald Trump is not get­ting richer off the pres­i­dency. Just the op­po­site. His net worth, by our cal­cu­la­tion, has dropped from $4.5 bil­lion in 2015 to $3.1 bil­lion the last two years, knock­ing the pres­i­dent 138 spots lower on The Forbes 400.

Three fac­tors are at play. Much of that de­cline is due to deeper re­port­ing, which re­vealed, for ex­am­ple, that the pres­i­dent had been ly­ing about the size of his pent­house. Some of it is due to larger mar­ket forces. Trump owns com­mer­cial space at a time when e-com­merce is dec­i­mat­ing brick-and-

mor­tar re­tail, shav­ing more than $100 mil­lion off his for­tune—and no amount of bully-pul­pit Ama­zon-bash­ing will change that.

But the third fac­tor comes from how Trump the pres­i­dent af­fects Trump the brand. Those fa­mil­iar with him saw his 2016 run as a sur­real mar­ket­ing strat­egy, and Trump has said as much, telling For­tune way back in 2000, “It’s very pos­si­ble that I could be the first pres­i­den­tial can­di­date to run and make money on it.” Since his un­ex­pected as­cent to the White House, Trump has tried to lever­age the trap­pings of the pres­i­dency to ben­e­fit his com­mer­cial projects, from vis­its to his golf cour­ses to host­ing sum­mits at Mar-a-Lago to launch­ing a new ho­tel-li­cens­ing busi­ness aimed at his vot­ers.

“My fa­ther made a tremen­dous sac­ri­fice when he left a com­pany that he spent his en­tire life build­ing to go into pol­i­tics,” coun­ters Eric Trump, who now co­man­ages the Trump Or­ga­ni­za­tion on be­half of the pres­i­dent, in a state­ment to

Forbes. “Ev­ery­thing he does is for the good of the Amer­i­can peo­ple—he has zero in­volve­ment in the Trump Or­ga­ni­za­tion and quite frankly to sug­gest oth­er­wise is out­ra­geous.” (Eric Trump him­self, how­ever, told Forbes shortly af­ter the in­au­gu­ra­tion that he would pro­vide the pres­i­dent bot­tom-line up­dates “prob­a­bly quar­terly.”)

Ei­ther way, Trump’s mix­ture of pol­i­tics and busi­ness has proved to be a net loser for him so far. In fur­ther po­lar­iz­ing the coun­try, he has also fur­ther po­lar­ized his busi­ness—to the tune of an es­ti­mated $200 mil­lion hit against his net worth. Un­der­stand­ing how that has hap­pened of­fers a fresh win­dow into the state of Trump Inc.—and

Trump’s Amer­ica.

In May 2016, a dozen or so

golf course ap­prais­ers set­tled in at Trump Na­tional Do­ral, the pres­i­dent’s 643-room Mi­ami mega-re­sort, for a few days of sem­i­nars and golf. At the time, Trump was steam­rolling through the Repub­li­can pri­maries while bash­ing Mex­i­cans, Mus­lims and even the pope. So it was no sur­prise when, in­side his re­sort, the con­ver­sa­tion turned to how the tu­mult was af­fect­ing Trump’s golf busi­nesses.

A top Do­ral ex­ec­u­tive, of all peo­ple, was will­ing to pro­vide an an­swer. Ac­cord­ing to three wit­nesses, he told the room of ap­prais­ers that busi­ness at the re­sort—whose rev­enues were as big as Trump’s ten other U.S. golf cour­ses com­bined—was suf­fer­ing be­cause of the cam­paign. His­tor­i­cally, Do­ral had drawn

much of its clien­tele from the North­east, where Trump was and is es­pe­cially un­pop­u­lar. “At the time there was a lot of talk about com­ments that Trump had made,” says Jeff Du­gas, who at­tended the event. “No­body was ex­tremely sur­prised.”

