Why Donald Trump's 40 Wall Street Was Struggling Even Before His Legal Woes

Forbes

Donald Trump is facing a cash crunch. He admitted in a court filing on Monday that he does not have enough cash and cannot secure a bond to cover the more than $457 million he owes to New York state after being found liable in a civil fraud case. And his team has reportedly not ruled out declaring bankruptcy via certain entities.  If any of Trump’s companies were to declare bankruptcy, it seems most likely that it would be one tied to 40 Wall Street, his troubled skyscraper in downtown Manhattan. The building looks glamorous–ascending 63 stories above the Financial District, with a copper crown on top–but its finances are not pretty. That fact may not have been clear to New York Attorney General Letitia James when she spoke with ABC News in February about preparing to seize Trump’s assets if he didn’t pay in full. “I look at 40 Wall Street each and every day,” James reportedly said, of the building Trump has run since 1995.  The former president’s debt at the property totals roughly $120 million, and the loan matures in 2025. That means Trump will need to find a new lender or come up with the cash to pay it off at some point next year, shortly after he figures out some way to get his hands on the roughly $540 million he owes in fines and interest resulting from three civil lawsuits.  Read the full story on Forbes: https://www.forbes.com/sites/zacheverson/2024/03/21/heres-the-trump-building-most-likely-to-go-bankrupt/?sh=754e65d13e04  Subscribe to FORBES: https://www.youtube.com/user/Forbes?sub_confirmation=1  Fuel your success with Forbes. Gain unlimited access to premium journalism, including breaking news, groundbreaking in-depth reported stories, daily digests and more. Plus, members get a front-row seat at members-only events with leading thinkers and doers, access to premium video that can help you get ahead, an ad-light experience, early access to select products including NFT drops and more:  https://account.forbes.com/membership/?utm_source=youtube&utm_medium=display&utm_campaign=growth_non-sub_paid_subscribe_ytdescript  Stay Connected Forbes newsletters: https://newsletters.editorial.forbes.com Forbes on Facebook: http://fb.com/forbes Forbes Video on Twitter: http://www.twitter.com/forbes Forbes Video on Instagram: http://instagram.com/forbes More From Forbes:  http://forbes.com  Forbes covers the intersection of entrepreneurship, wealth, technology, business and lifestyle with a focus on people and success.

Transcript

00:00 Hi, everybody. I'm Brittany Lewis with Forbes Breaking News. Joining me now is my Forbes

00:07 colleague, staff writer, Zach Everson. Zach, thanks so much for joining me.

00:11 Thanks for having me on, Brittany.

00:13 Former President Donald Trump is facing some big financial hurdles, as you have reported it on

00:19 before, after some legal setbacks. Can you talk about first how we got here?

00:26 Sure. So Donald Trump inherited a little bit of money from his dad,

00:30 invested it, bought a bunch of real estate, became president, allegedly committed a bunch of crimes,

00:40 and here we are. Specifically, what the deal is this time is he was found guilty on a New York

00:47 civil fraud case, and he has to put up more than, I think at this point, it's $457 million

00:53 in fines and interest, and he does not have that much cash, liquid available, so he needs to figure

01:00 out how to go ahead and pay that fine, assuming it does not get knocked down by an appeals court.

01:06 How can he afford this? Because Forbes does a real-time billionaires tracker,

01:12 and according to that, he is worth $2.6 billion estimated. So how can he not afford

01:20 about half a billion? It's not all liquid cash.

01:24 We were in an article yesterday. He actually would have been better for all of his perceived

01:30 financial acumen. He would have been better off if he had just taken this money and invested it in

01:34 the stock market when he inherited it from his dad, as opposed to all of his real estate dealings.

01:38 But he did choose the real estate dealings. It is such a lot of his money is tied up.

01:42 I believe that our latest count is he has about $400 million that's liquid cash,

01:47 and that, of course, doesn't mean he could just write a check for the $400 million and then figure

01:50 out what to do with the other $57 million. Some of that money, he needs to maintain a certain amount

01:55 of cash around to handle a business like that. So he's got to look at some options for how to

02:01 come up with this cash. You're reporting for Forbes

02:04 one Trump asset most likely to go bankrupt. Which one is it?

02:08 It is 40 Wall Street, which is a building down in lower Manhattan.

02:16 I want to read a line from your reporting because I think it paints an interesting picture. You

02:20 wrote this quote, The building looks glamorous, a setting 63 stories above the financial district

02:25 with a copper crown on top. But its finances are not pretty.

02:29 So talk to us about the finances of 40 Wall Street.

02:32 Why is it every time somebody singles out and a line from one of my articles,

02:37 it's the one the editor put in. But yes, kudos, kudos to Dan Alexander for that one.

