Mr. Trump comes to Washington, with cash

The Washington Post Sunday - - BUSINESS - BY JONATHAN O’CON­NELL

In the speech an­nounc­ing his pres­i­den­tial can­di­dacy Tues­day, Don­ald Trump held aloft a sum­mary of his fi­nan­cial state­ment, one he said puts his net worth at nearly $9 bil­lion.

He pos­sesses so much money, Trump said, that a bank had of­fered to lend him another $4 bil­lion, to which he an­swered: “I don’t need it. I don’t want it. And I’ve been there.”

He has. Trump’s foray into At­lantic City casi­nos in the 1980s, one fu­eled largely by bank loans, nearly cost him his for­tune when the deals landed in bank­ruptcy.

In the years that fol­lowed, Trump re­bounded by mak­ing mil­lions in tele­vi­sion and li­cens­ing his name to de­vel­op­ers who wanted to splash “TRUMP” atop their build­ings.

But in an in­ter­view with The Washington Post the day be­fore an­nounc­ing his can­di­dacy, Trump made another dis­clo­sure, that he was in­vest­ing $42 mil­lion into his

pre­em­i­nent Washington real es­tate pro­ject, a $200 mil­lion lux­ury ho­tel he and his daugh­ter Ivanka are build­ing at the Old Post Of­fice Pav­il­ion.

“I am putting $42 mil­lion ofmy own­cash into the pro­ject,” he said, “and there are no other eq­uity part­ners. We own all the eq­uity.”

Rather than bring­ing in other in­vestors or man­agers, Trump said he took out a stan­dard con­struc­tion loan with Deutsche Bank for the bal­ance of the $200 mil­lion. A spokesper­son for the Gen­eral Ser­vices Ad­min­is­tra­tion, which over­sees the pro­ject, con­firmed the ar­range­ment.

Since the bank­rupt­cies, crit­ics have ques­tioned whether the mag­nate him­self puts any money in Trump-branded projects. Some Washington ho­tel fi­nanciers won­dered whether he would stake his own money on a ho­tel that could prove a chal­leng­ing in­vest­ment: In a city where some of its ri­vals charge $500 a night, an­a­lysts say, Trump’s ho­tel rooms may need to take in $700 or more a night to suc­ceed.

En­list­ing eq­uity part­ners would be one way to spread the risk.

“It’s pos­si­ble Mr. Trump has other in­vestors thathe has just not an­nounced,” said Bill Grice, se­nior vice pres­i­dent and ho­tel fi­nanc­ing spe­cial­ist at the real es­tate ser­vices firm JLL.

Ivanka, who man­ages the pro­ject for the fam­ily, says the per­sonal in­vest­ment is im­por­tant. She has re­peat­edly said she would like to keep the build­ing in the fam­ily for fu­ture gen­er­a­tions. She says she is build­ing the big­gest, most el­e­gant guest rooms and largest ball­room of any ho­tel in the city.

“That level of in­vest­ment shows our tremen­dous com­mit­ment as a com­pany to this in­cred­i­bly ex­cit­ing pro­ject and to this spec­tac­u­lar build­ing, and that we are in this for the long haul,” she said.

And Don­ald Trump now ap­pears com­fort­able enough with his wealth that his com­pany is tak­ing large own­er­ship stakes again, not only in the Old Post Of­fice but in his Chicago hotelof­fice tower and in his $150 mil­lion pur­chase of the Do­ral golf re­sort in­Mi­ami.

Trump’s crit­ics are quick to bringuphis rush into At­lantic City early in his ca­reer, when he bor­rowed heav­ily to open a se­ries of casi­nos. By 2011, Trump-branded casino com­pa­nies had filed for bank­ruptcy four times to ward off cred­i­tors. Trump Plaza closed last year, and Trump Ta­jMa­hal Casino Re­sort is in­bankruptcy court­now.

Robert Re­ich, sec­re­tary of la­bor un­der Pres­i­dent Clin­ton, took to Face­book af­ter Trump’s speech to write that casino work­ers were “stuck with the mess” left be­hind by the bank­rupt­cies.

Trump has no role man­ag­ing those com­pa­nies to­day. And for projects since then he has de­cided to li­cense his name or ex­per­tise, rather than buy into them. For ex­am­ple, last year when Trump Soho, a 46-story tower in Lower Man­hat­tan, ran into fore­clo­sure, the Trump Or­ga­ni­za­tion did not have any eq­uity at stake; it only op­er­ates the prop­erty.

As his prospects im­proved in real es­tate, Trump hit it big in another in­dus­try: tele­vi­sion. “The Ap­pren­tice” aired its 14th sea­son this year and is some­times ranked as one of the most prof­itable re­al­ity shows. Trump co-owns the show and is paid mil­lions of dol­lars to star in it.

His rise in fame co­in­cided with a new el­e­ment of his brand: the sug­ges­tion that he might run for pres­i­dent. Ev­ery four years since the 1998 elec­tion, Trump has made noise about a can­di­dacy. Tues­day’s an­nounce­ment came right on sched­ule.

Win­ning the nom­i­na­tion will be dif­fi­cult. Trump does not poll well, even­within hisown­party. He is also given to bom­bas­tic re­marks, like in­sist­ing that Pres­i­dent Obama’s birth cer­tifi­cate was fake. “There are no jobs,” he said on Tues­day. Fact check­ers dug in: In April, the coun­try had 5.4 mil­lion job open­ings, the most since De­cem­ber 2000.

