According to The Washington Post, President Trump, who often bragged about his ability to leverage debt, made a curious shift in how he purchased properties starting in 2006, offering cash and paying in full.
In the nine years before he ran for president, Donald Trump’s company spent more than $400 million in cash on new properties — including 14 transactions paid for in full, without borrowing from banks — during a buying binge that defied real estate industry practices and Trump’s own history as the self-described “King of Debt.”
Trump’s vast outlay of cash, tracked through public records and totaled publicly here for the first time, provides a new window into the president’s private company, which discloses few details about its finances.
It shows that Trump had access to far more cash than previously known, despite his string of commercial bankruptcies and the Great Recession’s hammering of the real estate industry.
Why did the “King of Debt,” as he has called himself in interviews, turn away from that strategy, defying the real estate wisdom that it’s unwise to risk so much of one’s own money in a few projects?
And how did Trump — who had money tied up in golf courses and buildings — raise enough liquid assets to go on this cash buying spree?
The president's son told the Post the Trump Organization was just that lucrative and did not sell off anything or take on any outside investors.
Eric Trump said, the firm’s existing businesses — commercial buildings in New York, licensing deals for Trump-branded hotels and clothes — produced so much cash that the Trumps could tap that flow for spending money.
“He had incredible cash flow and built incredible wealth,” Eric Trump said. “He didn’t need to think about borrowing for every transaction. We invested in ourselves.”
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The cash purchases began with a $12.6 million estate in Scotland in 2006. In the next two years, he snapped up two homes in Beverly Hills. Then five golf clubs along the East Coast. And a winery in Virginia.
The biggest cash binge came last, in the year before Trump announced his run for president. In 2014, he paid a combined $79.7 million for large golf courses in Scotland and Ireland. Since then, those clubs have lost money while Trump renovated them, requiring him to pump in $164 million in cash to keep them running.
Trump’s lavish spending came at a time when his business was leaning largely on one major financial institution for its new loans — Deutsche Bank, which provided $295 million in financing for big projects in Miami and Washington.
George Ross, who advised Trump for 25 years, wrote a book called, "“Trump Strategies for Real Estate.”
“When Trump invests in a real estate project, he typically puts up less of his own money than you might think,” Ross wrote, explaining how Trump followed this rule. “Typically, his investors in the project will put up 85 percent while Trump puts up 15 percent.”
Then in 2006, the same year Ross’s book was published, Trump changed his approach.
Post opinion blogger Helaine Olin explains why that shift raises questions and shares what one move would help the president clear up any confusion.
Commercial real estate titans generally turn to debt to make their deals — the more the better, in fact. The less money they can spend per project, the more properties they can invest in, allowing them to — hopefully — make even more money. At the same time, they aren’t tying up too much of their own money in projects that could go south. Finally, they can take advantage of tax deductions to on the interest payments for the borrowed funds, lowering their overall bill even further.
This, rather famously, was Trump’s M.O. for almost his entire career. Then, suddenly, it wasn’t.
Yet even as Trump apparently changed his business model, he continued to let people believe he was still operating via debt — as The Post reminds us, he was boasting about his strategic use of debt during the 2016 campaign.
So why the change, and why the silence?
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If Trump released his taxes, he could clear up all sorts of questions.
The Splinter reminds us what both Eric and Don Jr. once revealed about the organization's access to Russian money.
In 2008, Donald Trump Jr. stated that, “Russians make up a pretty disproportionate cross section of a lot of our assets.”
In 2014, golf writer James Dodson was hanging out on the golf course with Eric Trump. Dodson asked him where the Trumps got all their money, as banks weren’t loaning at the time. According to Dodson, Eric said, “Well, we don’t rely on American banks. We have all the funding we need out of Russia.” He added: “Oh, yeah. We’ve got some guys that really, really love golf, and they’re really invested in our programs.”
Eric’s comments came at about the same time the Trump Organization embarked on its “biggest cash binge,” as described by the Post.
And then there is Trump's sale of an uninhabitable Palm Beach mansion to Russia's fertilizer king, Dmitry Rybolovlev, in 2008.
In 2004, Donald Trump purchased Maison de l’Amitie at bankruptcy auction for $41.35 million. Two years and a couple coats of paint later, Trump – having never lived in it -- put the property back on the market for $125 million. He eventually dropped the price to $100 million, but the mansion still sat unsold.
Finally, in 2008, the Russian oligarch offered Trump $75 million for the estate. The two men settled on $95 million on July 15, 2008 and conducted the entire transaction through intermediaries.
The mansion had a mold problem, and Rybolovlev never moved in. Instead, he got permission to tear it down and sell off the land as three separate parcels.
Here’s another big revelation about Trump’s finances. How about those tax returns? (WaPo Opinon)