Why Donald Trump’s Most Valuable Towers Would Be So Hard To Sell

Forbes Breaking News

Two anonymous office buildings have provided Donald Trump with massive windfalls in the past. Forbes money in politics reporter Kyle Mullins joins Brittany Lewis on "Forbes Newsroom" to discuss why the former president shouldn’t count on them for cash now.  Fuel your success with Forbes. Gain unlimited access to premium journalism, including breaking news, groundbreaking in-depth reported stories, daily digests and more. Plus, members get a front-row seat at members-only events with leading thinkers and doers, access to premium video that can help you get ahead, an ad-light experience, early access to select products including NFT drops and more:  https://account.forbes.com/membership/?utm_source=youtube&utm_medium=display&utm_campaign=growth_non-sub_paid_subscribe_ytdescript   Stay Connected Forbes on Facebook: http://fb.com/forbes Forbes Video on Twitter: http://www.twitter.com/forbes Forbes Video on Instagram: http://instagram.com/forbes More From Forbes:  http://forbes.com

Transcript

00:00 (upbeat music)

00:03 - Hi everybody, I'm Brittany Lewis with Forbes Breaking News.

00:06 Joining me now is my Forbes colleague,

00:07 Money and Politics reporter, Kyle Mullins.

00:10 Kyle, thanks so much for joining me once again.

00:12 - Always great to be here, Brittany.

00:15 - We have a theme in some of our conversations

00:18 and that is Donald Trump's cash troubles.

00:22 Today is no different.

00:23 Those troubles are in the neighborhood

00:25 of millions of dollars.

00:26 What do they look like now?

00:29 - His cash troubles may not be as in the headlines anymore.

00:34 He's gotten some reprieve from an appeals court,

00:36 but they're still very much present

00:38 and he's gonna have to deal with them sooner or later.

00:41 So we're talking about cash troubles

00:42 stemming from two different legal battles in New York.

00:46 You've got his fraud case where the New York Attorney General

00:50 won a hundreds of millions of dollars judgment against him.

00:54 And then you have, excuse me,

00:56 a lawsuit by, or multiple lawsuits actually,

00:59 by E. Jean Carroll,

01:01 accusing Trump of defamation and sexual abuse.

01:04 He lost those as well, lost those verdicts.

01:07 All of it adds up to $540 million.

01:10 In other words, more than a half a billion dollars

01:13 of legal penalties that he is on the hook for as of right now.

01:17 Now he's appealing in all of these cases,

01:18 he denies any wrongdoing.

01:20 So we're gonna see where it ends up,

01:22 but that is the situation as of right now.

01:25 - Something else we know about the former president,

01:28 he got his start in real estate.

01:30 He has a very impressive real estate portfolio

01:33 and you're reporting this.

01:35 Two anonymous office buildings have provided Donald Trump

01:38 with massive windfalls in the past.

01:40 Here's why he shouldn't count on them for cash now.

01:43 What are these buildings?

01:44 - So when I talk about these two buildings,

01:48 I'm talking about 1290 Avenue of the Americas,

01:50 which is in Manhattan,

01:52 and I'm talking about 555 California Street,

01:54 that's in San Francisco.

01:55 These are both big office skyscrapers.

01:58 Some of the largest buildings actually by square footage

02:01 in his portfolio,

02:03 and they're some of the most valuable buildings

02:04 in his portfolio.

02:06 He owns 30% of each,

02:08 the other 70% is owned by publicly traded

02:11 Vornado Realty Trust.

02:13 And Trump is kind of in the backseat in this partnership.

02:16 He has a, you know, like I said, a minority partnership,

02:18 only 30%, and he doesn't have much control

02:20 over the operations of these buildings.

02:21 Vornado manages pretty much everything,

02:23 but he owns 30%.

02:25 They've done very, very well in the past, pre-pandemic.

02:28 These were, you know, I think combined worth something

02:30 like $900 million after debt.

02:33 Now they're worth closer to about 400 million after debt.

02:36 But, you know, they've done very, very well for him

02:38 in the past.

