On the campaign trail, Donald Trump, the Republican presidential nominee, has sold himself as a businessman who has made billions of dollars and is beholden to no one.
But an investigation by the New York Times into the financial maze of Trump's real estate holdings in the United States reveals that companies he owns have at least $650 million in debt – twice the amount than can be gleaned from public filings he has made as part of his bid for the White House. The inquiry also found that Trump's fortunes depend deeply on a wide array of financial backers, including one he has cited in attacks during his campaign.
For example, an office building on Avenue of the Americas in New York, of which Trump is part owner, carries a $950 million loan. Among the lenders: the Bank of China, one of the largest banks in a country that Trump has railed against as an economic foe of the United States; and Goldman Sachs, a financial institution he has said controls Hillary Clinton, the Democratic nominee, after it paid her $675,000 in speaking fees.
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As president, Trump would have substantial sway over monetary and tax policy, as well as the power to make appointments that would directly affect his own financial empire.
Yet the examination underscored how much of Trump’s business remains shrouded in mystery. He has declined to disclose his tax returns or allow an independent valuation of his assets.
Mystery
Earlier in the campaign, Trump submitted a federal financial disclosure form. It said his businesses owed at least $315 million to a relatively small group of lenders and listed ties to more than 500 limited liability companies. Though he answered the questions, the form appears to have been designed for candidates with simpler finances than his and did not require disclosure of portions of his business activities.
Beyond finding that companies owned by Trump had debts of at least $650 million, the Times discovered that a substantial portion of his wealth is tied up in three passive partnerships that owe an additional $2 billion to a string of lenders, including those that hold the loan on the Avenue of the Americas building. If those loans were to go into default, Trump would not be held liable, the Trump organisation said. The value of his investments, however, would certainly sink.
Richard Painter, a professor of law at the University of Minnesota and, from 2005 to 2007, the chief White House ethics lawyer under president George W . Bush, compared Trump to Henry Paulson Jr, a former chief executive of Goldman Sachs whom Bush appointed Treasury secretary.
Painter advised Paulson on his decision to sell his Goldman Sachs shares, saying it was clear that Paulson could not simply have placed that stock in a trust and pretended it did not exist.
If Trump were to use a blind trust, the professor said, it would be “like putting a gold watch in a box and pretending you don’t know it is in there”.
Bankruptcies
Trump once said on CNN: “I am the king of debt. I love debt.” But in his career, debt has sometimes got the better of him, leading to at least four business bankruptcies. He is, however, quick to stress that, these days, his companies have very little debt.
Trump indicated in the financial disclosure form that he was worth at least $1.5 billion and has said publicly that the figure is actually greater than $10 billion. Recent estimates by Forbes and Fortune magazines and Bloomberg have put his worth at less than $5 billion.
To gain a better understanding of Trump's holdings and debt, the Times engaged RedVision Systems, a national property information firm, to search publicly available data on more than 30 properties in the United States.
That Trump seems to have so much less debt on his disclosure form than what the Times found is not his fault, but rather a function of what the form asks candidates to list and how.
Assets
The form, released by the Federal Election Commission, asks that candidates list assets and debts not in precise numbers, but in ranges that top out at $50 million – appropriate for most candidates, but not for Trump. Through its examination, the Times was able to discern the amount of debt taken out on each property and its ownership structure.
At 40 Wall Street in New York, a limited liability company, or LLC, that is controlled by Trump holds the ground lease – the lease for the land on which the building stands. In 2015, Trump borrowed $160 million from Ladder Capital, a small New York firm, using that long-term lease as collateral. On his financial disclosure form, that debt is listed as valued at more than $50 million.
Allen Weisselberg, chief financial officer of the Trump organisation, said Trump could have left the liability section on the form blank because federal law requires that presidential candidates disclose personal liabilities, not corporate debt. Trump, he said, has no personal debt.
“We overdisclosed,” Weisselberg said, explaining that it was decided that when a Trump company owned 100 per cent of a property, all of the associated debt would be disclosed, something that he said went beyond what the law required.
Properties
For properties where a Trump company owned less than 100 per cent of a building, Weisselberg said, those debts were not disclosed.
Trump, for example, has a 50 per cent stake in the Trump International Hotel Las Vegas. In 2010, the company that owns the hotel refinanced a $190 million loan, according to Real Capital Analytics, a commercial real estate data and analytics firm.
Weisselberg said a Trump entity was responsible for half the debt, and all but $6.4 million of the loan had been paid off.
The Times found three other instances in which Trump had an ownership interest in a building but did not disclose the debt associated with it. In all three cases, Trump had passive investments in limited liability companies that had borrowed significant amounts of money.
One of these investments involves an office tower at 1290 Avenue of Americas. In a typically complex deal, loan documents show that four lenders – German American Capital, a subsidiary of Deutsche Bank; UBS Real Estate Securities; Goldman Sachs Mortgage Company; and Bank of China – agreed in November 2012 to lend $950 million to the three companies that own the building. Those companies, obscurely named HWA 1290 III LLC, HWA 1290 IV LLC and HWA 1290 V LLC, are owned by three other companies in which Trump has stakes.
Ultimately, through his investments, Trump is a 30 per cent owner of the building, records show. Vornado Realty Trust owns the other 70 per cent and is the controlling partner.
Scale
On a smaller scale, Trump also has a 4 per cent partnership interest in a company that has an interest in a large Brooklyn housing complex and owes roughly $410 million to Wells Fargo, according to Bloomberg data.
The full terms of Trump’s limited partnerships are not known. The current value of the loans connected to them is roughly $1.95 billion, according to various public documents.
Weisselberg said that neither Trump nor the company were responsible for the debt associated with the limited partnerships. Trump, Weisselberg added, was liable for a “small percentage of the corporate debt” listed on the federal filing but would not elaborate.
Despite Trump’s holdings, Weisselberg said, the candidate should not be held to the same standards that might apply to the heads of companies in highly regulated industries.
Others disagree. Trump’s opaque portfolio of business ties make him potentially vulnerable to the demands of banks and to businesspeople in the United States and abroad, said Painter, the former chief White House ethics lawyer.
“The success of his empire depends on an ability to get credit, to get loans extended to his business entities,” he said. “And we simply don’t know a lot about his financial dealings, here or around the world.”
– New York Times Service
