Donald Trump’s path to the US presidency reveals a family business steeped in real estate with deals reaching far beyond American borders, writes PropertyEU co-founding editor Paul Wessels, who revisits a 2007 interview with Trump.
Some in the world of property take an optimistic view of the future because ‘one of us’ has become president of the US, and a look at the current deals shows that Donald Trump is certainly steeped in property. Trump’s children, Donald Jr, Ivanka and Eric are all heavily involved in international deals and Trump’s son-in-law Jared Kushner has close ties with one of the most aggressive real estate investors currently active in the market, China’s Anbang. The Chinese financial giant took over Dutch insurer Vivat last year and concluded one of the Netherlands’ biggest office deals in years.
Donald Trump has done business with governments outside the US or individuals with close ties to foreign governments, including million-dollar real estate deals in Azerbaijan and Uruguay. There are Trump Towers in Istanbul, Toronto, Panama City and the Philippines capital Manila. Trump’s children are often to be found abroad promoting the Trump brand, with recent trips to Canada, the United Arab Emirates and Scotland. In New York the Bank of China is one of the tenants in Trump Tower.
Go to a PDF of the 2007 interview
Worldwide branding
Companies all over the world want to do business with the Trump family. Through his buildings, often emblazoned with giant ‘T’ symbols, and his business dealings Trump has been cultivating a celebrity status since the 1980s that cannot be ignored in gossip columns, TV programmes and magazines. In 2004 he became the face of the hit reality TV show The Apprentice, in which aspiring young businesspeople competed for a job in the Trump business. The losing candidates were dismissed with the catchphrase: ‘You’re fired!’ It earned unprecedented recognition for the Trump name inside and outside the US, and the ultimate prize of the American presidency. And there is a very serious pay-off from all this publicity. Donald Trump’s children, Donald Jr, Ivanka and Eric have the task of developing the Trump name beyond US borders, often in structures that leave the real development work to others while Trump provides the brand name and publicity. The last series of deals announced by the Trump Organization were nearly all outside the US.
Trump’s business model has become significantly less risky in recent years than it was in the 1980s and 1990s. The tycoon puts his name and creative stamp on buildings while others take the risk. Partners pay Trump a fee of several million dollars at the outset, and agree that 8% to 15% of the gross sale price of the properties will go to Trump. If the Trump name subsequently inflates the sale price by 20% or more, both parties are winners. And ultimately the Trumps receive up to 50% of the proceeds above a previously agreed benchmark, which is generally around 20% above the market value of the development.
What sets Trump apart from other developers is his ability to generate publicity around his projects. In the cities where properties with the Trump name are being developed, the Trump family typically devote hours to talking with the media – which raises the prestige of the Trump brand and encourages buyers to pay a premium. A condominium in one of Trump’s skyscrapers typically fetches 20% to 40% more than comparable properties, and developers will hope that his new presidential status will bump up the value still further. This is the inheritance that the Trump family are building.
Family business
Donald Trump’s children have been closely involved in the daily management of the business. Before her father became president, Ivanka Trump was executive vice-president for development and acquisitions and in charge of the domestic and foreign expansion at the real estate empire. Donald Jr is also an executive vice-president of the Trump Organization and the company’s website says he is involved in new projects and developments in regions varying from Eastern Europe to South-East Asia, the Middle East, South America, China and the US. Eric Trump is in charge of the range of golf courses that form part of the Trump Organization. The Trump International Golf Links Scotland, near Aberdeen, has met with resistance from locals, partly for being built in a protected wildlife area, and Trump fell out with Scottish first minister Alex Salmond over the building of an offshore wind farm within sight of his resort. Despite these setbacks and the new president’s recent statement that he will not do any foreign business deals while in office, plans have recently been put forward for a second 18-hole course in Aberdeenshire. Now that Trump is president there are serious questions about conflicts of interest. Yet a few streets away from the White House, on Pennsylvania Avenue, is one of the newest luxury additions to the Trump family’s real estate empire – the Trump International Hotel. It is one of the most visible symbols of the task facing Trump when it comes to conflicts of interest.
The hotel is situated in a former post office building that belongs to the federal government. That means Trump as president will appoint the head of what’s known as the General Services Administration, which is responsible for the management of this piece of government real estate. He is also responsible for the National Labor Relations Board, which takes decisions about conflicts with the unions regarding one of his hotels. Only recently the Trump Hotel in Las Vegas lost a case heard by this board in a dispute with the unions.
Trump has said he will eliminate concerns about conflicts of interest by handing over the management of his business to his children in a so-called ‘blind trust’. Legal experts on both the Republican and Democratic sides have already said that this is not credible because Trump knows exactly what real estate is in this trust and is continuously in contact with the management, his family. Previous presidents have also been the subject of questions about their financial interests – Lyndon B Johnson owned several TV stations through his wife while he was president, for example. But presidents have had to take rigorous steps to avoid questions of ethics – George W. Bush put his shareholdings into a blind trust and Jimmy Carter did the same with his peanut farm. Trump’s accession brings a new dimension to the ethical debate.
Dependent on banks
The new US president has appointed the Secretary of the Treasury while being hundreds of millions of dollars in debt to the banks. The Wall Street Journal recently revealed that Trump is the guarantor for hundreds of millions in loans from well-known names such as JP Morgan Chase & Co, BlackRock, Fidelity Investments, Invesco, Pacific Investment Management, Prudential, Vanguard Group and Wells Fargo.
