Donald Trump talks big. Huge, really. Long before he was spinning and exaggerating things on the campaign trail -- including Trump University’s Better Business Bureau rating (not exactly the A grade he keeps touting) -- he was amplifying and inflating the size of the fortune he holds dearly as a measure of self-worth and a tool of self-promotion.
In 2006 Trump unsuccessfully sued a journalist who wrote a book proclaiming the mogul was worth a mere $150 - $250 million. Trump sat for a deposition in late 2007 as part of that case and had to discuss his net worth under oath.
During the deposition the billionaire famously said that his net worth fluctuates “with markets and with attitudes and with feelings, even my own feelings,” but that he determines the number based on his “general attitude at the time that the question may be asked.” When your fortune ebbs and flows according to your own mood, it’s not hard to push limits or conjure up billions. And what about when Trump isn’t feeling so hot about himself? “You wouldn’t tell a reporter you’re doing poorly,” he said.
A few of the lesser-known details from the deposition illustrate how Trump sometimes magnifies his assets, overlooks his liabilities and obscures his ownership stakes to arrive at sky-high valuations:
- Trump International Hotel & Tower Waikiki Beach Walk: This 38-story hotel and condo property is one of many buildings that bears the Trump brand without being owned by Trump. He licenses his name to the building’s owners (and manages the hotel for a fee). But that didn’t stop him from telling The Wall Street Journal in 2007 “the building is largely owned by me.” When confronted during the deposition, Trump backtracked and admitted that, while he considered the agreement to license his name “so strong and so solid” that it “could be interpreted as a form of ownership,” he did not have any equity in the property.
- Trump International Hotel Las Vegas: Trump opened this 64-story hotel and residential building near the Vegas strip in 2008. He told CNBC in July 2005 that “We have 1,282 units, and they sold out in less than a week.” But he admitted under oath that he had actually sold only 900 units for about $900 million, and that was by the end of 2005 -- more than five months later. In 2007 he again said the building was “100% sold,” for $1.3 billion in total sales. But those figures include apartments he claimed to have decided to keep for himself and was thus “not actively selling.” Still he stretched the definition of selling out when he juiced up the number of apartments sold and the total proceeds by misleadingly including the units.
- Seven Springs: This is Trump’s 230-acre estate an hour north of Manhattan, which features two early 20th-century homes and a lot of green space. On his 2005 personal balance sheet he valued the property as if it were subdivided and turned into 20 luxury homes, which he estimated he could build and sell for $80 million in profit, or $4 million in profit per home. The next year, he valued the same property at $150 million, based on building 17 luxury homes at $8.8 million in profit per home. Why did the value of the property nearly double in one year? Trump decided the values had “just gone up.” Did he consult with any experts? No. Did he commission an appraisal? No. (Local real estate sources believe the value of the property to be a fraction of Trump’s current $125 million estimate.)
- 40 Wall Street: Trump’s approach to this building shows that even when he does get appraisals from experts, he might disregard them anyway and go with the number he fancies best. He considered selling the property, his massive lower Manhattan crown jewel, in 2005 and was hoping to set a $400 million price. But a firm hired to appraise the building wrote him a letter requesting a meeting to discuss “realistic pricing expectations.” The firm said that $350 million -- which it called “premium pricing” -- might be achievable. Another company had pegged 40 Wall Street’s market value at $248 million a few months earlier. Despite these appraisals, Trump valued the property at $410 million on his personal balance sheet. In 2004 he also allegedly told a Real Estate Weekly reporter that the building was “nearly 100%” occupied; in reality it was almost 20% vacant.
- Trump World Tower: In 2004 Trump told Fortune that he had paid off all of the debt on this 72-floor skyscraper near the U.N. building in New York. But his personal statement of financial condition from the same time period showed an outstanding loan of $41.4 million.
- West Side Yards: Trump owned 30% of the huge tract of Manhattan land on the Hudson River, which he hoped to develop. When a New York Times reporter wrote that “Trump has a small minority stake in the project,” the billionaire sent him a handwritten note, saying, “Peter, you’re a real loser. Thanks for the nice story. Is 50% small?” with an arrow pointing to the line about his stake. Yet under oath Trump admitted that he always owned just 30% of the project, but he decided his 30% stake was “equated to 50%” because his partner, who held the other 70%, put up all of the money. Of course the 70% owner was entitled to recoup all of its initial investment before Trump would see a dime from the property, and if it were sold Trump would get 30% -- not 50% -- of the proceeds.
- The Learning Annex: Trump was paid to give speeches for this online educator in 2005. According to the deposition Trump bragged to Larry King that he was paid $1 million per speech, but in reality he only was paid $400,000. The remaining $600,000 never saw Trump’s pockets, but was instead the Learning Annex’s promotional expense for each speech (money the company spent on things like billboards and newspaper ads). Trump argued that because he likely benefits from the publicity, the money the Learning Annex paid advertisers could be considered personal income (lawyers for O’Brien implied that Trump did not include this as income on his taxes).
Bottom line, Trump has consistently exaggerated how much he owns and downplayed how much he owes. And he’s an extreme optimist when it comes to valuing his assets: He assumes the very best-case scenario and maybe rounds up from there. In Trump’s mind prices are always on the rise and buyers will always appear. But when we talk to analysts and real estate agents, they almost always unanimously agree that Trump’s numbers don’t add up.
Owning 30% of a project means owning 30%. Just because you didn’t have to put money in doesn’t magically boost your equity to 50%. And a golf course isn’t actually worth the two dozen megamansions one might at some point build on that land. You might need zoning permits and environmental surveying -- not to mention you have to actually build the homes and sell them at prices high enough to hit the profits you projected on the back of an envelope years ago. There are plenty of stages where things could go wrong, and if the housing bubble taught us anything it’s that real estate doesn’t always go up, up, up. It’s a stretch to say the current value of a piece of land is exactly what the profit could be on a bunch of homes in the future if everything goes according to plan.
Trump is a savvy salesman. He knows the bigger the stake in a project or the quicker it sells out, the more successful he looks. If he has to exaggerate to paint that picture, so be it. And the perceived success of Trump the businessman has been the lifeblood of Trump the candidate, driving support from disenchanted voters hoping a strong CEO in the Oval Office will make America rich again (like Trump!).
But when he says he’ll build a 40-foot wall and make Mexico pay for it, does he actually mean a 10-foot wall that happens to be 30 feet above sea level? And will Mexico ever pay to build it? Seems dubious as always.
