Trump leaves office facing mounting debt, devalued assets
One of the consequences of the chaos of the U.S. Capitol is a distancing of banks and other business from former President Trump. He now faces a delicate and difficult situation with his businesses, debt and taxes. Paul Solman reports.
JUDY WOODRUFF: One of the consequences of the chaos from the U.S. Capitol on January 6,
a distancing from banks and other businesses from former President Trump.
Paul Solman, for our Making Sense series, looks at the economic hit facing Mr. Trump.
DONALD TRUMP, Former President of the United States: I'm the king of debt.
I'm great with debt. Nobody knows debt better than me. I have made a fortune by using debt.
PAUL SOLMAN: In the early 1990s, Donald Trump also lost a fortune using debt.
He could face similar problems today.
TIM O'BRIEN, Executive Editor, Bloomberg View: Most of his money is tied up in real estate,
and real estate that's been hit hard by COVID-19. He has
debts north of $1 billion, and a big chunk that debt is coming due soon.
PAUL SOLMAN: Journalist Tim O'Brien has covered Trump for decades,
wrote "TrumpNation" with Trump's cooperation published in 2005.
TIM O'BRIEN: He really runs the risk of being cash-strapped at a time when his banks and
other businesses are turning their backs on him because of the January 6 insurrection.
PAUL SOLMAN: Famous hotels, famous golf courses, a $2-plus billion empire, by most estimates.
But 60 percent of Trump's wealth is held in just five buildings
in San Francisco and New York, says O'Brien.
TIM O'BRIEN: The four buildings in New York are Trump Tower, a retail space
next to Trump Tower that used to be known as NikeTown. But Nike moved out.
PAUL SOLMAN: Then there's 1290 Sixth Avenue,
and he owns what once vied for tallest skyscraper in the world, 40 Wall Street, filled with offices.
TIM O'BRIEN: He's very dependent on all of those spaces in that building being occupied,
and occupancy rates are at rock-bottom levels.
PAUL SOLMAN: At the moment, the real estate, the collateral on his debt,
just isn't worth what it used to be. And if it were less than he owes on it...
TIM O'BRIEN: It would be the same thing as a homeowner who has too much mortgage on their home,
and they have to sell the home for less than they paid for it. With him,
he's got a whole basket full of properties that are stressed like that.
PAUL SOLMAN: So the possibility is, to use the homeowner analogy, that he gets foreclosed on?
TIM O'BRIEN: That could happen. It really depends on the timing of
when each loan comes due. It's how strict the debt holders are about making him pay.
It's whether or not he can find other properties he could sell quickly.
PAUL SOLMAN: Or find new lenders, but, says Nancy Wallace:
NANCY WALLACE, Haas School of Business, University of California Berkeley: Donald
Trump has burned a lot of bridges in commercial lending.
PAUL SOLMAN: Professor Wallace chairs the real estate group at Berkeley's Business School.
NANCY WALLACE: Given his casino failures, most large commercial lenders
wouldn't work with him because of his behavior in those bankruptcies.
PAUL SOLMAN: Even his go-to lender for decades, Deutsche Bank, has now severed ties,
as have three other banks, including Signature, on whose board his daughter Ivanka once sat.
NANCY WALLACE: Basically, they closed his accounts.
I mean, forget about borrowing. They don't even want his bank accounts.
PAUL SOLMAN: You mean a bank said, here's your money, we don't even want your deposits?
NANCY WALLACE: That's correct.
PAUL SOLMAN: Because they're afraid of what?
NANCY WALLACE: There is huge reputational risk in banking. And anything that's associated with
significant lack of transparency is too risky. And we haven't even spoken about the Scottish assets.
PAUL SOLMAN: Yes, the Scottish assets, several prominent golf courses and hotels.
No outside loans on those properties, says reporter Martyn McLaughlin in Glasgow, but:
MARTYN MCLAUGHLIN, The Scotsman: Not a single one of Trump's companies here
has ever turned a profit. They have yet to pay a penny in corporation tax.
And, cumulatively, they have incurred losses of approximately 55 million pounds.
I have looked through some of the business that the hotels are doing.
In some cases, it's single-figure weddings over the course of a year.
PAUL SOLMAN: And thus the question now being asked by authorities in Scotland:
Where did the money come from?
MARTYN MCLAUGHLIN: There's obviously been a lot of speculation that the money
is coming from somewhere like Russia, like Azerbaijan and Georgia, and suspected foreign
individuals who may -- may be involved or have family who are involved in money-laundering.
PAUL SOLMAN: And if they determine money laundering was involved,
could they take his property?
MARTYN MCLAUGHLIN: If the owner of the property can't disclose
the financing, there is a mechanism for those properties to be seized.
PAUL SOLMAN: Purely hypothetical.
But if his properties were seized, he'd obviously have fewer assets with which to raise cash.
And even if he holds onto to everything, says Tim O'Brien:
TIM O'BRIEN: Private equity investors, hedge funds, anyone who wants to get into distressed
real estate, they just want to wait until he has to sell the property, so they can get it cheaply.
PAUL SOLMAN: So, you're suggesting that the private equity community or
private capital in general basically is smelling blood in the water?
TIM O'BRIEN: They all can smell when someone else is hurting, and they're more than willing
to watch that person bleed out, until they can get something as cheaply as they possibly can.
PAUL SOLMAN: But he was just able to raise like a couple of hundred million dollars
from people who back him. I mean, doesn't he have a tremendous source of financing there?
TIM O'BRIEN: He can try to use those funds for non-political purposes, but it's illegal.
PAUL SOLMAN: There's a final financial specter haunting Trump, his taxes, says Wallace.
NANCY WALLACE: And given what looks to be a lot of shenanigans in terms of
how he declares assets for tax purposes and how he declares assets for borrowing purposes,
there could be a serious problem there.
PAUL SOLMAN: And the issue there is, he declares a building worth a
great deal of money, so that he can borrow a lot against it, and then,
when he files his taxes, he claims that the building is worth a lot less?
NANCY WALLACE: Yes, for the underpayment of taxes.
PAUL SOLMAN: Possibly a crime, but even if not:
NANCY WALLACE: He might have a huge tax bill, to the tune of $100 million.
PAUL SOLMAN: All this had me deeply skeptical of Trump's financial future,
and left me with one last question, which I put to Dan Alexander, author of "White House, Inc."
Why can't he just declare bankruptcy?
DAN ALEXANDER, Author, "White House, Inc.": Well, the thing is, is that Trump,
his overall portfolio, is actually solvent. He's got really valuable assets. He does have some
cash that he could use, so he can pay back these loans. The question really is whether he wants to.
PAUL SOLMAN: We asked the Trump Organization for comment, and have not gotten a response.
But, yesterday, Donald Trump's son Eric told The New York Times that the Trump Organization
remained stable, with steady cash flow and relatively low debt. Still, according to
the company's own filings, the Trump Organization revenues declined more than 35 percent last year.
Says Dan Alexander:
DAN ALEXANDER: So, you're either going to see new lenders or you're going to look at a Trump
Organization and Trump empire that looks much smaller come about 2024 than it does in 2021.
And the irony of all of this is that, if he had just done what everyone told him to
do at the start, which was liquefy everything, take all that money,
and stick it into the S&P 500, he would be hundreds of millions of dollars richer today.
PAUL SOLMAN: Because the stock market is up nearly 80 percent since Donald Trump took office.
For the "PBS NewsHour," Paul Solman.
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