Is Trump Really a Billionaire? Forbes did the math in the President's pocket
"Is Donald Trump Really a Billionaire?" they all seemed to be wondering Sunday night, after the New York Times released a "bombshell report" on taxes paid by the president, detailing large losses in some years and limited revenues in others. The answer is: yes, it really is.
In fact, Trump is a multi-billionaire, with a fortune of $ 2.5 billion, according to our calculations. His portfolio, which includes commercial buildings, golf course properties, and branding businesses, is worth about $ 3.66 billion without debt. The president has a fair amount of debt, which amounts to about $ 1.13 billion, not enough to drag his net worth below $ 1 billion.
To understand how Donald Trump can be so rich, yet look so poor, it is essential to understand the difference between what we will call (a) taxable income and (b) operating income. Taxable income is the amount that people claim to have earned to the Internal Revenue Service, after subtracting items such as depreciation, interest, past losses and, in Trump's case, questionable business expenses. Operating income is the amount that companies derive from their standard operations, excluding a series of accounting tricks and extravagant financial maneuvers.
Many of Donald Trump's businesses generate an enormous amount of operating income, even though his statements to the IRS show very low taxable income. This is important because operating income, not taxable income, is a key factor in determining the value of a property. Investors want to know how much a building makes in annual profits. What happens next on a personal tax return doesn't really matter to a potential buyer.
"There's the tax world, and then there's the real world," says Eric Anton, a New York City real estate agent. "They are completely different."
Trump's operating income is real and documented, displayed in documents from local tax offices, the Securities and Exchange Commission and the president's business partners. Don't be fooled: the news isn't that the president is broke (tax returns don't record a person's net worth). The news, however, is that Donald Trump appears to have avoided paying a lot in taxes despite the significant operating profits of some properties. In other words, he has figured out how to share only a small portion of his fortune with the country he now leads.
Determining Donald Trump's net worth is like a big mathematical equation: adding up the value of assets, subtracting the value of liabilities. Obviously, understanding how much an asset is worth isn't always easy. For a commercial real estate building, it is necessary to examine the location, the square footage, the valuation multiples and the income, or the net operating income.
Take 40 Wall Street, a New York City skyscraper controlled by Donald Trump. Filings filed with the Securities and Exchange Commission show Trump's net operating income was $ 18.1 million in 2019. There are 1.2 million square feet in the building, according to a separate SEC filing.
In interviews conducted a few months ago, eight New York City real estate experts suggested multiples to apply to those income and square footage numbers. On average, they felt that the net operating result should be around 5.4% of the value. This would suggest that the business could be worth $ 336 million. The same experts, however, also suggested valuing the building around $ 400 per square foot. This equates to a total value of $ 466 million. Providing an exact valuation is difficult, but taking the average of the two methodologies and setting it at $ 401 million appears to be a fair approach.
Repeating a similar exercise across Trump's entire portfolio, assets total about $ 3.7 billion. A key variable in nearly all calculations is net operating income. It may be blown away when Trump's accountants finish preparing his taxes, but there's no denying it's there in the beginning, as it's reported on many other documents.
The president's partner at 555 California Street, a publicly traded real estate company called Vornado, revealed in public documents that his 70% stake in the building earned $ 60 million in net operating income in 2019; this means that Trump's 30% stake yielded $ 26 million. A document linked to a loan on 1290 Avenue of the Americas, another building in which Trump holds a 30% stake, records $ 96 million in 2019 net operating income, suggesting the president's stake was $ 29 million. . In addition to $ 18.1 million in 2019 operating income at 40 Wall Street, SEC filings record $ 13.3 million at Trump Tower, $ 1.7 million at Trump Plaza, and $ 600,000 at Trump International Hotel & Tower. New York City estimates operating income for retail space inside Trump World Tower ($ 1 million), Trump Parc ($ 600,000), Trump Parc East ($ 900,000), and Trump Park Avenue (approximately $ 2.4 millions). A representative of the Trump Organization told Forbes in September 2019 that the president's shop at 6 East 57th Street generated $ 10.7 million in profit per year. Overall, Trump's interests in those buildings, which also include residential space in many of them, are worth about $ 2.3 billion, not including debt.
Trump's portfolio of golf course properties is more complicated. He owns ten traditional US golf courses, which generated $ 108 million in revenue in 2019, according to an analysis of the president's annual financial disclosure report. It is difficult to determine operating margins on these properties, but past performance offers a clue. A 2014 income statement from the Trump club in Westchester County, New York, shows revenue of $ 1.1 million on $ 5.6 million in revenue, suggesting margins of 20%. Documents linked to the Trump club in Jupiter, Florida show margins of 19% in 2013, 13% in 2014 and 13% in 2015. After seeing these figures, seven golf experts still estimate pre-Covid margins in average of 21%, which would suggest that the operations were bringing in a total of $ 23 million last year. If the properties actually produced that much, they could be worth a total of $ 200 million today. Even if they are all losing money, they should still be worth at least $ 100 million.