Trump is also profiting from the low interest rates set by the US central bank, the Federal Reserve. He has criticised the latter institution for being ‘too political’. The head of the tax office, the Inland Revenue Service, is also appointed by the president. Financial issues are always an important aspect of a real estate company.
Donald Trump has repeatedly stated in the last few weeks that he has no interests in Russia. He even tweeted: ‘NOTHING TO DO WITH RUSSIA – NO DEALS, NO LOANS, NO NOTHING!’ In reality the Trump family has a long history with Russia. The family has repeatedly tried to build luxury apartments in Moscow. These efforts have reportedly drawn a blank so far. But Russian investors are still of great interest to Trump in terms of raising money for projects elsewhere in the world. The American press reports that it is impossible to find out if Trump currently has loans or deals with Russian institutions because he has refused to publish his tax return.
The Anbang connection
And then there are the links his 36-year-old son-in-law Jared Kushner (Ivanka’s husband) has with the media-shy Chinese company Anbang. These links are controversial because of the important role Kushner now has as an adviser to president Trump. The New York Times revealed how Kushner had dinner in New York’s Waldorf Astoria Hotel last November with a delegation led by Wu Xiaohui, the head of Anbang Insurance Group, which owns the Waldorf. Anbang is a Chinese financial giant with an estimated fortune of around $300 bn and an ownership structure shrouded in mystery.
Anbang is also active in the Netherlands: the Chinese insurer bought an office portfolio from Blackstone in 2016 for around €500 mln, the biggest office deal in years. According to Bloomberg, the offices were acquired via insurer Vivat, which was taken over by Anbang Insurance Group last year. Anbang has acquired assets from Blackstone elsewhere, including the Waldorf Astoria hotel in New York in 2014, as well as a portfolio of 16 hotels in the US in March 2016.
According to the New York Times, the dinner with Kushner and Anbang’s Wu Xiaohui concerned a joint venture between the two to redevelop the building at 666 Fifth Avenue, the jewel in the crown of the Kushner family’s property empire, which is due for a renovation. Anbang, which has close ties with the Chinese government, has recently been aggressively trying to buy property in the US (and elsewhere in the world). Under president Obama, attempts were made to call a halt to the rise of the Chinese company because of concerns about national safety arising from foreign investments.
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Dutch debacle in Atlanta
Dutch property investors are among those who know deals with the Trumps don’t always end well. In an interview with PropertyEU in 2007 in Atlanta, Donald Trump saw the opportunity to establish Trump Towers in several European capitals, including Amsterdam. ‘Come up with a good plan and I’ll come to Europe,’ he declared when asked by PropertyEU, adding in the same breath that his ancestors came from the Netherlands or Germany: ‘Van or Von Trump, I think.’ Trump was speaking in Atlanta in reference to the construction of Trump Towers in that city, a large-scale residential project that was proposed together with Dutch partner Global State Investments. The plan was to build two skyscrapers, one of them a 47-storey residential tower containing 363 luxurious apartments, with prices starting at $500,000 (€470,000) and going up to $11.4 mln for a penthouse. The outcome was very different, partly as a result of the financial crisis – in 2010 the axe fell on Trump Towers, after Weesp-based Global State had raised around $18 mln from 250 private investors in the Netherlands.
Trump ran no personal risks with this project, but licensed the brand name, which meant Trump was obviously highly concerned with the quality level of the project. After the presentation of the Trump Towers in Atlanta in 2007, his daughter Ivanka flew to the Netherlands to promote the project again during a flying visit to woo potential Dutch investors. At a meeting in Hilversum, investors fell at the feet of the blonde Ivanka, who in her own words has learned to dispense with making a serious impression and instead makes an asset of her appearance: ‘On a construction site I wear boots, but otherwise it’s Manolo Blahnik pumps.’
An earlier attempt to build a Trump Tower in Germany similarly failed to get off the ground. Frankfurt’s Millennium Tower and Alexander Platz in Berlin were both mooted as possible sites before the Trump Organization settled on Stuttgart. But after unveiling plans for a €250 mln building, the proposed idea was rejected by the city of Stuttgart in 2003. Trump’s German venture, TD Trump Deutschland AG, was wound up two years later, after an attempt to claim compensation from the city of Stuttgart was defeated in court.
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Kushner: active son-in-law
While the Trump Organization has moved in recent years from acquisitions to selling its brand name for real estate projects, the Kushner family business is an important real estate investor in New York and beyond. Jared Kushner established a name for himself as a New York property tycoon in 2007, when, at age 25, he purchased a skyscraper in Manhattan for $1.8 bn.
The New York Times estimates that Kushner has done $7 bn worth of deals in the last 10 years, often financed by capital from abroad. Kushner also recently announced that he would be stepping down from his business activities as of January 20; he and Ivanka are understood to be clearing the decks prior to taking up influential advisory roles in the White House, with Ivanka briefing her father on a range of issues ranging from childcare to climate change. After naming Kushner as a senior adviser in the week of his inauguration, Trump praised his son-in-law as ‘incredibly successful’ and a ‘tremendous asset and trusted adviser throughout the campaign and transition’. Those remarks were made in the New York Observer, a weekly newspaper owned by Kushner. According to informed sources, Kushner has a decisive say in all Trump’s important decisions. He was the man behind a large-scale purge of the transition team which saw the out-of-favour Chris Christie and his associates dismissed.