His tally of his wealth­was­much scru­ti­nized, too. Af­ter his speech, Forbes broke down his as­sets and es­ti­mated his net worth at $4.1 bil­lion — less than half what he stated.

One thing the two agreed on was Trump’s $302.3 mil­lion in cash and se­cu­ri­ties, giv­ing him a bal­ance sheet ca­pa­ble of pulling off nine-fig­ure deals like the Old Post Of­fice with­out other in­vestors.

“Look, the Trump Or­ga­ni­za­tion is a sig­nif­i­cant real es­tate player,” Grice said. “Their be­ing the sole eq­uity part­ner in that pro­ject is not nec­es­sar­ily un­usual, but it’s more likely there’s a com­bi­na­tion of eq­uity in­vestors in these type of projects.”

Trump said his abil­ity — and will­ing­ness — to put up his own money set him apart from a crowded field of high-pro­file prospects for the pro­ject, in­clud­ing Hil­ton, which pro­posed turn­ing the prop­erty into a Wal­dorf As­to­ria.

“It re­ally was one of the rea­sons we were cho­sen,” Trump said. “Very few peo­ple would be will­ing to do a job like this.”

The Trumps will pay $3 mil­lion an­nu­ally in rent, with es­ca­la­tions tied to the con­sumer price in­dex, ona lease last­ing 60 years from the ho­tel’s open­ing, with op­tions to ex­tend 40 years more.

Some in Washington’s ho­tel in­dus­try ex­pect it will be a dif­fi­cult task mak­ing the ho­tel prof­itable given the ex­pense of up­dat­ing the 1890s-era build­ing.

A com­pet­ing firm, work­ing with Hil­ton, con­tested Trump’s win, ar­gu­ing that spend­ing $200 mil­lion on the pro­ject “would re­quire Trump to ob­tain ho­tel room rev­enues which are sim­ply not ob­tain­able in the Old Post Of­fice’s lo­ca­tion based on the con­cepts for re­de­vel­op­ment.” (The protest failed.)

Trump, who turned 69 this month, does not seem con­cerned, tout­ing golf cour­ses, ho­tels and other lux­ury get­aways that he snaps up — some­times at de­pressed prices — and fig­ures how to make money on later.

In 2011, for ex­am­ple, the Trumps bought most of the Kluge Es­tate Win­ery and Vine­yard, out­side Char­lottesville, at a bank auc­tion for $6.2 mil­lion, pick­ing up the re­main­der of the prop­erty shortly af­ter­ward for $6.5 mil­lion. A few years ear­lier the es­tate had been listed for $100 mil­lion.

When the Kluge deal closed, Trump’s son Eric said the fam­ily didn’t know what they would do with it. “There’s a lot of pos­si­bil­i­ties,” he said, “but we’re not rush­ing into any­thing right now. It’s just great to have done this.”

Sim­i­larly, af­ter he won the Old Post Of­fice deal, Don­ald Trump was asked whether there was re­ally a mar­ket of Washington trav­el­ers will­ing to pay such high prices to stay in a ho­tel with his name on it.

“Maybe, and maybe not,” he said. “And you know if there isn’t, it’s okay, be­cause we have a lot of money. And we’ll have a beau­ti­ful paint­ing.”

Con­struc­tion work­ers at the Old Post Of­fice are busy putting that paint­ing to­gether. They are erect­ing a 14,000-square-foot ball­room (“by far the big­gest in Washington,” says Ivanka), in­stalling a nearly half-acre tem­pered glass sky­light, pre­serv­ing win­dows and care­fully wash­ing the stone ex­te­rior and mar­ble in­te­ri­ors.

“Wait un­til you see the bath­room fix­tures that we are putting in,” Trump said. “They are ab­so­lutely top-of-the-line.”

As his Washington-area hold­ings pile up, Trump’s trips to town are in­creas­ingly a mix of pri­vate busi­ness and his out­size po­lit­i­cal per­sona. The day of his most re­cent tour of the Old Post Of­fice con­struc­tion, he spoke at a char­i­ta­ble event for mil­i­tary and vet­eran care­givers hosted by the El­iz­a­beth Dole Foun­da­tion.

“I apol­o­gized for be­ing to­tally dusty,” he said. “My shoes — you couldn’t even see my shoes they were so dusty. But that’s what you do when you’re build­ing a pro­ject, you go and tour it.”

Later this month the Trumps are sched­uled to un­veil up­grades at their Vir­ginia golf course, Trump Na­tional Golf Club, in Ster­ling. Any per­son’s run for the Amer­i­can pres­i­dency is a long shot. But with the ho­tel ex­pected to open in fall 2016, Trump has an ex­cel­lent chance of get­ting a room on Penn­syl­va­nia Av­enue for the inau­gu­ral pa­rade.

TRACY A. WOOD­WARD/THE WASHINGTON POST

Real es­tate mogul and pres­i­den­tial can­di­date Don­ald Trump says he put $42 mil­lion of his own money into the $200 mil­lion pro­ject to turn the 1890s-era Old Post Of­fice Pav­il­ion build­ing into a lux­ury ho­tel. The build­ing sits on Penn­syl­va­nia Av­enue at 12th Street NW.

KEVIN LAMARQUE/REUTERS

Don­ald Trump en­vi­sions an ex­trav­a­gant ho­tel at the Old Post Of­fice Pav­il­ion that would have the city’s largest ball­room.

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