The Trump Reorganization: What’s next for the president’s firm?

At a nighttime campaign rally in Macon, Georgia, last month, Donald Trump stood at the podium and tried to inspire his base. “Could you imagine if I lose? I’m not going to feel so good,” the president said. “Maybe I’ll have to leave the country — I don’t know.”

It’s unclear what Trump’s life will look like after Jan. 20, 2021. Writers and political observers have speculated that he could start his own TV network, host a radio show or — yes — move abroad.

Or he might just return to the real estate firm founded by his father and grandmother as E. Trump & Son in the early 1920s.

Upon trading his Trump Organization digs for the Oval Office, Trump transferred control of the private business to his sons, and the company agreed not to solicit deals in foreign countries during Trump’s presidency.

When Trump’s presidency ends, his firm will no longer need to abide by that plan, which critics said did not prevent conflicts of interest anyway. Its entities include hotels, casinos, office buildings and golf courses in multiple countries as well countless licensing deals.

In the near term, the most pressing issue appears to be the company’s debt, followed by the president’s personal tax mess and investigations into his business dealings.

The Trump Organization, currently led by Eric Trump, has more than $300 million in loans coming due in the next four years, according to the New York Times. Forbes pegged the company’s debt at $1 billion-plus.

Covid-19, meanwhile, upended not only the president’s re-election bid but also the hospitality sector, a core area of his business. The Trump Organization’s resorts and golf courses laid off over 1,300 employees in March and April.

But the condition of the business might not be as bad as some presume. It should be able to refinance and service its debt, according to some experts. And although the hospitality industry is in tatters, the company’s office properties and limited partnerships still generate cash.

Trump should also be able to capitalize on his branding and licensing strength, especially in countries where he remains popular such as Israel, Brazil, the United Arab Emirates and India.

“The Trump brand name has tremendous value,” said Bernie Kent, chairman of Michigan-based Schechter Investment Advisors.

Debt issues

The Trump Organization’s golf resorts, hotels, office buildings, mansions and other assets are valued at about $3.66 billion, giving the president a net worth of over $2 billion, according to a recent Forbes report.

But days before the election, officials from Deutsche Bank, one of Trump’s go-to lenders, told Reuters that it seeks to cut ties with him, citing reputational damage. Deutsche Bank declined to comment.

Although Trump may not be as overleveraged as some observers have suggested, he will likely have to find a new lender to refinance debt coming due. Deutsche Bank holds three loans with about $340 million outstanding, Reuters reported, citing senior bank officials. The loans are tied to Trump’s golf course in Doral, Florida, and to hotels in Washington and Chicago.

Trump has burned a number of lenders in his career, which Deutsche Bank knew when it provided the financing. But Richard Painter, a law professor at the University of Minnesota and former chief ethics lawyer for President George W. Bush, said the German bank could be a conduit for another party.

“We don’t know who took the risk on his loans,” Painter told The Real Deal. “I would be surprised if [Deutsche Bank] took that much risk with Donald Trump.”

Deutsche Bank could seek to collect on the loans before they are due, or it could sell them.

One source familiar with the matter said Trump won’t have much difficulty refinancing, as most of his loans are AAA-rated. Trump could turn to Ladder Capital, which has lent the firm more than $200 million on its 40 Wall Street skyscraper and Trump Tower. Those loans were packaged and sold to bond investors as commercial mortgage-backed securities.

Trump could probably still tap the CMBS market to refinance some loans, including the one on Trump Tower’s commercial base expiring in 2022. Net cash flow for the flagship asset, which generated $6 million in the first half of 2020, has dipped only slightly this year. And its largest tenant, Gucci, has a lease in place until 2038.

“We pride ourselves on remaining highly underleveraged,” Eric Trump said in a statement to TRD. “The very little debt we do carry as a company, relative to the value of our assets, is something that most developers would dream of.”

Golfer-in-chief

Since his first successful swing in West Palm Beach in the late 1990s, Donald Trump has invested more than $1 billion in 11 golf properties, including his Doral resort, the Trump National Golf Club in Bedminster and the storied Turnberry Golf Club in Scotland, according to Reuters.

Trump has stressed that the value of those properties is in their development potential.

“My golf holdings are really investments in thousands, many thousands of housing units and hotels,” he told the financial news outlet in 2016.

But the Trump Organization — which has yet to build those homes— has lost about $315 million on its golf courses over the past two decades, the Times reported, citing Trump’s tax returns.

While Trump could look to developers such as golf legend Jack Nicklaus, who built a high-end residential community around a private golf course in Jupiter, Florida, he might want no part of the extensive approval process.

“I scratch my head at what his ultimate goal is,” said Mike Kahn, a golf course consultant in St. Petersburg, Florida, when asked about Trump’s plans for his golf resorts.

Unwanted scrutiny

Since Trump took office, the organization has mostly unloaded rather than acquired assets.

His sons have sold $118 million worth of assets since 2017, Forbes calculated. In March, they reportedly sought to sell the Trump International Hotel in Washington, D.C., for $500 million but received little interest at that price. The Trumps are also seeking a buyer for a sprawling 213-acre tract in Westchester, New York, called Seven Springs, the Wall Street Journal reported.

But sales could be hampered by the investigations into Trump’s U.S. business dealings.

Manhattan District Attorney Cyrus Vance is investigating Trump and his company for potential crimes, including payments made to two women who allege they had affairs with Trump. As part of this investigation, Vance is seeking eight years of his personal and corporate tax returns.

New York Attorney General Letitia James is conducting a civil investigation into Trump’s business, exploring whether it overvalued its assets to secure financing and tax breaks.

Whether or not Trump returns to real estate, he is unlikely to have much interest in personally negotiating leases or working with lenders. His sons will control much of the business.

The jury is still out on how they will do. In 2017, Don Jr. and Eric announced the company would develop two new lines of hotels catering to budget and midpriced travelers but scrapped those plans two years later, citing scrutiny from Democrats and the “fake news” media. Starting next month, they will have more leeway to build the company.

“There will certainly be no shortage of opportunities for us to pursue,” Eric Trump said.