Dec. 29 (Bloomberg) -- Donald Trump, the real estate developer turned TV personality, is betting his name will boost the value of his golf courses even as the premium for the brand declines on condo properties and ratings slide on his show, “The Apprentice.”
Trump has acquired nine golf properties in the U.S., including four since 2008, after mostly steering clear of using his own money to buy real estate since 2005. In July, he started building a 750 million-pound ($1.15 billion) luxury golf course and resort in Scotland. Trump says that putting his name on the courses increases membership sales and the fees he can charge.
The Trump name hasn’t prevented the failure of real estate developments in Florida and Mexico, nor has it helped his New York condos sell for more than other apartments in the city. Trump buildings in Manhattan, whether he owns them or licenses his name for the properties, command prices similar to or lower than comparable towers, said Sofia Song, vice president of research at StreetEasy.com, which compiles real estate listings.
“There’s no obvious premium for the Trump name,” she said in an interview.
With the Trump name appearing on vodka, health products, mattresses, furniture, cuff links, shirts, ties and a seminar company once known as Trump University, the brand has been devalued, said Josh Feldmeth, chief executive officer of the New York division of consulting company Interbrand.
“Once that branding decision has been diluted, it becomes difficult to charge a premium,” Feldmeth said. “He has cashed out. He’s become kind of a circus sideshow. He’s not making smart luxury decisions.”
Trump, 64, says the popularity of his brand continues to grow and helped him navigate the recession better than most real estate developers.
“The name is hotter than ever,” he said during an interview at his 26th floor office in Manhattan’s Trump Tower, where he has a view of Fifth Avenue, the Plaza Hotel and Central Park. “It’s been hot as a pistol.”
Four units at New York’s Trump Plaza, at 167 E. 61 St., sold for an average of $791 a square foot in the third quarter while three units at the nearby Savoy, at 200 E. 61 St., sold for $1,203 a square foot, according to StreetEasy. The Savoy is so similar to the Trump Plaza that Trump sued the Savoy’s developer for copying his design.
At the Trump International Hotel & Tower at 1 Central Park West, four units sold in the third quarter for an average of $1,577 a square foot, according to StreetEasy. That compares with $4,089 a square foot for three condos at Time Warner Center, a Related Cos. development across Columbus Circle.
Such comparisons are unfair, Trump said, because smaller apartments without views command less per square foot. A condo at Trump International sold in March for $33.2 million, or $5,988 a square foot, one of six units in the building that each sold for more than $13 million since 2007, he said.
“Those are all very, very successful buildings,” Trump said.
At Manhattan’s Trump Soho, 32 of the 391 units had sold by Dec. 9, when the 46-story hotel-condominium received financing from CIM Group to repay debt owed to iStar Financial Inc.
On Nov. 17, investors bought the 41-story Trump Hollywood, in Hollywood, Florida, out of foreclosure. At the time, 22 of the tower’s 200 condos had sold. The Trump Soho and Trump Hollywood are both keeping the Trump name.
“The Trump brand is powerful for a luxury product,” Daniel Lebensohn, a partner in BH III LLC, the Miami investment firm that paid $160 million for the $223 million note on the Florida tower, said in a telephone interview. “It’s internationally known.”
The failure of projects bearing Trump’s name has hurt his reputation among institutional investors, said John Arabia, managing director at Green Street Advisors, a Newport Beach, California-based provider of real estate research and advice to investment banks, pension funds and private equity firms.
“In conversations with institutional investors, I don’t know anybody who would give him money,” Arabia said. “He has a worse reputation with institutional investors than he does with mainstream America.”
Trump said he doesn’t need institutional money.
“I don’t have any problem financing because I self-finance,” he said. “Everything I buy, I buy out of cash. We have a tremendous amount of cash.”
Trump declined to disclose how much money he has on hand. He said he’s in the process of negotiating “11 turnaround deals” with banks and other institutional investors who asked him to take over troubled projects.
“The reason they want me is because I have the brand,” Trump said. He declined to name any of the investors.
Condo buyers attracted by the brand last year joined lawsuits against Trump-licensed condominiums in Tijuana, Mexico, and Tampa and Fort Lauderdale, Florida. At least 300 people have joined the lawsuits against Trump, seeking refunds of their deposits on projects that weren’t completed.
Trump has denied responsibility and sought to be dismissed from the suits because he wasn’t the developer. On Dec. 22, U.S. District Court Judge Adalberto Jordan in Miami dismissed 11 of 13 counts filed against the Trump Organization, including ones that named Trump as a developer of the Trump International Hotel & Tower in Fort Lauderdale. In a separate case, a Broward County, Florida, judge in October rejected Trump’s dismissal motion in a lawsuit against the hotel.
Donald Isbell, 64, a retired psychiatric nurse from Oceanside, California, said he deposited $147,000 for a $459,000, one-bedroom unit at the Trump Ocean Resort Baja development in Mexico, where he was planning to live with his wife. He applied for Mexican residency and bought a bottle of Trump vodka to drink on the balcony of the ocean-view condo on the day he hoped to move in.
“With a name like Trump, I thought I’m buying something as safe as a T-bill,” said Isbell, who lost his deposit. “He’s become nothing more than a celebrity advertiser. I couldn’t do business with him again. Now I wish I could take back the vodka.”