Big names like Nascar and the PGA Tour also pulled busi­ness from the club. Af­ter Trump won the elec­tion, Do­ral lost 100,000 booked room nights, ac­cord­ing to some­one who knows the re­sort’s busi­ness. While rev­enues for the Mi­ami lux­ury ho­tel mar­ket jumped 4% over­all in 2017 ac­cord­ing to the data an­a­lyt­ics firm STR, Do­ral’s rev­enues fell by an es­ti­mated 16%. And that was be­fore a de­ranged gun­man wan­dered into the lobby ear­lier this year, draped an Amer­i­can flag over the front desk and be­gan shoot­ing at the chan­de­liers be­fore he was ap­pre­hended by po­lice.

Over­all, rev­enue at the pres­i­dent’s U.S. golf prop­er­ties fell

by an es­ti­mated 9% in 2017. It goes be­yond pol­i­tics—guests now en­dure metal de­tec­tors and bomb-sniff­ing dogs. “It’s not a coun­try club ex­pe­ri­ence,” a source fa­mil­iar with Trump’s golf busi­ness says. “It was captivating at first, but it has be­come tire­some.” Not even the chance to rub shoul­ders with a sit­ting pres­i­dent can over­come this prob­lem: Rev­enues ap­pear to be down at the three cour­ses Trump vis­its most of­ten.

A sim­i­lar sce­nario has played out in Trump’s tra­di­tional wheel­house: lux­ury res­i­den­tial real es­tate. The pres­i­dent still holds roughly 500 con­dos, co-ops and man­sions, all with their own com­pli­ca­tions, in terms of both has­sles and brand­ing. He has 37 units worth an es­ti­mated $215 mil­lion in midtown Man­hat­tan. Prices for con­dos in Trump Tower have fallen ev­ery year since 2015, when Trump de­clared his can­di­dacy, and are an es­ti­mated 33% be­low their highs. Sim­i­lar trends are play­ing out a few blocks away at Trump Parc East, where prices are down 23%, and at Trump Park Av­enue, where they have dropped 19%.

In Chicago, val­ues of Trump con­dos have crept down­ward, the op­po­site di­rec­tion of the over­all mar­ket. “Peo­ple bought into the build­ing based on the brand be­ing syn­ony­mous with lux­ury,” says Cyndy Sal­gado, a real es­tate bro­ker who once worked for the Trump Or­ga­ni­za­tion, sell­ing con­dos in the Chicago tower. “Now many peo­ple feel that the brand rep­re­sents di­vi­sive­ness, em­bar­rass­ment and ques­tion­able mo­rals.” All told, the shift in per­cep­tion has erased an es­ti­mated $50 mil­lion from the value of his res­i­den­tial units in Chicago and New York.

On the Caribbean is­land of St. Martin, Mario Moli­nari, a real es­tate agent, re­calls try­ing to show a Chi­nese bil­lion­aire a villa a few months ago. The seller, he says, was Don­ald Trump, who was of­fer­ing 11 bed­rooms, an out­door bar and a pri­vate ten­nis court for $16.9 mil­lion. But when they got to the gate, the pres­i­dent’s prop­erty man­ager told them they needed back­ground checks to go in­side, which typ­i­cally take a cou­ple of days to process. “It’s too small for me,” the bil­lion­aire re­sponded, miffed. More than a year af­ter the place went on the mar­ket, Trump still hasn’t sold it.

Such weak­ness seems to have in­fected the Trump brand across the board. Af­ter mul­ti­ple bank­rupt­cies, Trump adroitly turned his busi­ness to­ward real es­tate man­age­ment and li­cens­ing, slap­ping his name on other peo­ple’s build­ings, ties, steaks and even a urine test—al­low­ing him to make money while oth­ers take all the fi­nan­cial risk. But part­ners at three Trump­branded ho­tels (Toronto, Panama, New York City’s SoHo) have taken the pres­i­dent’s name off their projects, which helps ex­plain why pol­i­tics has dragged that seg­ment of the Trump ho­tel em­pire down about $30 mil­lion, by Forbes’ es­ti­mates. Mean­while, many of his li­cens­ing cus­tomers, in­clud­ing Macy’s and the mat­tress-maker Serta, fled in the early days of his abra­sive cam­paign—and the pres­i­dent’s com­pany doesn’t seem to have landed a sin­gle new deal since. In 2015, Forbes val­ued Trump’s prod­uct-li­cens­ing op­er­a­tion at $23 mil­lion. It’s now down to a mere $3 mil­lion. “He’s so po­lar­iz­ing that peo­ple are afraid to do busi­ness with him,” says Jeff Lot­man, who runs the li­cens­ing com­pany Global Icons. “He has sig­nif­i­cantly tar­nished the brand.”

