Investor | profile
The Donald
Donald Trump’s iconic surname has branded a diverse and, at times, seemingly unrelated stream of premium products and services – but the celebrity billionaire maintains that property has always been his one true love. He’s bringing his tried and true formulas for success down under to reveal how you too can “think like a billionaire”. Sarah Megginson reports
or someone so focused, Donald Trump likes to operate on diverse and disparate playing fields. The extravagant billionaire has business interests extending from property, hotels, casinos and mortgage broking to restaurants, golf clubs and several New York City skating rinks. He also runs Trump University, an institute that offers online courses in marketing, real estate, entrepreneurship and investing, and he owns the biggest beauty pageant in the world, Miss Universe. Trump also owns a successful Manhattan modelling agency, Trump Models, which boasts supermodel Jodie Kidd and Italian actress Isabella Rossellini on its roster, and he is the star of his own reality TV series, The Apprentice – which earned him a star on the Hollywood Walk of Fame and attracted such high ratings in the US that it spawned a spin-off, The Celebrity Apprentice. The Trump name has branded a varied and ever-growing stream of premium projects, and he show no signs of slowing down – particularly when it comes to property. His current projects include Trump SoHo, a controversial 46storey condo-hotel development in downtown Manhattan that is upsetting locals due to its proposed height,
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and the US$500m Trump International Hotel & Tower in Toronto, which will become Canada’s tallest residential building. The projects are ambitious and record-setting, but Trump loves a challenge – and property is, after all, his one true love. “It’s tangible, it’s solid, it’s beautiful. It’s artistic, from my standpoint, and I just love real estate,” Trump said in a recent media interview. briefly with the idea of attending film school ... but in the end I decided real estate was a much better business.” He began by attending Fordham University, but after two years he applied to the Wharton School at the University of Pennsylvania and got in. “I decided that as long as I had to be in college, I might as well test myself against the best,” he says. “I was also very glad to get finished. I immediately moved back home and went to work full-time with my father.” He worked alongside his father for five years, whom Trump credits as the main influence that helped him form his business sense. “My father was my mentor,” Trump says, “and I learned a tremendous amount about every aspect of the construction industry from him.” One of Trump’s first projects, which he coordinated while he was still in college, was the revitalisation of the foreclosed Swifton Village apartment complex in Cincinnati, Ohio. He transformed an apartment complex with 1,200 properties and a 66% vacancy rate into a thriving development with 100% occupancy within 12 months. When the Trump Organization sold Swifton Village for US$12m, it cleared US$6m in profit. “Everything
Early success
Surprisingly enough, real estate was a career choice that Trump almost didn’t pursue. Trump’s father Fred Trump was a successful property developer, which exposed young Donald to the industry from an early age. In his book, Trump: The Art of the Deal, he discusses his undergraduate career, saying: “I flirted
“I’m one of the largest developers in the world, and real estate will always be my primary thing. I have fun with television, and The Apprentice has become a monster hit, but I want to be known for real estate, not for television”
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Investor | profile
Investor | profile
Invest like a Trump
onald Trump became a billionaire in real estate by making a series of creative and successful investments. He and his daughter Ivanka, who is vice president of real estate development and acquisitions for the Trump Organization, share some of their top investment tips with Your Investment Property. Be smart when choosing your investment property because location is everything, Donald says. Find a location that offers easy access to amenities, and one that has a history of property appreciation. Do your research and find out what other properties in that area have been selling for. If you plan to rent out the property, research the rental and vacancy rates for comparable properties in the area. Meanwhile, Ivanka says she invests in real estate because she “believes in the tangible asset”. “I think, in terms of real estate, there are few bad decisions as long as you can weather the hard times,” she says. This means having the financial means to hold your property through difficult periods, such as the sub-prime crisis in the US. “A lot of people didn’t do the math correctly and weren’t able to carry their properties when their rates were adjusted,” Ivanka says. “Generally speaking, if you do the math and the property is something you can afford to carry for a number of years through downturns in the market, you’re pretty much always going to do well if the asset is quality and in a great location.” Investing in real estate isn’t just for the rich, she adds. “There are many emerging markets and plenty of opportunities for people who have been priced out of the urban environment. If you find that great location and invest with a developer who has a reputation for executing on their vision, real estate is a safe bet.”
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he seems to touch,” his father commented, “turns to gold”. Trump expanded his father’s company into the lucrative Manhattan real estate market, and in the 1970s they benefited from the financially strained New York City government’s willingness to give tax concessions in exchange for investments at a time of financial crisis, via the redevelopment of the bankrupt Commodore Hotel. He went on to acquire some of the most exclusive properties in New York, slapping the Trump brand on some of the finest hotels, casinos and building complexes in the city. One of Trump’s key strengths lies in his ability to spot a solid opportunity, which he did in 1980. The city had attempted to restore the Wollman Ice Skating Rink in Central Park, but six years and US$12m later, construction was still not complete. Trump stepped in and took over the job, completing the project in six months and with US$750,000 of the US$3m project budget remaining. The
rink remains in Trump’s portfolio to this day.