02:39 They're still a very large piece of his empire,

02:41 despite, you know, they don't have his name on them.

02:44 They're much less famous than Trump Tower

02:46 or Trump Las Vegas,

02:48 but they are, they're key financially for him.

02:52 - The market for office spaces really took a plunge

02:55 that we all saw in a post-pandemic world.

03:00 And because these buildings are office spaces,

03:03 because he doesn't control them,

03:05 is that why you're reporting that he shouldn't count

03:07 on them for money?

03:08 - Yeah, in short, it's pretty tough to sell a building

03:12 that you have a minority, or excuse me,

03:14 tough to sell a minority partnership in a building,

03:16 especially a building that is primarily

03:19 office and retail space.

03:20 The retail space has bounced back better

03:21 than the office market has,

03:23 but overall the office market in New York,

03:25 and especially in San Francisco,

03:27 are just not doing very well.

03:28 I talked to multiple experts who told me

03:30 this is one of the worst cycles they've seen

03:32 in a really long time.

03:34 One San Francisco expert told me he's seen four or five,

03:36 you know, business cycles in San Francisco,

03:38 and this is the worst one he's ever seen.

03:40 You know, you have the rise of remote work

03:44 that has taken people out of the office,

03:45 so they're going into the office less.

03:47 You've got all these tenants who are less interested

03:49 in renting big, swanky office spaces

03:51 and downtown office cores.

03:52 So these buildings are still doing fine

03:55 from a financial perspective.

03:56 They don't have extremely high vacancy rates,

04:00 but the rents that they're getting are lower

04:01 than they were before the pandemic,

04:03 and overall, from a sale perspective,

04:05 they're worth a lot less than they were before.

04:08 - So Trump has a minority stake in these buildings.

04:10 You're reporting that the majority stake is Vornado,

04:14 the CEO of that being Stephen Roth.

04:16 Can you talk about him?

04:17 Who is he, and what is his relationship to Donald Trump?

04:20 - Yep, Stephen Roth is, like you said,

04:23 the CEO of Vornado Realty Trust.

04:25 He's also a billionaire,

04:27 though not quite as wealthy as former President Trump.

04:29 He's worth a little over a billion dollars, Stephen.

04:33 And he's got a reputation as a very savvy businessman.

04:36 You know, Roth is a, you know,

04:39 he's known to, you know, jump in on deals

04:42 when he can get, when he can take advantage of it.

04:44 And so, you know, he is,

04:46 and additionally, he's been doing business with Trump

04:48 for a very long time.

04:50 So, you know, in addition to these two buildings,

04:52 he's had other economic ventures with them in the past.

04:55 And, you know, he's also served

04:58 as one of Trump's economic advisors

05:00 in somewhat of an informal capacity

05:02 after Trump entered politics.

05:05 - As Forbes has been reporting,

05:06 Trump had a cash crunch in the past,

05:08 could have a cash crunch in the future,

05:10 depending how his legal issues shape out.

05:13 Is there any indication that Vornado

05:15 could buy Trump out of his minority stake?

05:17 - So, Vornado has a couple of issues here.

05:21 They have cash on hand, about 1.3 billion,

05:23 which would be more than enough

05:24 to buy out Trump shares after debt.

05:27 But unfortunately, a lot of that cash

05:29 is actually spoken for.

05:30 One of the analysts I talked to told me that, you know,

05:32 they've got a lot of debt maturing

05:33 in the next couple of years.

05:34 They're probably going to need to service that debt.

05:36 They've also got big spending plans

05:38 in some of their other properties.

05:39 They own property largely in New York,

05:41 but across the country.

05:42 And, you know, they've got spending in Chicago,

05:44 and especially in the Penn District in Manhattan,

05:47 that they're really trying to plow cash into,

05:49 do lots of renovations, lots of construction,

05:51 to get those properties up to where they want them to be.

05:53 So, it's a little tough to say whether or not

05:56 they would jump at the chance to spend a bunch of money,

06:00 that they, you know, kind of have earmarks for other stuff

06:03 on buying out Trump's stakes in these buildings.

