Why the Trump Organization became debt averse, as told by Eric Trump

In 2006, the organization abruptly changed its strategy

New York Weekend Edition /
May.May 06, 2018 08:01 PM

Far right: Eric Trump. (Credit from right: Rich Girard, screenshot)

Before he became President, Donald Trump proudly self-described as “the King of Debt.”

But, for almost a decade leading up to being elected, Trump poured over $400 million of his own money into buying properties and 14 deals were done  without any lenders, according to the Washington Post. So what changed?

The way Eric Trump, the son who is now running the Trump Organization alongside Donald Trump Jr., tells it, the “King” had cash to burn.

“He had incredible cash flow and built incredible wealth,” Trump told the Post. “He didn’t need to think about borrowing for every transaction. We invested in ourselves.”

The strategy defies most contemporary thinking, namely that investors tend to prefer borrowing.

“For privately held real estate firms, basically they like to use as much debt as they can. The only brakes are put on by the lending institutions, who don’t want to lend too much,” MIT real estate finance professor David Geltner told the Post.

“At the end of the day, you want some debt,” Georgetown University real estate professor Ed Walter echoed to the Post.

But, starting in 2006 with the $12.6 million purchase of a Scotland estate, the Trump Organization took a different path. Fueled by sales of residential units and licensing deals, the organization took a more “nimble” approach, as the younger Trump put it.

“If we see an unbelievable opportunity or something that interests us, we want to jump on it,” he told the Post. “With lenders, every time you sneeze, you have to write a four-page report.” [WP]Erin Hudson


Related Articles

arrow_forward_ios
With a cooling trade war, stocks perform well, including real estate. (Credit: iStock)
Real estate stocks push up this week as U.S.-China trade tensions ease
Real estate stocks push up this week as U.S.-China trade tensions ease
Make Greenland Great Again? Trump wants to buy Arctic territory
Make Greenland Great Again? Trump wants to buy Arctic territory
Make Greenland Great Again? Trump wants to buy Arctic territory
416 West 25th Street and Maverick Real Estate Partners principal David Aviram (Credit: Google Maps and LinkedIn)
Chelsea landlord claims “predatory” lender is charging a crippling interest rate as punishment after losing foreclosure case
Chelsea landlord claims “predatory” lender is charging a crippling interest rate as punishment after losing foreclosure case
Vanbarton Group’s Gary M. Tischler and Richard Coles with Marble Collegiate Church at 1 West 29th Street (Getty)
Vanbarton Group, church sued by foreign investors in fallout from HFZ debacle
Vanbarton Group, church sued by foreign investors in fallout from HFZ debacle
Trump Plaza New Rochelle at 175 Huguenot Street and Donald Trump (Getty, Anthony22/Wikimedia)
Trump Plaza New Rochelle dumps Trump Org as property manager
Trump Plaza New Rochelle dumps Trump Org as property manager
Donald Trump with Trump International Hotel in Washington DC (Getty, Trump Hotels)
Trump Org in “advanced talks” to sell DC Hotel lease
Trump Org in “advanced talks” to sell DC Hotel lease
Donald Trump and Trump Tower at 725 5th Avenue (Getty, Jorge Láscar/Wikimedia)
Trump PAC a key tenant at strained Trump Tower
Trump PAC a key tenant at strained Trump Tower
The agency is challenging $21 billion in deductions over a three-year period (Getty)
IRS probes promoters of tax-deductible property easements
IRS probes promoters of tax-deductible property easements
arrow_forward_ios

The Deal's newsletters give you the latest scoops, fresh headlines, marketing data, and things to know within the industry.

Loading...