The rocky road to success
Not all of Trump’s business dealings have been so successful, however. Although he now owns some of the most prestigious pockets of real estate in New York City, there was a time when it looked like Trump’s empire was set to collapse around him. By the late 1980s, the effects of the recession had put Trump in a position where he was unable to meet his loan payments, and by 1991 increasing debt brought Trump to business bankruptcy and the brink of personal bankruptcy. Despite having already lost hundreds of millions of dollars in dealings with Trump, banks and bond holders opted to restructure the property magnate’s debt to avoid losing even more money. Trump’s US$1bn Taj Mahal casino project reemerged from bankruptcy in October 1991, with Trump handing over 50% ownership to the original bondholders in exchange for lowered
Donald Trump’s investment strategies
s the world’s most famous real estate billionaire, Donald Trump believes that success in real estate requires more than just smart strategies – it demands an ability to project personal qualities that inspire confidence in others, such as enthusiasm, showmanship and never-say-die tenacity. “You need to know your subject,” Trump tells Your Investment Property. “Love what you do, or you will never work at it hard enough to become a huge success. You need to know everything that there is to know about what you are doing, and continue to learn.” George H Ross, Trump’s closest advisor for 25 years and co-star on several series of The Apprentice, reveals the core real estate investing strategies that have made the extravagant property mogul so successful: Go for the big four when scouting your location: views, prestige, convenience and growth potential. It has to be special. If it is, be willing to pay a premium for a prime location Remember that location is important, but it is a starting point for what could be a great investment – it doesn’t guarantee anything. Trump’s philosophy is to improve any location, and don’t buy without a creative vision for adding significant value. This could include striking renovations, changing the zoning or adding space to the property Know that creative problem-solving leads to big profits Write a preliminary business plan before you buy Borrow as much as you can for as long as you can. The key to a successful investment strategy is to have extra money on hand that you have no immediate use for – if you keep yourself liquid, then you can act when an opportunity presents itself, which often occurs when money is tight and there are few buyers with significant cash in the market. The fact that you have available cash enables you to snap up the bargains that are available.
(Source: Trump Strategies for Real Estate – Billionaire Lessons for the Small Investor by George H Ross, foreword by Donald J Trump)
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interest rates on the outstanding debt, and more time to pay it off. In November 1992 the Trump Plaza Hotel was forced to file a prepackaged Chapter 11 Bankruptcy protection plan after being unable to make its debt payments. Under the plan, Trump agreed to give a 49% stake in the luxury hotel to Citibank and five other lenders. In return, Trump received more favourable terms on the remaining US$550m debt, and retained his position as chief executive – although he wasn’t paid for this role, and didn’t have a role in day-to-day operations. By 1994, Trump had eliminated most of his US$900m personal debt and had significantly reduced nearly US$3.5bn worth of business debt, a feat that critics thought he was incapable of achieving. “In business, I’ve discovered that my purpose is to do my best to my utmost ability every day,” Trump says. “Business is full of complexities. That’s what makes it so interesting.” While he was forced to relinquish the Trump Shuttle, which he had bought in 1989, he was able to retain Trump Tower in New York and his controlling interest in his three casinos in Atlantic City. And although Chase Manhattan Bank, which lent Trump the money to buy the West Side yards – his biggest Manhattan property parcel – had forced the sale of the holding to Asian developers, Trump remained at the helm, as the new owners employed him to oversee the development. They also kept his name on the buildings that were eventually constructed on the yards, to leverage off his wellknown moniker and charge a higher premium for the condos. Plenty of other setbacks have peppered his career, but Trump has always been up to the challenge; after all, he says, “the big time isn’t for slackers”. “If you really want to succeed, you’ll have to go for it every day like I do… I’ve always told people that to be successful, you have to enjoy what you’re doing, and right now I really enjoy what I’m doing. I’m having too much fun with my life,” he says. “And anyone who thinks my story is anywhere near over is sadly mistaken.”
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Trump down under
Trump has completed real estate projects throughout the world, and has “some fantastic projects underway globally at the moment”. Although he has no plans to expand his empire down under at the present, he does believe that the Australian property market offers plenty of opportunities to local investors. “In a softer market, there are always great buys, and it’s always a great time to get into real estate. It’s about recognising opportunities and going for them when the time is right,” he says. “Australia is doing okay, but perhaps not as well as it was doing two or three
Donald’s daughter Ivanka is vice president of real estate development and acquisitions for Trump Organization
“I’ve always told people that, to be successful, you have to enjoy what you’re doing, and right now I really enjoy what I’m doing”
years ago. You can expect to have difficult times ahead in terms of the cost of fuel, which is like blood. Fuel is killing everything. But in real estate, good buys – if you’re in the right place at the right time – exist in any market, no matter what the conditions,” he continues. Trump will soon be in Australia to deliver his advice and opinions in person, appearing in Sydney, Melbourne and the Gold Coast as the headline speaker of the ‘Think like a Billionaire’ seminar throughout November. The seminar will feature a line-up of investment and wealth creation experts, and some participants will have the opportunity to meet with the Donald in person. The first rule Trump offers to those wanting to get into the mindset of the world’s wealthiest elite is to “think big”. “I like thinking big. If you’re going to be thinking anything, you might as well think big,” he says. “Who wants to earn $300,000 a year when you can make $1m or $10m a year? Look at your ideas, and make them as big as possible. “Ninety-eight per cent of adults are conditioned to stop when they hear the word ‘no’. Forget it; use that as the power to push on.” Like most successful business leaders, Trump also believes that individual success largely depends on the people that you surround yourself with. “No matter how smart you are, no matter how comprehensive your education, no matter how wide ranging your experience, there’s simply no way to acquire all the wisdom you need to make your business thrive,” he says. “Watch, listen and learn. You can’t know it all yourself – anyone who thinks they do is destined for mediocrity,” he advises. His final tip? “Above all, negotiate,” he says. “When the market is tough, everyone wants business, including the banks. So you negotiate for the purchase and you negotiate for everything else… and enjoy what you’re doing.” Donald Trump will speak at the ‘Think like a Billionaire’ seminar series in Melbourne on Wednesday 12 November, followed by Sydney on Thursday 13 November and the Gold Coast on Friday 14 November. Visit www.trumpinaustralia.com.au
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