06:05 With all of that said, I also talked to, you know,

06:08 well, I talked to several analysts here.

06:09 They all told me that Roth has this reputation

06:11 as a savvy businessman.

06:13 One compared him to a shark,

06:15 and when, you know, he smells blood in the water,

06:17 he's going to strike.

06:18 And that was, you know, that might be illustrative.

06:22 If Trump is flailing, looking for a buyer,

06:25 you know, kind of last minute,

06:26 he's only got a limited amount of time

06:28 to raise the cash that he needs, potentially,

06:30 maybe Roth makes him an offer.

06:33 - So, you're saying that there's not blood in the water yet,

06:36 but there could be down the road.

06:38 - It's hard to say, you know,

06:41 with everything when it comes to Donald Trump's finances,

06:43 there's, it's highly unpredictable

06:46 between finances and legal trouble,

06:48 neither of which are particularly predictable,

06:50 but, you know, this is definitely

06:53 an exercise in hypotheticals.

06:55 - If Roth and Vornado pass,

06:57 are there any other potential buyers here?

06:59 - So, if you're looking for outside buyers,

07:03 again, they're going to run into some of the same issues.

07:05 The office market's just not super strong right now.

07:08 There's not a lot of people who are looking to invest

07:10 a bunch of money in a big office building,

07:13 and because it's a minority partnership,

07:15 most people don't want to buy into,

07:17 most investors don't really want to buy into a building

07:20 if they don't have the chance to improve

07:22 the economics on that building a little bit,

07:25 and so, because of that, you know,

07:28 these are kind of less attractive stakes.

07:30 That said, you could see, you know, a big pension fund,

07:33 you know, from, you know, Korean pension fund or something,

07:35 maybe comes in and buys into a, buys into a stake,

07:38 but they're probably going to be looking for a reduced cost,

07:40 ultimately everything's going to be dictated by cost.

07:43 - Do you see a world in which this buyer pool would grow?

07:46 - Yeah, absolutely.

07:48 If Trump is, again, looking to sell really quickly,

07:52 you know, a fire sale of sorts,

07:54 that's going to drive the price that he can, you know,

07:57 ask for, for these stakes down,

07:59 and that could expand the buyer pool.

08:01 - You pointed out in your reporting

08:02 that a bright spot for Trump

08:04 are his shares in Fruits Social.

08:06 How much are they worth?

08:09 - As of early May, we had them about $5.6 billion.

08:12 Now those are publicly traded,

08:14 so they're going up and down, you know,

08:15 with the stock market every single day.

08:17 They've been on a bit of a roller coaster lately.

08:18 They, you know, jumped very high

08:21 right after they went public, took a huge dive,

08:23 and have had a pretty remarkable recovery recently,

08:25 and that's really boosted the former president's net worth.

08:27 He's up to over 7 billion at this point.

08:29 - We know that his shares are tied up in a lockup agreement,

08:32 but would he be able to access that

08:34 before the appeals court hears his case?

08:38 - It all depends on when the appeals court hears his case.

08:40 The earliest that they could hear it is September.

08:43 That's around the same time that his lockup agreement,

08:45 which carries about six months

08:46 after the stock went public in March, expires.

08:50 So if they hear it very early,

08:52 they recognize maybe it's a really important case

08:54 and they wanna get their ruling done quickly,

08:56 maybe he does, you know, face a bit of a crunch there

08:59 because, you know, he can't access those shares

09:02 until after the, you know, the ruling is handed down.

09:05 That said, if there's any sort of delays,

09:06 and courts are not exactly known for moving quickly,

09:09 you know, I think it's probably likely

09:11 he's going to be able to access

09:12 at least some of these shares

09:13 before a ruling is handed down.

09:15 - Kyle Mullins, per usual,

09:16 thanks for the conversation and your reporting.

09:19 - Always great to be here, Brittany.

09:21 Thanks so much for having me on.

09:23 (silence)

09:25 (silence)

09:27 (silence)

09:29 [BLANK_AUDIO]

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