New York, Chicago
While condo projects struggle, Trump’s hotel properties in New York and Chicago are outperforming their competition. The Trump Soho hotel in New York, which opened in April, had an 86 percent occupancy rate, without all the rooms being available, and an average nightly rate of more than $500 last month, according to Jim Petrus, chief operating officer at the Trump Hotel Collection. The Trump International Hotel & Tower on Columbus Circle had 89 percent occupancy and a room rate of about $900, he said.
That’s higher than the 82 percent occupancy and $462.41 average room rate at New York luxury chain hotels, according to Hendersonville, Tennessee-based Smith Travel Research Inc.
Trump is expanding his golf holdings as the number of private clubs in the U.S. fell to 4,256 this year, down 3.4 percent from 2008, according to the National Golf Foundation. In addition to owning courses, he also stars in “Donald J. Trump’s Fabulous World of Golf” on the Golf Channel, which starts its second season Jan 31.
“Golf clubs, I think, are some of the few cases where we’re able to get great, great distressed deals,” Ivanka Trump, the Trump Organization’s executive vice president of development and acquisitions, said during the interview in her father’s office. “You’re not seeing that here in the city in terms of commercial office.”
Drop in Fees
The Trump name hasn’t prevented a decline in initiation fees at Trump clubs as the recession weighs on consumers’ discretionary spending. At the Trump National Golf Club Bedminster in New Jersey, for example, initiation fees have dropped as low as $150,000 today from as high as $300,000 before the recession, Donald Trump said.
“Demand for new golf courses in the USA has slowed to a crawl,” said Tom Doak, a Michigan-based golf course designer. “It is a challenging time to maintain business at existing courses. The economic downturn has to be having an effect on the number of golf rounds played and the price people are willing or able to pay.”
Trump’s personal fortune is an estimated $2.4 billion, Forbes said in September, ranking him 153rd on its annual list of richest Americans. That’s up from $2 billion in the magazine’s March estimate and excludes the value of his brand, Trump said.
The brand was worth $3 billion in 2008, according to Jonathan Low, a partner of West Palm Beach, Florida-based Predictiv LLC who was hired by Trump to conduct an analysis for the bankruptcy proceedings of Trump Entertainment Resorts Inc., the operator of three Trump-branded casinos in Atlantic City, New Jersey.
“Based on data we’ve received subsequently, I don’t believe it’s diminished significantly,” Low said in an interview. “It’s a powerful brand, particularly given its global impact. There doesn’t seem to be any dilution yet.”
Trump Entertainment exited bankruptcy in July after a judge awarded control to Trump and his partners in a dispute with investor Carl Icahn. U.S. Bankruptcy Judge Judith H. Wizmur said in a ruling that “the Trump brand is worth millions of dollars to debtors,” a factor that weighed in the Trump group’s favor. Trump’s casinos have gone in and out of bankruptcy two other times since the 1990s.
Trump’s “The Apprentice” television series, which airs on NBC, ended its 10th season on Dec. 9 in 82nd place. It drew 45 percent fewer viewers than the previous season, when the show had celebrity contestants including singer Cyndi Lauper and former New York Mets baseball player Darryl Strawberry, NBC said in an e-mailed statement. The audience has shrunk 40 percent from 2007, when the program last relied on unknown contestants, who vie for a job with Trump.
“He basically peaked during the first two seasons in terms of brand proposition,” said Feldmeth of Interbrand. “Any TV show is ephemeral. He pressed it beyond its limit.”
Trump broke briefly from his office interview to welcome Kate Gosselin, the star of the reality show “Kate Plus 8.” After she left, Trump said, “If Trump wasn’t doing well, the stars don’t come up and kiss my ass.”
Other Trump-brand products have had mixed success. The Trump Entrepreneur Initiative, a seminar company formerly known as Trump University, is on hiatus until next year because its managers are “re-forming the company,” said Michael Cohen, executive vice president and special counsel to Trump. The name was changed in 2009 because the program had no academic accreditation, Cohen said.
Sit ‘n Sleep stopped selling the Trump Home mattress line in mid-December due to lack of demand, said Larry Miller, chief executive officer of the Gardena, California-based mattress-store chain. The company, which has 22 stores in Southern California, replaced Trump with the similarly priced Perfect Day line. Perfect Day and Trump are both Serta Mattress products.
“Trump was just not highly successful here,” Miller said in a telephone interview.
November was the best month for Trump mattresses in the line’s history, said Cathy Hoffman Glosser, executive vice president of global licensing for the Trump Organization. Sales were up fourfold from a year earlier, she said.
Sales of Trump-brand neckties and shirts also are up 30 to 50 percent this holiday season from 2009 at Macy’s Inc. stores, which have exclusive rights to the lines, said Allen Sirkin, president and chief operating officer of Phillips-Van Heusen Corp., which licenses the Trump name.
Instead of licensing his name, Trump paid $3.7 million of his own funds last Christmas for a lease with an option to buy the Pine Hill Golf Club in New Jersey out of foreclosure. Trump changed the name to Trump National Golf Club Philadelphia after the nearby city. He repainted the brown clubhouse white and increased membership by 200 to 330.
“I fixed it,” he said. “I re-branded it and the people are through the roof.”
In June, Trump won preliminary planning approval to develop a 1,400-acre (567-hectare) estate north of Aberdeen, Scotland, where construction has begun on a course in his mother’s homeland and birthplace of the game he said he now plays with “a good 2” handicap.
“I got it built because they wanted Trump,” he said. “If my name was anything else than Donald Trump, zero chance -- zero.”
To contact the editor responsible for this story: Kara Wetzel at firstname.lastname@example.org