Trump Organization's trying times
Owning so many golf courses, hotels and condos in blue states is becoming a drag on the president's business
AARON ELSTEIN November 20, 2018 12:00 AM UPDATED 9 MINUTES AGO
crainsnewyork.com
Long before he became a political figure, Donald Trump built a business putting his name on hotels, condominiums, golf courses and office towers in New York, New Jersey, Illinois, California and other blue states where today he is unpopular. That now appears to be costing his business.
The Trump Organization's revenue fell last year by somewhere between $45 million and $90 million, a Crain's analysis of the president's financial disclosures found. In 2016 the company's revenue was roughly $700 million. Before becoming president, Trump claimed that his businesses generated $9.5 billion.
The Trump Organization did not respond to requests for comment.
The state of Trump's affairs can be deduced from the president's personal financial statements filed with the federal Office of Government Ethics. Trump lists specific revenue figures for certain ventures, such as golf courses and the Wollman Rink in Central Park. For others, such as the Upper East Side condominium Trump Plaza, he reported revenue between $1 million and $5 million. For his Manhattan office towers, he checked a box saying they pulled in more than $5 million. Crain's calculated revenues for those buildings based on market-rate rents and tallied up Trump Organization revenue using the bottom and top end of ranges provided in the president's financial statement. Figures had to be prorated because the president's most recent financial disclosure covers calendar year 2017, while his previous filing covered the period from Jan. 1, 2016, to April 15, 2017. The president's filings list only revenue, not expenses, so it's unclear how profitable the business was.
Before diving into the details, it is important to note that many commercial landlords are treading water or even sinking because rising interest rates are lifting operating costs, while e-commerce relentlessly hammers many retail tenants.
In New York City the president's brand has suffered. Last year the Trump SoHo hotel changed its name to the Dominick, and this year Trump Place residents removed that moniker from their Upper West Side condo complex after defending against a Trump Organization lawsuit seeking to halt the change.
Even with those setbacks, though, the Trump Organization is still generating a lot of cash, thanks in part to the jewels in its crown: 1290 Sixth Ave. and 40 Wall St., also known as the Trump Building.
The first property is a 2.1 million-square-foot tower filled with blue-chip tenants including Morgan Stanley and State Street. Trump has a 30% stake in the property; Steven Roth's Vornado Realty Trust owns the rest. Crain's estimates that the Trump Organization collected $62 million in rent there last year.
The Wall Street property is an older building with a colorful history of renting space to penny-stock hustlers. It generated an estimated $40 million in revenue in 2017.
Because of long-term leases with business tenants, it is unlikely that revenues at either 1290 Sixth or 40 Wall fluctuate much from year to year.
Closer to the White House, business is humming at the Trump International Hotel in Washington. It generated $40 million in revenue, more than twice as much as in the 12 months following its September 2016 opening. But the incoming Democratic majority in the House of Representatives is pushing the company to disclose its guest list, as are the parties in a lawsuit alleging the president's ownership of the hotel violates the Constitution's emoluments clause barring government officials from accepting anything of value from foreign governments without congressional approval.
The hotel is helping to offset harder times at Trump Tower. The company's flagship building collected $30 million in rent from commercial tenants in 2012, according to a mortgage-backed security offering first reported by Forbes, but that figure has since fallen to approximately $21 million because tenants have left.
Foremost among them is Niketown, which moved out last year from a site connected to Trump Tower, leaving behind 65,000 square feet that have not been filled. (Two Nike sources told Forbes the primary reason for leaving was the configuration of the space, while the association with Trump was "a factor, to some degree.") Replacing the lost rent will be difficult considering that the average asking retail rent has fallen by 20% in Manhattan during the past three years, according to CBRE. Remaining Trump Tower tenants include Gucci, Starbucks and the Industrial and Commercial Bank of China, a state-controlled institution. The bank's lease expires next year, according to the 2012 filing, and Gucci's in 2026. It is unclear when Starbucks' lease expires.
Quote:BEST GUESSTIMATE
For years the Trump Organization reported revenues of $9.5 billion to news outlets. But analyses found that was likely exaggerated. Last year Crain's began using evidence-based estimates to rank New York's privately held companies.
Estimated revenue:
2016: $698 million
2017: $655 million
In the rough
Business is also weakening at Trump-branded golf courses, in part because less golf is being played just about everywhere. Last year rounds played nationally fell by 2.7%, according to Golf Datatech. But declines appear to be steeper at some Trump-branded courses.
At Trump National Doral in Miami, revenue fell last year to $75 million, a decline of about $15 million. Mar-a-Lago Club revenue fell by a prorated $4 million, or 14%, to $25 million. At the Trump National Golf Club in Bedminster, N.J., where the president spends many weekends, revenue was flat at $15 million.
Meanwhile in the Bronx, city data show that revenue at Trump Golf Links at Ferry Point sank by 43% last year, to $4.1 million. It looks as though business has since stabilized, with the city reporting $2.4 million in revenue for the course during the first half of 2018. One reason for the drop might be that playing 18 holes at Trump Ferry Point on weekends and holidays costs city residents $185 and nonresidents $224. Across the Bronx, at the city-owned Van Cortlandt course, an 18-hole round costs $51—a price difference that predates Trump's presidency.
Some nonprofits have ceased renting Trump Ferry Point for fundraisers, although the likelihood that politics played a role varies greatly from one case to the next. The City Parks Foundation stopped its Ferry Point event last year and no longer sponsors a golf benefit, said marketing director Rosemary Jorda. She said the foundation added a fundraiser for its environmental education program to celebrate Earth Day; this year it was held at the Tesla showroom in the Meatpacking District. The group is nonpartisan but raises money in a city where anti-Trump sentiment runs high and many elected officials are outspoken critics of the president.
Another to leave was Hank's Yanks, a charity named for Yankees co-owner Hank Steinbrenner that supports youth baseball. It held the first major event at Trump Ferry Point after the venue's July 2015 opening, drawing former Yankees Reggie Jackson, Willie Randolph and David Cone. The group returned to Trump Ferry Point in 2016 and 2017, but not this year. Ray Negron, who helps run Hank's Yanks, said it ended golf fundraisers because they barely broke even after expenses, and politics was not a factor. "I live out in Babylon, Long Island," he added. "It wasn't convenient to get to the Bronx."
Instead he raised money by staging a play about his own life. It told the story of a kid plucked off the Bronx streets in the 1970s to become his favorite team's bat boy. The play was performed four times. Mickey Rivers, the inimitable former Yankees center fielder, appeared on stage.
"I had the time of my life," Negron said. "And we were able to raise more money for our cause."
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