The Times article does not record Trump's golf course revenues, but digs into his resorts, which were already known to be in trouble. European regulatory documents record losses year after year in the president's three overseas properties. At Trump National Doral, the president's resort in Miami, net operating income dropped from $ 13.8 million in 2015 to $ 12.4 million in 2016 and $ 4.3 million in 2017, according to documents obtained by officials. locals. A representative of the Trump Organization told Forbes that profits jumped to $ 9.7 million in 2018. The Times reports that Trump bought Doral for $ 150 million and then shelled out another $ 213 million, suggesting an investment. total of 363 million dollars. Forbes estimates it is worth $ 153 million. Based on these calculations, the president has lost $ 210 million to date.
In mid-September, Forbes reported that Doral and the Trump International Hotel in Washington, DC, appeared to be in financial trouble. The Times story confirms this and adds more details. The D.C. opened in 2016, and in 2018, Trump had already reported $ 55.5 million in tax losses, according to the Times. However, the property is worth something. An investor offered $ 175 million before the coronavirus brought the hotel industry to its knees. The Trumps refused the offer. Forbes now estimates the hotel’s value is approaching $ 168 million. He sure seems to be continuing to lose money.
There are many other revenue-generating properties in Trump's portfolio, including a 50% stake in a range of hotel apartments in Las Vegas, a licensing firm and Mar-a-Lago. All these properties make money. Then there are the "toys", which no, do not produce profits: airplanes, helicopters and homes in New York, Florida and St. Martin. But even if they're not making a lot of money, they're still worth a lot.
Add up all of Donald Trump's assets - those that bring in large sums of money, those that lose a lot of money, and those that don't really function as businesses - and the total is just as high as $ 3.7 billion. Real assets that are worth real money. But that's not Trump's net worth. To understand this, we must consider the debts.
Trump has already proclaimed himself the "debt king," a nickname that fits for the early days of his career, as he staggered into bankruptcy, and more recently as president, as he accumulated huge federal budget deficits. As a businessman, Trump has been playing a little safer lately. Without a doubt, his estimated $ 1.1 billion debt is a huge amount of leverage. But considering Trump's $ 3.7 billion in assets, most of his bankers should still be able to sleep soundly.
A large chunk of Trump's liabilities are concentrated in 1290 Avenue of the Americas in New York City and 555 California Street in San Francisco, the two skyscrapers he owns along with Vornado. In its most recent quarterly statement, Vornado disclosed $ 950 million in debt at the New York property and $ 543 million at the San Francisco property. This equates to $ 1.5 billion in total debt, and Trump's 30% stake amounts to $ 448 million.
The president has hundreds of millions of extra debts on other Manhattan buildings, as documented in SEC filings and property records. For Trump Tower, he has a $ 100 million loan. At 40 Wall Street, for $ 139 million. At Trump Plaza, of 13 million dollars. At Trump International Hotel & Tower, of 6.5 million dollars. At Trump Park Avenue, an estimated $ 10 million. That's another $ 268 million, which brings the tally to $ 716 million.
The president borrowed $ 125 million through two publicly registered mortgages to Doral. His company secured a deal to borrow $ 170 million for the DC hotel. The Times story reports a balance on that loan of $ 160 million. Trump may have paid some for it. The president's financial disclosure report lists liabilities to his Chicago tower of more than $ 75 million. Add at least another $ 360 million and you get $ 1.1 billion.
Trump has an $ 11 million mortgage for a mansion in Palm Beach, plus another loan for a mansion in Bedford, New York. He took out a loan for his golf club near Washington and two mortgages for one of his golf courses in New Jersey. All in all, the total still stands at $ 1.1 billion.
Having debt involves paying interest, which reduces Trump's profits on his tax returns. But the president also appears to be using far more unusual methods to limit his fiscal outgoings.
Donald Trump has long been proud to play with the tax system. "He makes me smart," he declared in a famous 2016 presidential debate. He may also make him vulnerable to investigators investigating his financial situation.
There is a lot to consider. For example, Trump appears to have had his daughter Ivanka as a "consultant" for his real estate company, while she worked as an employee of the company. Donald Trump wrote off $ 26 million in "unexplained" consulting fees from 2010 to 2018, according to the Times. “If the payments to his daughter were compensation for the job, it is unclear why [Donald] Trump did it in this form,” says the Times, “other than to reduce his tax liability. Another legally more dangerous possibility is that payments were a way to transfer assets to his children without incurring taxes on donations ".
The Times also describes the extravagant expenses, including over $ 70,000 worth of hairstyles, turned out to be business costs. Trump Corp., a wholly-owned subsidiary of Donald Trump, has written off charges against Alan Futerfas, a lawyer who represented Donald Trump Jr. in the Russia investigation, according to the newspaper. In another questionable move, Trump labeled his mansion in Bedford, New York, as a real estate investment, paving the way for him to evade $ 2.2 million in property taxes, according to the Times.
These tricks, and many others detailed in the Times article, have proved effective. In 2016 and 2017, according to the Times, Trump paid just $ 750 in federal income taxes. The scandal is not that Trump is broke and that he pays those meager sums, but that he remains quite rich.
