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HomeBreaking NewsSHAM CASE: Trump's Valuation Troubles

SHAM CASE: Trump’s Valuation Troubles [Up Against the Wall]

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Being in the business of real estate valuations, I couldn’t resist doing my own valuation of Trump’s key personal assets; his condo in Trump Tower as well as Trump Tower itself and also Mar-a-lago in Palm Beach, Florida, you know, for the hell of it. It only took me a little under an hour to come to a radically different conclusion than the New York court.

Let’s start with the condo unit, the penthouse – made up of three floors. Trump valued that unit initially at $327 million in 2015. Then in 2017, two years later, he lowered the value to $116.8 million, which is what he argued before the court. By comparison, the assessment ranged from $18 million to $27 million from 2011 to 2021, as far as I can determine from public records.

By comparison, the court says the entire building was worth $340 million. Trump said the entire building was worth $540 million. It’s all very confusing because both parties, the court and prosecution included, appear to be mixing apples and oranges. But if we just took the assessor’s own value of $27 million divided by the 11,000 sf condo, that comes to about $2,500 per square foot. Apply that to the portion of the building that Trump owns, and it’s easy to determine that Trump’s valuation is probably not far off. In fact, his piece of the pie may be worth more than $250 million using a per square foot analysis (although it is difficult to get accurate square footage figures and other details on the building).

It’s actually easier to look at Mar-a-lago. Mar-a-lago is 17.51 acres sitting at a prime location on the bridge crossing over from the mainland in Palm Beach, Florida. It’s a very rare parcel of undeveloped land in the middle of prime real estate, with water views on both sides (which is very unusual). The land literally stretches from the inland waterway to the ocean side and is within walking distance of a nature preserve.

Trump valued that at $426 to $612 million from 2011 to 2021. In contrast, the court says it’s worth $18 million, but here’s the thing; the city assessment on Mar-a-lago was $30 million and even Zillow says it was worth $24 million. Both the assessor and Zillow say the property is worth substantially more than the court and prosecutor say. Now given that the assessor is considered an expert in valuation by the government itself, it’s odd that the court says its market value is worth so much less.

So let’s look at market comps (or comparables) to determine a value. In Naples, the developer of the new Ritz Carlton purchased a 125-acre property for $362.3 million. A lot of that cannot be developed though, as it’s a golf course. The usable size for a new building(s) is similar to Mar-a-lago. Considering that the prime oceanfront location in Naples sold for $362.3 million, it wouldn’t be unfair to think that Mar-a-lago could sell for that – or a lot more. Why more? Because it’s Palm Beach, where people pay tens of millions of dollars for a single condo or a lot more compared to Naples.

I saw many condos for sale in the $20 to $40 million dollar range online in Palm Beach. If you consider that the land value portion of each condo would be a standard 25% to 50% that means $5 to $20 million per unit in land value. I calculated that Mar-a-lago could hold around 875 units based upon a density of 50 units per acre (which is what we develop 4 story apartments at. By comparison, tall towers in the greater Miami area have a density much, much greater.) At 875 units times the land value per unit (which is how we residential developers value our buildings; per unit), the land would be worth $4.375 Billion to $17.5 Billion. Yes, that Billion with a capital B.

Even using Trump’s own high point value of $612 million, the value of the land per unit would be only $700,000 by comparison! That’s pennies on the dollar. Even if you cut the density down, the value of the property would still be multiples of what Trump valued it at.

What’s interesting though, is that even if he overvalued Trump Tower, which includes office space, retail stores, and residential units, the true value of Mar-a-lago provides such a huge margin of error that it overwhelms any possible over valuation of Trump Tower.

But let’s consider other factors any appraiser would use to consider valuing Trump’s condo and his tower. (Disclosure: I have a master’s degree from the #1 real estate valuation program in the nation; the Graaskamp Real Estate Center.) His condo, I understand, is gilded heavily in gold. Think of what that is worth.

Plus there’s the Trump brand. Trump has proven time and time again, worldwide, that his brand commands a premium, so any valuation must consider that. It’s not the same as valuing an unbranded asset. His brand has to be worth at least another 20% or more. An analysis of the premium he obtains in other locations and also that he gets on the office and retail space rents vs the nearby competition would indicate a premium percentage to apply.

But here’s the really big factor that the court obviously did not consider; that once Trump was elected president in 2015, the value of his properties soared. Why? Because they became instantly historic. Buyers will pay more for a historic property once owned and occupied by a famous president. Trump Tower is where he announced his candidacy – walking down the escalator. Mar-a-lago was the southern White House or presidential palace. Think the Reagan Ranch. What would that be worth on the open market today?

And then there’s COVID. Most residential property values jumped in value. Hell, even my own house that I sold in 2020 (two weeks into COVID) increased in value by a margin of $700,000 in just two years! That was just the increase. Imagine what Mar-a-lago would be worth if it was sold and redeveloped knowing that it was a presidential property.

Now, let’s consider the court case. First, this is a highly unusual case – it’s a state prosecutor suing a presidential candidate under civil law. That’s right; I read that it’s not even a criminal case. So why is a state prosecutor suing then? Second, under civil liability cases, there has to be harm done and there has to be actual damages and a victim or you can’t sue. There are no banks claiming harm or damages, so who was harmed? The case should be thrown out on that basis alone.

Then there is the court, which ruled in summary judgement – without a jury and without a trial, but wait, hold that thought, the court says it can rule in summary judgement but then still hold a trial later for other parts. That’s b.s. The court certainly didn’t hire its own valuation report by an expert, and with these many facts in dispute, that would require a trial. His lawyers would not even have had time to hire their own expert and get a valuation report at this stage. That’s says to me that this is a sham case, and Trump is being railroaded, but you already knew that!

Lastly, having taken out many loans myself, every lender/bank has its own credit department that evaluates the borrower’s financial statement. They also hire their own appraisal outside the influence of the borrower. They then make their own adjustments to those statements and to the appraisal. They would never rely on the borrower’s financial statement. Plus there is the theory of informed consent, so to speak. The lenders were professionals with intimate knowledge of the industry, the borrower, and the properties.

They were fully informed and had a legal obligation to obtain any other information they desired. But again, they are not claiming any harm. In fact, no one was harmed and in my expert opinion, no misrepresentation of his values was made. But let’s stop making excuses for the prosecutor and court – as if this was a legitimate case; it’s not. It’s a crock of baloney. There are no excuses. This case should be dismissed and the prosecutor sued for malicious prosecution.

T. Wall holds a degree from the UW in economics and an M.S. in real estate analysis and valuation and is a real estate developer. Disclaimer: The opinions of the writer are not necessarily those of this publication or the left!

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