Desocupado Lector,
May. 13th, 2019 03:17 pm![[personal profile]](https://www.dreamwidth.org/img/silk/identity/user.png){kind=small}
timeletsHow would we make a case for Trump being a great businessman?
1. Entrepreneurship is inherently risky, with failure being the most likely outcome. Moreover, real estate entrepreneurship, unlike e.g. tech or pharma, is a leveraged business where failure can result in catastrophic losses. Therefore, risk management is essential for success: ideally, you want to own the upside and transfer the downside to another party.
Trump gets an A for that because both in the 1990s and in the 2000s he managed to transfer losses to his investors, while retaining control of his most valuable properties. He also used bankruptcies and threats of bankruptcy to avoid potential personal financial ruin.
2. Financing and cash flow are essential to real estate entrepreneurship. Throughout his career, he showed that he can obtain massive loans for his projects. Furthermore, unlike Fred Trump, he got loans from commercial, rather than government sources or under government guarantees. Remarkably, he was able to obtain commercial loans even after a series of business failures in the 1990s. He's also been quite good at refinancing and/or litigating his loans, thus avoiding asset liquidation. Solid B.
3. Retaining upside earnings and cash flows (see pp. 1 &2) can present a significant problem in high-tax jurisdictions, such as New York. As the available tax information shows, Trump successfully used existing and novel tax optimization techniques to pay very little or no taxes. A+.
Overall, he can be legitimately viewed as a highly successful businessman, although most of his methods would be considered unethical by people outside of his industry.* As always, he still might get into some legal trouble, but his core assets are not in danger.
* “Trump says he wants to run the nation like he’s run his business. God help us. I’m a New Yorker, and I know a con when I see one.” - Michael Bloomberg.
1. Entrepreneurship is inherently risky, with failure being the most likely outcome. Moreover, real estate entrepreneurship, unlike e.g. tech or pharma, is a leveraged business where failure can result in catastrophic losses. Therefore, risk management is essential for success: ideally, you want to own the upside and transfer the downside to another party.
Trump gets an A for that because both in the 1990s and in the 2000s he managed to transfer losses to his investors, while retaining control of his most valuable properties. He also used bankruptcies and threats of bankruptcy to avoid potential personal financial ruin.
2. Financing and cash flow are essential to real estate entrepreneurship. Throughout his career, he showed that he can obtain massive loans for his projects. Furthermore, unlike Fred Trump, he got loans from commercial, rather than government sources or under government guarantees. Remarkably, he was able to obtain commercial loans even after a series of business failures in the 1990s. He's also been quite good at refinancing and/or litigating his loans, thus avoiding asset liquidation. Solid B.
3. Retaining upside earnings and cash flows (see pp. 1 &2) can present a significant problem in high-tax jurisdictions, such as New York. As the available tax information shows, Trump successfully used existing and novel tax optimization techniques to pay very little or no taxes. A+.
Overall, he can be legitimately viewed as a highly successful businessman, although most of his methods would be considered unethical by people outside of his industry.* As always, he still might get into some legal trouble, but his core assets are not in danger.
* “Trump says he wants to run the nation like he’s run his business. God help us. I’m a New Yorker, and I know a con when I see one.” - Michael Bloomberg.
no subject
Date: 2019-05-15 01:32 am (UTC)Trump's first loans were guaranteed by Fred Trump and used Fred's connections. At that time, Donald was essentially a front man for his father's business interests.
Fred Trump — along with the Hyatt hotel chain — jointly guaranteed the $70 million construction loan from Manufacturers Hanover bank, “each assuming a 50 percent share of the obligation and each committing itself to complete the project should Donald be unable to finish it,” according to veteran Trump chronicler Wayne Barrett in his 1992 book, “Trump: The Deals and the Downfall.”
Fred Trump’s signature on the guarantee ensured the new hotel would get built. “No document in the long paper trail attached to the Commodore deal better demonstrated the lack of bank confidence in the Donald or the project, and none made clear the limits of his promoter role,” Barrett wrote. Trump simply did not have the credit or connections to obtain such financing on his own. “It was Fred’s two-decade-old relationship with a top Equitable officer, Ben Holloway, that had helped entice them to do the project.”
https://www.wsj.com/articles/trumps-father-helped-gop-candidate-with-numerous-loans-1474656573
refinancing and/or litigating his loans, thus avoiding asset liquidation
There some asset liquidation along the way. The lenders forced Trump to sell the Plaza Hotel, his most valuable asset.
Westin Hotels sold the Plaza in 1988 to Donald J. Trump, who described the hotel as a work of art, for $390 million. Teetering at the edge of bankruptcy, Mr. Trump was forced by his lenders to sell to a group led by Prince al-Waleed in 1995 for $325 million. The prince installed Fairmont Hotels as manager of the property.
The prince in turn sold the 805-room hotel for $675 million to an Israeli company, the Elad Group. Elad burnished the public spaces and turned half the building into condominiums, selling 181 apartments for a combined $1.4 billion.
https://www.nytimes.com/2017/08/23/nyregion/plaza-hotel-for-sale-subrata-roy.html