Headaches in the lux­ury mar­ket could, in the­ory, be off­set by Trump’s new­found pop­u­lar­ity with the larger, less af­flu­ent MAGA set. Four months af­ter their fa­ther took of­fice, Eric and Don­ald Trump Jr. an­nounced a new busi­ness ven­ture to bring low­er­priced Trump brands to ho­tels in Mid­dle Amer­ica. Fil­ings re­leased months later in­di­cate that the ma­jor­ity owner of this ven­ture is none other than the pres­i­dent him­self, with a 77%

stake, po­si­tion­ing Trump to profit from his po­lit­i­cal star­dom.

But not much has come of it. The Trumps signed deals to brand four ho­tels in Mis­sis­sippi, but those agree­ments gen­er­ated only $27,000 last year. They told re­porters there were as many as 35 other deals in the works—none of them have panned out so far.

TruMp’s busI­ness has soMe brIghT spoTs. A few blocks from the White House, at the Trump In­ter­na­tional Ho­tel, Trump fans hob­nob with ca­ble news stars and Cabi­net sec­re­taries. The place turned a $2 mil­lion profit in the first four months of 2017, far ex­ceed­ing the Trump Or­ga­ni­za­tion’s ex­pec­ta­tions. A chunk of that money comes from var­i­ous GOP or­ga­ni­za­tions, which have pumped more than $1.3 mil­lion into the ho­tel since it opened in fall 2016, ac­cord­ing to Fed­eral Elec­tion Com­mis­sion data. De­spite what seems a vi­o­la­tion of the Con­sti­tu­tion’s emol­u­ments clause, de­signed to keep pres­i­dents free from for­eign fi­nan­cial in­ter­est, the gov­ern­ments of other na­tions are wel­come too. Ev­ery­one from Kuwaiti of­fi­cials to the prime min­is­ter of Malaysia has re­port­edly spent money there. And lob­by­ists work­ing for Saudi Ara­bia dis­closed that they ran up a $270,000 tab in just six months.

In terms of condo sales, Trump sold one in New York to a woman named An­gela Chen, just a month af­ter he took of­fice. Chen paid $15.9 mil­lion, $1.8 mil­lion more than her down­stairs neigh­bor shelled out for a sim­i­lar apart­ment a year ear­lier. The deal sparked con­flict-of-in­ter­est con­cerns be­cause Chen is ap­par­ently the head of a busi­ness called Global Al­liance As­so­ci­ates, which claims to use its net­work with the “high­est lev­els of govern­ment of­fi­cials” to help com­pa­nies ex­pand into China.

Pres­i­den­tial prove­nance is also prov­ing lu­cra­tive. Af­ter Trump made Mar-a-Lago world fa­mous, the club is said to have dou­bled its ini­ti­a­tion fee to $200,000. Fall­out from the pres­i­dent’s re­sponse to the deadly white-su­prem­a­cist rally in Char­lottesville re­port­edly prompted roughly 20 or­ga­ni­za­tions to yank events from the club, likely cost­ing Trump over $1 mil­lion in rev­enue. Nev­er­the­less, Forbes es­ti­mates, Mar-a-Lago is now worth $160 mil­lion—$10 mil­lion more than it was be­fore it be­came the win­ter White House.

The same goes for the pres­i­dent’s pent­house in Trump Tower. Al­though de­clin­ing prices in the build­ing have likely hurt its value, the 11,000-square­foot apart­ment be­came a his­toric land­mark the mo­ment Trump won the pres­i­dency. Forbes fig­ures the elec­tion could have added $10 mil­lion to any po­ten­tial deal.

