The Washington PostDemocracy Dies in Darkness

You may not take Donald Trump’s candidacy seriously but take another look at his real estate business

Donald Trump is turning the Old Post Office into a luxury hotel in downtown Washington. He’s also running for president. ( Photo by Jeffrey MacMillan )(AP Photo/Mark Humphrey, File)

In the speech announcing his presidential candidacy Tuesday, Donald Trump held aloft a summary of his financial statement, one he said puts his net worth at nearly $9 billion.

He possesses so much money, Trump said, that a bank had offered to lend him another $4 billion, to which he answered: “I don’t need it. I don’t want it. And I’ve been there.”

He has. Trump’s foray into Atlantic City casinos in the 1980s, one fueled largely by bank loans, nearly cost him his fortune when the deals landed in bankruptcy.

In the years that followed, Trump rebounded by making millions in television and licensing his name to developers who wanted to splash “TRUMP” atop their buildings.

But in an interview with The Washington Post the day before announcing his candidacy, Trump made another disclosure, that he was investing $42 million into his pre-eminent Washington real estate project, a $200 million luxury hotel he and his daughter Ivanka are building at the Old Post Office Pavilion.

“I am putting $42 million of my own cash into the project,” he said, “and there are no other equity partners. We own all the equity.”

Rather than bringing in other investors or managers, Trump said he took out a standard construction loan with Deutsche Bank for the balance of the $200 million. A spokesperson for the General Services Administration, which oversees the project, confirmed the arrangement.

Since the bankruptcies, critics have questioned whether the magnate himself puts any money in Trump-branded projects. Some Washington hotel financiers wondered whether he would stake his own money on a hotel that could prove a challenging investment: In a city where some of its rivals charge $500 a night, analysts say, Trump’s hotel rooms may need to take in $700 or more a night to succeed.

Enlisting equity partners would be one way to spread the risk.

“It’s possible Mr. Trump has other investors that he has just not announced,” said Bill Grice, senior vice president and hotel financing specialist at the real estate services firm JLL.

Ivanka, who manages the project for the family, says the personal investment is important. She has repeatedly said she would like to keep the building in the family for future generations. She says she is building the biggest, most elegant guest rooms and largest ballroom of any hotel in the city.

“That level of investment shows our tremendous commitment as a company to this incredibly exciting project and to this spectacular building, and that we are in this for the long haul,” she said.

[How the Trumps landed the Old Post Office Pavilion]

And Donald Trump now appears comfortable enough with his wealth that his company is taking large ownership stakes again, not only in the Old Post Office but in his Chicago hotel-office tower and in his $150 million purchase of the Doral golf resort in Miami.

Trump’s critics are quick to bring up his rush into Atlantic City early in his career, when he borrowed heavily to open a series of casinos. By 2011, Trump-branded casino companies had filed for bankruptcy four times to ward off creditors. Trump Plaza closed last year, and Trump Taj Mahal Casino Resort is in bankruptcy court now.

Robert Reich, secretary of Labor under President Clinton, took to Facebook after Trump’s speech to write that casino workers were “stuck with the mess” left behind by the bankruptcies.

But Trump has no role managing those companies today. And for some projects afterwards he decided to license his name or expertise to projects, rather than buy into them. For example, last year when Trump Soho, a 46-story tower in Lower Manhattan, ran into foreclosure, the Trump Organization did not have any equity at stake; it only operates the property.

As his prospects improved in real estate, Trump hit it big in another industry: television. “The Apprentice” aired its 14th season this year and is sometimes ranked as one of the most profitable reality shows. Trump co-owns the show and is paid millions of dollars to star in it.

His rise in fame coincided with a new element of his brand: the suggestion that he might run for president. Every four years since the 1998 election, Trump has made noise about a candidacy. Tuesday’s announcement came right on schedule.

Winning the nomination will be difficult. Trump does not poll well, even within his own party. He is also given to bombastic remarks, like insisting that President Obama’s birth certificate was fake. “There are no jobs,” he said on Tuesday. Fact checkers dug in: In April, the country had 5.4 million job openings, the most since December 2000.

His tally of his wealth was much scrutinized, too. After his speech, Forbes broke down his assets and estimated his net worth at $4.1 billion — less than half what he stated. One thing he and the magazine agreed on was Trump’s $302.3 million in cash and securities, giving him a balance sheet capable of pulling off nine-figure deals like the Old Post Office without other investors.

“Look, the Trump Organization is a significant real estate player,” Grice said. “Their being the sole equity partner in that project is not necessarily unusual, but it’s more likely there’s a combination of equity investors in these type of projects.”

Trump said his ability — and willingness — to put up his own money set him apart from a crowded field of high-profile prospects for the project, including Hilton, which proposed turning the property into a Waldorf Astoria.

“It really was one of the reasons we were chosen,” Trump said. “Very few people would be willing to do a job like this.”

The Trumps will pay $3 million annually in rent, with escalations tied to the consumer price index, on a lease lasting 60 years from the hotel’s opening, with options to extend 40 years more.

Some in Washington’s hotel industry expect it will be a difficult task making the hotel profitable given the expense of updating the 1890s-era building. A competing firm, working with Hilton, contested Trump’s win, arguing that spending $200 million on the project “would require Trump to obtain hotel room revenues which are simply not obtainable in the Old Post Office’s location based on the concepts for redevelopment.” (The protest failed.)

Trump, who turned 69 on June 14, does not seem concerned, touting golf courses, hotels and other luxury getaways that he snaps up — sometimes at depressed prices — and figuring how to make money on them later.

In 2011, for example, the Trumps bought most of the Kluge Estate Winery and Vineyard, outside Charlottesville, at a bank auction for $6.2 million, picking up the remainder of the property shortly afterward for $6.5 million. A few years earlier the estate had been listed for $100 million.

When the Kluge deal closed, Trump’s son Eric said the family didn’t know what they would do with it. “There’s a lot of possibilities,” he said, “but we’re not rushing into anything right now. It’s just great to have done this.”

Similarly, after he won the Old Post Office deal, Donald Trump was asked whether there was really a market of Washington travelers willing to pay such high prices to stay in a hotel with his name on it.

“Maybe, and maybe not,” he said. “And you know if there isn’t, it’s okay, because we have a lot of money. And we’ll have a beautiful painting.”

Construction workers at the Old Post Office are busy putting that painting together. They are erecting a 14,000-square-foot ballroom (“by far the biggest in Washington,” says Ivanka), installing a nearly half-acre tempered glass skylight, preserving windows and carefully washing the stone exterior and marble interiors.

“Wait until you see the bathroom fixtures that we are putting in,” Trump said. “They are absolutely top-of-the-line.”

As his Washington-area holdings pile up, Trump’s trips to town are increasingly a mix of private business and his out-sized political persona. The day of his most recent tour of the Old Post Office construction, he spoke at a charitable event for military and veteran caregivers hosted by the Elizabeth Dole Foundation.

“I apologized for being totally dusty,” he said. “My shoes — you couldn’t even see my shoes they were so dusty. But that’s what you do when you’re building a project, you go and tour it.”

Later this month the Trumps are scheduled to unveil upgrades at their Virginia golf course, Trump National Golf Club, in Sterling. Any person’s run for the American presidency is a long shot. But with the hotel expected to open in fall 2016, Trump has an excellent chance of getting a room on Pennsylvania Avenue for the inaugural parade.

Follow Jonathan O’Connell on Twitter: @oconnellpostbiz