02:43 Yeah, it's not sitting pretty because it is about to see a rent escalation and it does not look like

02:48 it brings in enough money for that to be worth it. So the issue here is that Trump doesn't actually

02:53 own the ground lease. It is owned by a German shipping family and he pays rent for it and he

03:00 manages the building that's on top of that ground. So right now that rent is about $2.5 million a

03:06 year, but it is going to spike to an estimated about $16 million around 2033. And it does not

03:14 look like the building is going to be bringing in enough cash to make that worth it. And then

03:19 in the meantime, he also has his mortgage on the building coming due in 2025, and that is for $120

03:26 million. So he's going to need to figure out how to deal with that mortgage, either pay it off

03:31 or find somebody to refinance it. Let's talk about the options a bit.

03:35 I'm going to read you another line from your reporting. Maybe it's yours. If not, shout out

03:41 Dan Alexander. But here, let's see what let's see what we have. Quote,

03:46 the issues at 40 Wall Street, a treacherous ground lease and an unforgiving office market

03:51 are fundamentally business problems and not ones that Trump can easily fix. Is this you?

03:56 I don't think so. Well, once again, shout out to Dan Alexander.

04:03 I think I think that one got workshopped. I think I can put my fingerprints in there.

04:06 OK, good. A tag team effort by both astounding reporters.

04:10 What are the solutions here? How can Trump fix this? Because you're saying it's not an easy fix.

04:17 No, it's not an easy fix. You know, it could have been an easy fix if he wasn't on the hook for all

04:24 this other money right now due to those lawsuits. But he is most likely depending on how the appeal

04:31 goes through. The easiest solution for him would be if the landlords were willing to renegotiate

04:37 the lease with him would be one of the best ways for him to be able to handle this a little bit

04:40 better. You know, if you could find a way to refinance the hotel, refinance the building

04:45 and then get the current currently the currently sold, there's two renegotiate. So the deal is not

04:52 as one sided and that it actually he would still be able to run that building at a profit.

04:57 In your reporting, you said that the building generates around 15 million dollars a year.

05:02 How much is this building worth? It's worth, you know, after debt,

05:07 it is worth about forty seven million dollars to Donald Trump, which is a sizable amount of money,

05:11 although it is down from 80 million dollars, which is what we valued it at last year. Obviously,

05:17 the poor market conditions and the looming ground rate escalation are the two big issues there.

05:22 And in terms of market conditions, I mean, it is just seeing its

05:25 occupancy rate go down big time, you know, just the same as anybody else post pandemic in 2015.

05:32 It was at ninety seven point eight percent. Twenty twenty two is eighty two point nine percent.

05:38 And then in September of last year, it was down to seventy six point six percent. So it is it

05:42 is really struggle to maintain a high occupancy rate there, which is not uncommon. Obviously,

05:48 as we all know, post pandemic office buildings haven't had the best of markets. Is this the

05:55 building or is this one of Trump's real estate properties with the worst financial issues?

06:00 You know, it's a combination. It's certainly not being helped by the market. But, you know,

06:06 at the same point, it was Donald Trump who signed that lease and agreed to what those

06:11 with that rent spike could be. And, you know, it was always going to be a significant rent spike

06:15 in when come twenty thirty three. So that is something that he agreed to as well. He was

06:20 also the one who took out the one hundred twenty million dollar loan for it. New York Attorney

06:25 General Letitia James did say this. We are prepared to make sure that the judgment is

06:29 paid to New Yorkers. And yes, I look at 40 Wall Street each and every day since this building

06:35 is facing financial strife. Would it be seized? It could be. I don't think it's necessarily the

06:42 smartest move for them to take this one, at least first. It would be difficult to sell,

06:47 difficult to unload on behalf of the New York taxpayers. It's going to be, you know, given what

06:52 we just said about the real estate market, you're not going to find a lot of people who are super

06:55 interested in picking up a lease for a, you know, that would need to be renegotiated because, you

07:02 know, you imagine whoever picks up the lease is still going to face some of those same problems

07:05 the existing lease owner has and to come in and take that. And, you know, she's going to be looking

07:10 to get rid of this quickly. I don't think the New York attorney general's office cares to be

07:14 managing this building for a while. So, you know, it'd be something they'd want to unload. And in

07:19 that case, I don't think you'd necessarily find a great deal on it. You'd be better off going for

07:24 some of those residential properties. Has Trump tipped his hand either way in what he's going to

07:30 do with this property? What's going to happen to 40 Wall Street? No, you know, there's been

07:36 reports out there that they've talked about bankruptcy. There have been reports out there

07:39 that they haven't talked about bankruptcy. I don't know. You know, we'll see if we see it,

07:44 if he files anything. You know, it's just our belief that this would certainly be, you know,

07:49 one of his smarter moves if he's going to put anything in bankruptcy would be to put this

07:52 one in bankruptcy because it's struggling in the first place. Zach Everson, per usual,

07:57 thank you so much for your reporting. I'm sure I will be talking to you soon.

08:01 Thanks, Brady. Appreciate it.

08:03 Thanks.

08:04 Thanks.

08:05 Thanks.

08:06 Thanks.

08:07 Thanks.

08:08 Thanks.

08:09 [BLANK_AUDIO]

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