At one of Trump’s biggest buildings, profits are down, expenses are up and the mortgage is about to come due. It’s all enough to push 40 Wall Street into the red.
Read the full story on Forbes: https://www.forbes.com/sites/zacheverson/2024/10/05/donald-trump-wall-street-tower-40-building/
0:00 Introduction
2:20 How Much Is Trump's Mortgage?
5:39 Trump's Rent Is How Much?
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Read the full story on Forbes: https://www.forbes.com/sites/zacheverson/2024/10/05/donald-trump-wall-street-tower-40-building/
0:00 Introduction
2:20 How Much Is Trump's Mortgage?
5:39 Trump's Rent Is How Much?
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:
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NewsTranscript
00:00Hi, everybody. I'm Brittany Lewis, a reporter here at Forbes. Joining me now is my Forbes
00:07colleague Zach Everson. Zach, thanks so much for coming on.
00:12Thanks for having me back, Brittany.
00:14You have some reporting. Trump's Wall Street tower appears to be underwater, according
00:19to your latest report. But let's go back to the beginning here and give us the history
00:23of the building. It's 40 Wall Street. It was at one point, as you point out, destined to
00:29be the tallest building in the world. That didn't come to fruition. But take us back
00:33to then.
00:34Sure. So 40 Wall Street, it was going to be built as the Manhattan Company's headquarters,
00:40which is a bank that was founded by those famous muses of Broadway, Alexander Hamilton
00:45and Aaron Burr. They were planning on it being the tallest building. And shortly after it
00:50went up, the Chrysler Building bested it because they built the massive spire in secret, which
00:56well played Chrysler Building people, well played. The other thing that was unfortunate
01:01right when it opened was that it was shortly after the 1929 stock market crash. So all
01:07these companies that had committed to being tenants of the building were no longer interested.
01:12So the business plan didn't work out originally either.
01:17So then between the 20s to now, how did Trump end up getting his hands on it?
01:23Sure. So in the 80s, it really started changing hands a little bit. Some of the secret owners
01:27were Ferdinand and Imelda Marcos, who secretly invested in the building. That year, a group
01:32of investors led by a Hamburg shipping magnate family also bought the land. Then Marcos'
01:42assets were seized. The building kind of bounced back. The leaseholds kind of bounced back
01:45and forth between who had it. And eventually, Citicorp was stuck with it. They didn't want
01:50it. Downtown real estate wasn't doing well. So they sold the leasehold to Donald Trump.
01:55So he does not actually own the building, but he has the leasehold, like the right to
01:59lease out that building to other tenants. He signed a 64 year ground lease with the
02:04German shipping family and got it for a mere $1.3 million.
02:0964 years. That was about 30 something years ago. So he still has a good chunk of lease
02:16left. How much does he owe?
02:20He owes a significant amount. Now, you can actually see the exact amount because he signed
02:25this mortgage. He refinanced it in 2015 with ladder capital and they promptly chopped it
02:31off and securitized it. So you can see how much is owed through the four different filings
02:37with the SEC, for the four different investment vehicles. So he owes about $118 million on
02:44the building. The way he's been paying off his mortgage is largely just been paying interest.
02:49So he owes $118 million of the original $160 million mortgage. The loan is coming due in
02:5510 months. So how much is Trump's equity worth?
03:00The building itself, when Forbes valued it, came in at $116 million, which $116 million
03:07is $2 million less than $118 million, which if our estimates are correct, does put it
03:12slightly underwater right there. So not a major amount that is underwater, but certainly
03:17not in a place where you want to be as you're about to refinance and the building is having
03:22a bunch of other problems as well.
03:25So essentially, the building's not earning enough money to cover the rest of Trump's
03:28loan. So then the question remains, how does he pay that back?
03:34That is an excellent question.
03:38We reached out to the Trump organization, they did not answer.
03:42He could try to refinance with another organization.
03:45He could try to pay part of it down and then refinance part of it elsewhere.
03:48The problem he's having is that the building is also just it's a money loser right now.
03:53Never mind the fact that the investments underwater, you've seen occupancy rates there have
03:58plummeted. And we're getting this off of, you know, again, since the loan was collateralized
04:03that their SEC filings, you can get this from where you're seeing that the occupancy
04:08rate in 2015, when he first took out the loan, it was 94.5 percent.
04:13But then it's dropped. In 2019, it was 89, then 86, then 82, 74.
04:18And then last year, it was down to or June, rather, it was down to 73.9 percent.
04:23And you're just not going to be able to make your money back and make any profit when your
04:27occupancy is that low. And that's we're seeing that's exactly what's been the case when
04:31he's reported his income.
04:33Income has fallen from 40 from 2019.
04:36It was 41 million to 2022.
04:39It was 30 million.
04:41There was a bit of a bounce back last year when it went up three million.
04:44Not sure exactly why it could just be escalating rent clauses with existing tenants.
04:48But it's just not not bringing in the money there that he needs to to pay to service
04:53today. I mean, from 2020 on in 2020, especially the pandemic really decimated any
04:59commercial real estate in New York City specifically.
05:02And the market is at a tough time bouncing back.
05:05So do the math for us.
05:07How much is this building making Trump a year?
05:09It's making up just about one point two million dollars is what it made him last year.
05:13You know, not bad.
05:15I would enjoy having some sort of asset that brought in that return for me.
05:18But it's nowhere near what ladder capital it projected it would make when it gave the
05:23loan to Trump in 2015, when it projected that he would be taking home 11 million
05:27dollars. And I would love for you to dive.
05:30I would love for you to dive a little bit into the land lease situation.
05:34How is that throwing a wrench into his finances here?
05:38So it is right now he's paying about two point five million dollars in annual rent to
05:43that German shipping magnet family.
05:45But that is set to change dramatically in 2033, where it could escalate to at least 6
05:52percent of the value of the land.
05:53So an estimate that was done a few years back thought that his ground, his his rent on
06:01the leasehold would soar from two point eight million dollars in 2032 to 16 point three
06:07million dollars the following year.
06:09And, you know, that's that's just doesn't make this investment tenable whatsoever.
06:12So we also reached out to the Hindenburg family, the ones who who own the building to
06:19see if they were open to renegotiating with this with Trump, if they've had any
06:22conversations. They also do not respond to inquiries.
06:26His legal troubles cost him millions in recent years.
06:29So, I mean, we talked about earlier, how is he going to pay this back?
06:33What's the future of this lease and with Trump in it really look like?
06:39It's a giant question, Mark, I honestly don't know what what's going to happen with
06:44this. He has some options.
06:46He could file for bankruptcy again, although it would be his first bankruptcy that
06:50doesn't involve a hotel. So that's new.
06:54But, you know, he'd be on the hook for I think it's about twenty five million dollars
06:58is what he'd have to pay.
06:59But the rest of it, he'd be able to just walk away and leave the mess for somebody
07:02else. He obviously has a history of having done that.
07:06Mentioned earlier, he could try to refinance.
07:07He could pay down part of it himself and then get a mortgage for the rest.
07:10But it's going to be tough finding a lender when you're looking at this lease on a
07:14money losing property that's already underwater.
07:17Well, Zach, definitely a lot to look out for per usual.
07:21I appreciate your reporting.
07:22You're welcome back anytime.
07:23Zach Everson, thanks for joining me.
07:26Thanks for having me.