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
Carpenter & Company's Richard Friedman and 2 Canal Street in New Orleans (Carpenter & Company, Google Maps)
New Orleans Four Seasons lands $315M loan from Madison Realty Capital
New Orleans Four Seasons lands $315M loan from Madison Realty Capital
From left: Letitia James, Donald Trump, Eric Trump, Ivanka Trump, Allen Weisselberg, and Donald Trump Jr. (Photo Illustration by Steven Dilakian for The Real Deal with Getty Images)
NY AG files civil fraud suit against Trump, children and company
NY AG files civil fraud suit against Trump, children and company
Cohen Brothers Realty’s Charles Cohen and 750 Lexington Avenue (Getty Images, Cohen Brothers Realty, Council on Tall Buildings and Urban Habitat)
Cohen Brothers’ Midtown tower back in special servicing
Cohen Brothers’ Midtown tower back in special servicing
ASG's Steve Reardon, DoorLoop's Ori Tamuz and David Bitton (ASG, DoorLoop)
Property management startup DoorLoop raises $20M
Property management startup DoorLoop raises $20M
From left: Kris Jenner, Donald Trump and the Trump Tower at 721–725 Fifth Avenue (Photo Illustration by Steven Dilakian for The Real Deal with Getty Images and NYSCEF)
Trump Org sues scandal-plagued school once tied to Kris Jenner
Trump Org sues scandal-plagued school once tied to Kris Jenner
arrow_forward_ios

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

Loading...