Donald J. Trump, the controversial real estate mogul who was elected as the 45th President of the United States, has boasted widely about having a net worth of more than $10 billion. While Investopedia lists Mr. Trump's 2016 net worth lower than that, at $3.9 billion, he will nevertheless be one of the all-time wealthiest presidents.
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Born into a wealthy family, Donald Trump made a few successful real estate investments in the Manhattan market in the 1980s before transitioning to self-marketing in the 1990s. He bought beauty pageants, football teams, television shows and fashion lines and with every investment, 'The Donald' infused his brand: brash, boisterous, unapologetic and always entertaining, and marketers loved it. In a way, Donald Trump built his wealth simply from the fact his name was Donald Trump.
The Trump Family Fortune
Trump's father, Frederick Christ "Fred" Trump, made a sizable fortune by building and selling housing for American soldiers and their families in World War II. It was at his father's real estate company that Donald got his start in business. In 1971, he took control of his father's apartment rental company, Elizabeth Trump & Son Co., and later on, he renamed it The Trump Organization. Trump stuck mostly with real estate investments during this period, particularly condo associations, huge apartment buildings and Federal Housing Administration (FHA)-backed housing, all in the New York metropolitan area.
Trump hit a milestone in 1980 when he teamed up with the Holiday Inn, Corp., (then parent company of Harrah's casino resorts) to develop a $250 million hotel and casino complex in Atlantic City, named Harrah's at Trump Plaza.
Eventually, Trump would buy out his partners and rename the property Trump Plaza Hotel and Casino. Following the successful launch of Trump Plaza, Trump purchased a second property in Atlantic City from Hilton Hotels for a sum of $320 million. After the hotel chain had failed to obtain a gaming license, in classic Trump fashion he renamed this latest purchase Trump Castle.
Back in New York, Trump purchased the Plaza Hotel in 1988 for over $400 million and spent an additional $50 million renovating and redecorating under his wife, Ivana Trump’s, direction. While it seemed nothing could stop Trump’s meteoric rise in the 1980s, even the most ambitious real estate tycoons are at the mercy of city bylaws. When Trump purchased an apartment building and an adjacent hotel in Manhattan, Trump’s plans for a large condominium tower on the site were curtailed by the city’s rent control programs. In 1985, when Trump unveiled his plans for an $88 million complex on the West Side of Manhattan, dubbed 'Television City,' community opposition, and a lengthy approval process ended Trump’s vision for the project.
However, these two failures pale in comparison to the setbacks that would soon befall the Trump organization. In 1990, when the booming real estate market of the 1980s began to decline, many of Trump’s highly leveraged investments began to weigh heavily on the company’s balance sheets.
Trump Faces Bankruptcy
Ultimately, in the early 1990s, Trump’s winning streak ground to a halt. The national economy started to slow down, and New York's economy stalled, causing Trump’s income streams to dwindle. Soon, he found it difficult to make the interest payments on the debt he'd accrued to finance his different businesses. Trump's annual loan payments were $300 million. The Trump Organization and its subsidiaries owed $9 billion, and Trump's personal debt totaled $975 million.
To avoid having to file for bankruptcy, Trump met with four of his major lenders: Citibank (C), Bankers Trust, Chase Manhattan Bank and Manufacturers Hanover Trust Co. (now owned by JPMorgan Chase Bank, National Association). The banks were concerned that if they foreclosed on his properties they, too, would lose tremendous amounts of money. In the end, Trump convinced the banks to loan him an additional $65 million, which he'd use to keep his businesses afloat. The banks also agreed to defer, for five years, the interest and principal payments on Trump's outstanding loans. Some of Trump's debts were paid down with funds from the sale of his assets, which included an airline company (Trump Shuttle) and a yacht (which was sold to Saudi billionaire Prince Alwaleed Bin Talal). Trump also sold his controlling stake in the Plaza Hotel and turned his Florida beach house, Mar-a-Largo, into a resort.
The Trump Organization famously revealed it was $5 billion in the hole in 1990, with as much as $1 billion guaranteed by Donald Trump personally. The business survived thanks to a combination bailout / deferment by more than 70 banks. Many point to the 1988 purchase of the Taj Mahal Casino as a major catalyst for the Trump debt cycle. There is some truth in this, particularly after Trump unsuccessfully tried to finance the construction of its sister casinos in 1989 through mostly junk bonds.
The bailout package allowed him to take out second and third mortgages on most of his properties. Leverage became a common theme for Trump, who notoriously dealt with bankruptcy four times. Trump used the extra rope from his lenders to shore up debt, build up his rents and purchase other enterprises, including more casinos.
The early 1990s were tumultuous for the Trump Organization and Donald's business prospects. In 1991 and 1992, two of Trump’s Atlantic City casinos (the Trump Taj Mahal and the Trump Plaza Hotel) filed for Chapter 11 bankruptcy, which allowed them to restructure their debt. As a result of the onerous debt, in 1991, Trump was forced to cede 50% of ownership in the Taj Mahal to his bondholders in exchange for lower interest payments and extra deferments. Shortly after, Trump combined his three Atlantic City casinos, forming a single company, called Trump Entertainment Resorts.
1995 and the Trump Turnaround
Fortunes began to change in 1995. That year, Trump established Trump Hotels and Casino Resorts, Inc. and took the company public, eventually selling 13.25 million shares at $32.50 a share in 1996 for a tidy capital gain of $290 million over his original ownership stake.
Also, in the mid-1990s one of Trump's initial investments, the Grand Hyatt building that opened in 1980, became wildly successful. Trump quickly sold his stake back to Hyatt for a reported $140 million.
