The Money Report April 2013

What Exactly Is Donald Trump's Deal?

Is he a buffoon? A genius? An exploration of the man, his brand, and his chronic bluster.

Part of the reason Trump gets little respect from most of Wall Street can be found in a Queens, New York, courthouse. That’s where Trump filed a lawsuit in 2008 against the lenders—led by Deutsche Bank and Fortress Investment Group, a hedge fund—that provided the financing for his 92-story Chicago hotel and condominium project, built on the site of what was once the headquarters of the Chicago Sun-Times. Despite his earlier cliff-hanging experiences in Atlantic City, and making an exception to the business philosophy he has generally followed in recent years, Trump personally guaranteed $40 million of the $640 million construction loan that Deutsche Bank made in 2005. Fortress and other investors put in another $130 million in subordinated debt.

Some $330 million of the construction loan was due November 7, 2008, but because of the global financial crisis, which came to a head around the same time, Trump wanted the lenders—a ragtag collection of foreign and domestic banks and investors—to grant him an extension. After they declined, Trump filed his suit on November 6, claiming that a force majeure—a “superior force,” such as a war or an act of God—had occurred. (A force-majeure clause had been written into the contract, enabling him to make the argument that the financial crisis was an uncontrollable event that triggered a change in his financial obligation.) He asked for $3 billion in damages. He also claimed that Deutsche Bank—one of the largest underwriters of mortgage-backed securities in the years prior to 2008—had helped cause the financial crisis. “In fact, Deutsche Bank is one of the banks primarily responsible for the economic dysfunction we are currently facing,” Trump wrote in a November 4 letter to William Mott, a Deutsche Bank managing director.

“I’ve seen the world go good, and I’ve seen the world go bad,” he said by way of explaining his cautious strategy.

In the lawsuit, Trump claimed Deutsche Bank’s “predatory lending practices” had harmed his reputation, “which is associated worldwide with on-time, under-budget, first-class construction projects and first-class luxury hotel operations.” Deutsche Bank countersued Trump, in Manhattan, to collect on his $40 million guarantee. “This suit is classic Trump,” the bank said in a legal filing. “Trump is no stranger to overdue debt.” In March 2009, the two sides reached a legal truce in order to restructure the debt. In August 2010, the original loan was extended for five years. One of the lenders involved told me that the dueling lawsuits made the situation seem much worse than it was, and that everything has worked out. Trump “tends to take a litigious route if he thinks it will benefit him,” he said. “In the end, I don’t think it benefited him here, in the negotiations, but the fact is, it was a good resolution for everybody. It was a good resolution for him. It was a good resolution for the banks.” Trump insisted that I speak with his bankers from Deutsche Bank—“just to show you how good my relationship is”—but that never happened, because, despite permission from Trump, the bank said it has a policy against speaking publicly about its clients.

For his part, Trump was pleased with how the Chicago tower turned out. “I like to think of Chicago as something that I got built, that is a great monument,” he told me. “It’s a great building. It’s the second-tallest building in Chicago, and I always say it was better for the people of Chicago than it was for Donald Trump. I got it built. It wasn’t financially good for me”—he declined to say whether he had lost money on it—“but it was something that I’m very proud of.”

Golf is a good prism through which to examine Trump, to assess his strengths, his foibles, his self-awareness (or lack of it), and above all his preoccupation with seeming invincible. He has developed 13 new golf courses—ranging in location from Aberdeenshire, Scotland, to Los Angeles, California—with a 14th course under way in Ferry Point, in the Bronx. He is proud of his ability to build golf courses when the odds are against him. For instance, in Aberdeenshire, “I got it zoned, and nobody thought it was possible to get it zoned,” he told me. “It’s the largest dunes anywhere in the world, the most incredible dunes. It’s the great dunes of Scotland. I bought them … and it’s a spectacular success.” About a year ago, he bought the Doral Golf Resort & Spa for $150 million. “Eight hundred acres in Miami, right smack in the middle of Miami,” he said. “We’re redoing it. We have the big Cadillac Championship there, which is a major championship, at Doral. In a year from now, which you will see, there won’t be anything like it. There just won’t be anything like it.” (He made sure to tell me that Deutsche Bank provided a $106 million mortgage for the Doral acquisition, even though he didn’t need its money. “We have a great relationship,” he said.)