This phe­nom­e­non also ex­tends to the value of Trump’s Boe­ing 757, which be­came a back­drop for his cam­paign ral­lies. Some plane bro­kers think it could be worth dou­ble the roughly $20 mil­lion it would fetch if any­one else owned it (Forbes es­ti­mates a more con­ser­va­tive $6 mil­lion pres­i­den­tial pre­mium). Eric Roth, who

cus­tom­ized the in­te­rior of the plane for Trump, says, “What’s a base­ball worth? About $3. What about if Babe Ruth signed it? It’s not $3 any­more.”

Some of the pres­i­den­tial prof­i­teer­ing ap­pears more di­rect: On the day he as­sumed of­fice, Trump took the un­usual step of im­me­di­ately launch­ing his re­elec­tion cam­paign. Donor money kept flow­ing, and Trump’s com­pa­nies have kept charg­ing rent to the cam­paign. The re­sult: Amer­ica’s first bil­lion­aire pres­i­dent has turned more than $900,000 of do­na­tions into rev­enue for him­self, with­out putting up a dime.

As long as he’s pres­i­dent—and re­fuses to di­vest his busi­ness hold­ings—Don­ald Trump will be able to boost his for­tune in ways no other busi­ness­man can. Three days be­fore Christ­mas last year, Trump sat in the Oval Of­fice to sign the most sig­nif­i­cant tax re­form leg­is­la­tion in decades. “This is some­thing I’m very proud of,” he said, clutch­ing a black marker. “Great for our coun­try, great for the Amer­i­can peo­ple.”

Great as well for Don­ald Trump. The pres­i­dent fa­mously re­fused to re­lease his tax re­turns, but the new bill clearly ben­e­fits him. A Forbes anal­y­sis shows that Trump could save about 10% on busi­ness in­come. Based on Trump’s 2005 tax re­turn, which leaked shortly af­ter the real es­tate mogul took of­fice, that could mean as much as $11 mil­lion an­nu­ally.

Other poli­cies, which went into ef­fect with far less fan­fare, may also bol­ster his for­tune. Take tar­iffs. Higher steel and alu­minum prices make it more ex­pen­sive for devel­op­ers to build. For some­one like Trump, who owns build­ings but hasn’t done much con­struc­tion re­cently, that raises the bar­rier to en­try for com­peti­tors. His im­mi­gra­tion poli­cies, which ap­pear to be rais­ing the cost of con­struc­tion la­bor, could have a sim­i­lar ef­fect. Those two fac­tors are “very fa­vor­able to a guy who owns hard as­sets,” says Dave Rodgers, a real es­tate an­a­lyst at fi­nan­cial firm Baird.

And while Trump promised not to do any new for­eign deals while in of­fice, cut­ting off a source of growth, op­por­tu­ni­ties will be wait­ing once his pres­i­dency ends. In the for­mer Soviet re­publics of Ge­or­gia and Kaza­khstan, Trump’s ex-busi­ness part­ners felt em­pow­ered to move ahead with po­ten­tial projects, mak­ing it clear they are pre­pared to pay him down the road. “The tower will be ready for the Trump mark,” the pres­i­dent’s for­mer part­ner in Ge­or­gia told Forbes last year, “if the Trump mark is ready to come back to the tower.” And Trump has not for­got­ten about his busi­ness: He asked about the Ge­or­gia project in a meet­ing with the coun­try’s prime min­is­ter last year, ac­cord­ing to the part­ners.

For now, though, Trump’s pres­i­dency re­mains a net loser for him, which seems ironic. In not di­vest­ing, he set him­self up so that his ac­tions, and those of peo­ple who en­gage with his busi­nesses, present per­pet­ual con­flicts of in­ter­est—or the ap­pear­ance of them. Mean­while, if he’d liq­ui­dated, paid cap­i­tal gains tax on his en­tire for­tune and cre­ated a blind trust to in­vest it all in the boom­ing stock mar­ket, Trump would be $500 mil­lion richer than he is to­day—with­out the headaches.

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