Later in 1995, Trump purchased the old Bank of Manhattan Trust building located at 40 Wall Street. This building would go on to become one of his most famous properties. Trump claims he bought the building for just $1 million, though this is likely an exaggeration. The building was available at a discount however after another deal with former Filipino President Ferdinand Marcos fell through, and the owners of the building became desperate. The net value of this building, best-known as the Trump Building, is now worth $530 million according to Forbes.
Fred Trump died in 1999 with an estimated net wealth between $250 million and $300 million according to a New York Times article at the time of death. While the specific amount Trump inherited from his father has not been revealed, a January article from the New York Times shows that Trump's will divided $20 million after taxes among his living children including Donald. Further, in 2003, it was reported that Donald and his siblings sold a portion of their father’s real estate holdings for around half a billion dollars. In addition to this inheritance, Trump’s father helped the mogul financially throughout his lifetime by giving him loans and access to trust funds, and establishing a wealth of real estate and political connections for his son.
‘The Apprentice’ Makes Hundreds of Millions
Trump got his start on TV as a wrestling character on the World Wrestling Entertainment’s 'Wrestlemania' in the 1980s and never looked back, eventually starring in a reality TV show about his business called, ‘The Apprentice.’ Trump’s name recognition skyrocketed after 'The Apprentice' aired in 2004. In each season, more than a dozen contestants vied for a six-figure paying managerial position at one of Trump's many companies. A press statement issued by the Trump presidential campaign states that during the ten-year history of ‘The Apprentice’ and its spin-off series ‘The Celebrity Apprentice,’ Trump made a total of $214 million. (See also: 7 "Apprentice" Hosts From Around the World.)
The Trump Brand: A Bestseller
If you want to understand Trump, the billionaire, you have to look past Trump the real estate investor. You have to think of Trump as a brand name, just like Coca-Cola Co. or Nike Inc.
Many of the properties that bear the Trump name aren't actually owned by the mogul. The Trump Organization has been known to partner with developers in licensing deals. In such an arrangement, a developer pays Trump a licensing fee; in exchange, they're given permission to brand their building with the Trump name and logo. Trump benefits by receiving a regular stream of royalties, while the developer can increase the rates she charges because the Trump name signifies high quality and luxury. According to Trump, his real estate licensing deals, intellectual property, brands and branded development are worth more than $3.3 billion; however, Forbes pegs this number at around $253 million.
In addition to real estate, Trump has lent his name to a diverse list of products ranging from mattresses and apparel to fragrances and furniture. These licensing deals contribute to Trump's annual income. In 2014 alone, Trump brought in $3.25 million via consumer products licensing according to Forbes. Trump has found another way to monetize his outspoken nature—by charging speaking fees for conferences and other functions. Between May 2014 to March 2015, he spoke at several engagements and charged as much as $450,000 for each presentation. Overall speaking engagements contributed $1.75 million to Trump's income during that period alone.
'The Art of the Deal' and Trump's Books
While Trump gained prominence and notoriety in the 80s through his business deals and colorful television appearances, he skyrocketed to a new level of fame when he released his first book. ‘The Art of the Deal,’ was released in November 1987. It spent 51 weeks on the bestseller list and has sold around 1 million copies thus far according to most reports.
Now, ‘The Art of the Deal,’ is making headlines again in 2016, following a controversial interview in The New Yorker with the book’s co-author Tony Schwartz. Schwartz claims he wrote “every word,” of the popular book. “Donald Trump made a few red marks when I handed him the manuscript, but that was it,” he said in an interview with ABC’s 'Good Morning America.'
Schwartz, who observed Trump almost daily for 18 months when penning 'The Art of the Deal,' describes Trump as a dangerous sociopath whose successes were mythicized in 'The Art of the Deal.' Schwartz says he now regrets writing the book:“I feel a deep sense of remorse that I contributed to presenting Trump in a way that brought him wider attention and made him more appealing than he is,” Schwartz told The New Yorker. In response to Schwartz’s ‘Good Morning America’ interview and New Yorker article, Trump’s camp has issued Schwartz a cease-and-desist letter and has asked Schwartz to send a check to Trump for the royalties generated from 'The Art of the Deal,' plus his advance.
The Republican presidential candidate's latest disclosure revealed that ‘The Art of the Deal,’ generated royalties of $50,000 to $100,000 in 2015. Trump’s disclosure also reported income between $1 million and $5 million for his November 2015 book, 'Crippled America: How to Make America Great Again.' Last year, Trump's personal financial disclosure revealed that the billionaire received book royalties amounting anywhere from $85,000 to $215,000 in 2014.
Trump’s Real Estate Fortune Today
Though the Trump empire spans many industries, real estate development and acquisitions have always been its core business. Trump's real estate income is derived from many different types of property. The Trump Organization, for example, owns hundreds of residential units and office spaces that create regular rental income. According to Forbes, The Trump Hotel Collection and real estate licensing brought in $128 million in 2014.
The Bottom Line
Donald J. Trump has launched an empire, based largely on his name. Taking on large loans, Trump constructed many luxury hotels, apartments, and casinos, which have become iconic monuments to the excess and exuberance of the 1980s. However, Trump’s businesses have faced four bankruptcies throughout the years. The most recent one was in 2009 when Trump Entertainment Resorts was ravaged by the 2008 recession. Though he has faced near financial ruin and multiple business bankruptcies, Trump's branded products and real estate licenses remain popular and have helped to land him on the Forbes 400 for several decades.