Trump’s fascination with golf courses may stem in part from his personal interest in playing the game. He is, by all accounts, a terrific golfer. “I’ve won many club championships,” Trump told me. “And I was always the best athlete. But I’ve won many a club championship. It’s something that people don’t know unless they are with me and have played with me.” Jimmy Lee, the über‑banker at JPMorgan Chase, had played with Trump recently at one of his New York–area golf clubs. Trump wanted me to call Lee and ask him about his golf game. Trump “is more than legit,” Lee said. “He shot a 67 on his own ball, with me.” He said there were no, shall we say, “preferred lies,” either.

But that’s reportedly rare for Trump, according to others who have played golf with him. “He is the most rampant cheater,” one claimed. “This will give you an insight into Donald: He’s so overt in his cheating that to virtually everybody I know that plays golf with him, including myself, it’s part of his personality, in a way, on the golf course. For instance, he never plays for money, because I don’t think he would ever cheat the way he does on the golf course if he played for money, so he won’t make financial bets. For him it’s just all about winning. And his cheating is so obvious that I think he is self-aware that a part of the expectation that people have of his personality on the golf course is that he does it. And we always have fun watching how he does it.” He said he had seen Trump move the ball “from the woods into the middle of the fairway” and, on an elevated green, “kick another guy’s ball about 15 more feet from the pin—by the way, in front of me.” Nobody calls Trump on it, he said, because, well, it’s just part of the theatrics of being with Trump. (Trump himself disputed all this: “It just sounds like it’s coming from people I beat, and beat badly.”)

These days, Trump likes to say he has never been hotter. That is, when he’s not asserting that he is the best-known person in the world. Michael Cohen, his special counsel, said Trump has $800 million in cash in the bank. Not true, Trump declared: “Eight hundred? No, more than that … Not that that’s a bad number. But I have substantially more than that.”

He pointed out that while money was tight for others, it was plentiful for him. He made sure that I knew that something called “The Hollywood Rich List,” on the Web site Celebuzz, had just stated that he’d earned a “whopping $63 million” in 2012 from his books, speaking engagements, and The Apprentice. “And I’m not even in Hollywood. That’s like my part-time job,” he said. He had borrowed money for the Doral project only because interest rates are at historically low levels and he likes leverage. “Every single bank wants to do business with me, and the reason they want to, William, is because I really am a great developer,” Trump told me. “I build the best. A lot of people say, ‘Oh, he’s very promotional.’ I don’t think I’m promotional. I think what I am is the best developer. I think I have great product. When I do something, I build better.”

He then rattled off (again) one Trump project after another. “I’ve done an incredible job,” he said, “and the banks know that, and the banks want to put their money [with me]. I’ve never seen a time like this. Money is extremely cheap, but nobody can get it—but I can get it. The banks are dying to give me whatever I want.”

In passing, Trump referred to the recently concluded presidential election. He said he gave up thinking about the race because NBC was desperate to have him continue The Apprentice, and because he supported Mitt Romney and his policies. He told me that was a mistake: “I thought he could win, and he didn’t. He just didn’t resonate, for whatever reason, and he didn’t catch on, and it’s too bad. He’s a nice man, and it just didn’t work. So in retrospect, I probably wish I’d stayed in. Frankly, I think I would’ve won.”

William D. Cohan is a contributing editor at Vanity Fair and a former investment banker. He is writing a new book about crime, race, sports, and privilege at America’s elite private universities.
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William D. Cohan, a columnist for BloombergView, is a contributing editor at Vanity Fair and the author, most recently, of The Price of Silence.

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