00:00Hi, everybody. I'm Brittany Lewis, a reporter here at Forbes. Joining me now is my Forbes
00:07colleague Zach Everson. Zach, thanks so much for coming on.
00:12Thanks for having me back, Brittany.
00:14You have some reporting. Trump's Wall Street tower appears to be underwater, according
00:19to your latest report. But let's go back to the beginning here and give us the history
00:23of the building. It's 40 Wall Street. It was at one point, as you point out, destined to
00:29be the tallest building in the world. That didn't come to fruition. But take us back
00:33to then.
00:34Sure. So 40 Wall Street, it was going to be built as the Manhattan Company's headquarters,
00:40which is a bank that was founded by those famous muses of Broadway, Alexander Hamilton
00:45and Aaron Burr. They were planning on it being the tallest building. And shortly after it
00:50went up, the Chrysler Building bested it because they built the massive spire in secret, which
00:56well played Chrysler Building people, well played. The other thing that was unfortunate
01:01right when it opened was that it was shortly after the 1929 stock market crash. So all
01:07these companies that had committed to being tenants of the building were no longer interested.
01:12So the business plan didn't work out originally either.
01:17So then between the 20s to now, how did Trump end up getting his hands on it?
01:23Sure. So in the 80s, it really started changing hands a little bit. Some of the secret owners
01:27were Ferdinand and Imelda Marcos, who secretly invested in the building. That year, a group
01:32of investors led by a Hamburg shipping magnate family also bought the land. Then Marcos'
01:42assets were seized. The building kind of bounced back. The leaseholds kind of bounced back
01:45and forth between who had it. And eventually, Citicorp was stuck with it. They didn't want
01:50it. Downtown real estate wasn't doing well. So they sold the leasehold to Donald Trump.
01:55So he does not actually own the building, but he has the leasehold, like the right to
01:59lease out that building to other tenants. He signed a 64 year ground lease with the
02:04German shipping family and got it for a mere $1.3 million.
02:0964 years. That was about 30 something years ago. So he still has a good chunk of lease
02:16left. How much does he owe?
02:20He owes a significant amount. Now, you can actually see the exact amount because he signed
02:25this mortgage. He refinanced it in 2015 with ladder capital and they promptly chopped it
02:31off and securitized it. So you can see how much is owed through the four different filings
02:37with the SEC, for the four different investment vehicles. So he owes about $118 million on
02:44the building. The way he's been paying off his mortgage is largely just been paying interest.
02:49So he owes $118 million of the original $160 million mortgage. The loan is coming due in
02:5510 months. So how much is Trump's equity worth?
03:00The building itself, when Forbes valued it, came in at $116 million, which $116 million
03:07is $2 million less than $118 million, which if our estimates are correct, does put it
03:12slightly underwater right there. So not a major amount that is underwater, but certainly
03:17not in a place where you want to be as you're about to refinance and the building is having
03:22a bunch of other problems as well.
03:25So essentially, the building's not earning enough money to cover the rest of Trump's
03:28loan. So then the question remains, how does he pay that back?
03:34That is an excellent question.
03:38We reached out to the Trump organization, they did not answer.
03:42He could try to refinance with another organization.
03:45He could try to pay part of it down and then refinance part of it elsewhere.
03:48The problem he's having is that the building is also just it's a money loser right now.
03:53Never mind the fact that the investments underwater, you've seen occupancy rates there have
03:58plummeted. And we're getting this off of, you know, again, since the loan was collateralized
04:03that their SEC filings, you can get this from where you're seeing that the occupancy
04:08rate in 2015, when he first took out the loan, it was 94.5 percent.
04:13But then it's dropped. In 2019, it was 89, then 86, then 82, 74.
04:18And then last year, it was down to or June, rather, it was down to 73.9 percent.
04:23And you're just not going to be able to make your money back and make any profit when your
04:27occupancy is that low. And that's we're seeing that's exactly what's been the case when
04:31he's reported his income.
04:33Income has fallen from 40 from 2019.
04:36It was 41 million to 2022.
04:39It was 30 million.
04:41There was a bit of a bounce back last year when it went up three million.
04:44Not sure exactly why it could just be escalating rent clauses with existing tenants.
04:48But it's just not not bringing in the money there that he needs to to pay to service
04:53today. I mean, from 2020 on in 2020, especially the pandemic really decimated any
04:59commercial real estate in New York City specifically.
05:02And the market is at a tough time bouncing back.
05:05So do the math for us.
05:07How much is this building making Trump a year?
05:09It's making up just about one point two million dollars is what it made him last year.
05:13You know, not bad.
05:15I would enjoy having some sort of asset that brought in that return for me.
05:18But it's nowhere near what ladder capital it projected it would make when it gave the
05:23loan to Trump in 2015, when it projected that he would be taking home 11 million
05:27dollars. And I would love for you to dive.
05:30I would love for you to dive a little bit into the land lease situation.
05:34How is that throwing a wrench into his finances here?
05:38So it is right now he's paying about two point five million dollars in annual rent to
05:43that German shipping magnet family.
05:45But that is set to change dramatically in 2033, where it could escalate to at least 6
05:52percent of the value of the land.
05:53So an estimate that was done a few years back thought that his ground, his his rent on
06:01the leasehold would soar from two point eight million dollars in 2032 to 16 point three
06:07million dollars the following year.
06:09And, you know, that's that's just doesn't make this investment tenable whatsoever.
06:12So we also reached out to the Hindenburg family, the ones who who own the building to
06:19see if they were open to renegotiating with this with Trump, if they've had any
06:22conversations. They also do not respond to inquiries.
06:26His legal troubles cost him millions in recent years.
06:29So, I mean, we talked about earlier, how is he going to pay this back?
06:33What's the future of this lease and with Trump in it really look like?
06:39It's a giant question, Mark, I honestly don't know what what's going to happen with
06:44this. He has some options.
06:46He could file for bankruptcy again, although it would be his first bankruptcy that
06:50doesn't involve a hotel. So that's new.
06:54But, you know, he'd be on the hook for I think it's about twenty five million dollars
06:58is what he'd have to pay.
06:59But the rest of it, he'd be able to just walk away and leave the mess for somebody
07:02else. He obviously has a history of having done that.
07:06Mentioned earlier, he could try to refinance.
07:07He could pay down part of it himself and then get a mortgage for the rest.
07:10But it's going to be tough finding a lender when you're looking at this lease on a
07:14money losing property that's already underwater.
07:17Well, Zach, definitely a lot to look out for per usual.
07:21I appreciate your reporting.
07:22You're welcome back anytime.
07:23Zach Everson, thanks for joining me.
07:26Thanks for having me.
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