A great story in the Washington Post on Sunday sets out in detail how Donald Trump & # 39; In the years before Trump became president, business continued, which the newspaper called a "spending spree" buying real estate and extending the reach of the brand. Most astonishing, however, is that much of it – at least $ 400 million – was spent in cash. It was not just a surprising strategy for someone who was known to be – and infamously – making debts to make purchases; It also raises the question of where exactly the money comes from. And indeed, this question might be interesting for the federal investigators.
The post article was written by three reporters: Jonathan O'connell, Jack Gillum and David A. Fahrenhold. After its release, I spoke to Fahrenthold by telephone who received a Pulitzer Prize last year for his coverage of Trump's charitable work. (He has also broken the story of Access Hollywood volume.) In the course of our conversation, which was edited and condensed for clarity, we discussed how the post came to this story, what the Trump deals This is unusual, and from here comes the coverage of Trump's finances.
Isaac Chotiner: What made you think about the Trump organization's use of cash, and why was not much talked about anymore?
David A. Fahrenthold: The Trump organization is a truly unusual company that has its weapons in many different ways and is opaque from the outside. So we tried to understand parts of it when we went along. Our decision for this year was to understand the debt of the Trump organization. There are some really mysterious things that I do not understand about his debts. The Great White Whale of this coverage is something called Chicago Unit Acquisition LLC, which is this weird LLC that Trump has listed in his personal financial disclosures. It's like a shell company that it owns, yet claims it has no assets. And yet he says he owes this shell company more than $ 50 million. I do not know anything about it.
So I started to look: Who are his debts? Whom does he owe money? And I figured the way to do this extensively would be to pull the land registers for everything I knew, and try to see what mortgages were on the deeds. Who owned the mortgages? How old have you been? For what rates were they? And I thought I could find mortgages that he had not taken into account in his personal financial disclosures. Instead, I found a number of places without any debt. And when we found that out, especially in places like Scotland and Ireland, where there are tons of money being borrowed, we said, OK, maybe that's the story – that weird buying behavior that does not fit like other people do do.
When did Trump switch to cash on many of these deals instead of debt, and have a sense of what triggered the change?
The first of those big bucks he makes in cash, at least the first one I know, is in 2006 when he buys a property in Scotland that he later turns into a golf course. Maybe there are other purchases before, but I did not find any.
The Answer: Eric Trump's answer is that the Trump children get into the business and are less risky than their father. Her father remembered his debts years ago, so they decided to buy things in cash. The guy who had worked with Trump to buy this estate thought it was some kind of mystical connection. Trump's mother was from Scotland and maybe he wanted to own this piece of Scotland directly. These are the only concrete explanations that I have uncovered.
What was the state of Trump's business empire in 2006?
Around this time, the first wave of The Apprentice type of Crested and The Apprentice 's ratings are on the decline. I think it was before they figured out how to rebuild them with Celebrity Apprentice . The year 2006 is so significant because it is the year of Trump's life in which he spends a lot of time in Los Angeles. They try to increase the ratings by having it in Beverly Hills; In Los Angeles he is at a dead end. Melania has just returned Barron to New York. He meets Stormy Daniels this year. It's been a year of many changes and upheavals in his private life.
Business is a time to enter these partnerships, and these licensed properties are in the US and overseas: Felix Sater, Bayrock, Trump Panama, licensed properties on which Trump lends his name, but not own, and come later under much control.
Deutsche Bank was, as you report, the only major lender to offer credit after its bankruptcy. Why were they willing to do so, and why were not others, especially as he became more famous and "respectable" in the later decade?
Deutsche Bank is not a world that I know well. There is one particular banker on the private side of Deutsche Bank who appears to be his principal lender. It is not the bulk of Deutsche Bank that would normally give this size of commercial credit. The only other big financial institution that grants him big loans is something called Ladder Capital Finance. They're involved in a lot of the older debts refinanced by Trump in many New York buildings. One connection seems to be that the son of Trump's CFO works at Ladder Capital Finance. There is no such obvious connection with Germans, but they lent it to no one else.
Most people in the real estate business seem to believe that paying cash is not the best way to do business, which raises the question of why he did that. And if he had $ 400 million in cash during that time, that would give him some security for a bank that could lend him money. How do you understand this contradiction?
It seems to be a contradiction, as you said. For most people, if you had $ 400 million, you would not only pocket everything on golf courses that are notorious as a non-large money maker. You would use it as a lever to get more loans, or things with a higher return, especially if you had $ 400 million in the period after the Great Recession of 2008-2009. You would be able to buy a lot of capital – real money that makes fortunes – really cheap. The only explanation we received from the Trumps comes from Eric, who said they changed the business and that it would not be a traditional big credit, big risk, big reward real estate deal anymore. Instead, it's like a generational business. We're going to buy those assets, and we're going to make a cash return and live on it, and we will not be the Wheeler dealers of the past few years.
But even this explanation has its own contradictions because with Deutsche Bank they are doing two really risky, really big deals with debts: the Doral golf course in Florida and the old post office hotel in Washington. These are both Trump really old-style deals with a lot of debt and a lot of risks.
Is this traditionally a warning sign for lenders – to write down all the money for such big deals?
I do not know. We've talked to people in the golf finance industry who say it does not happen on that scale. Normally, the only people who put so much money – their own money – into golf course transactions would be people who basically had so much money that they did not have to make any money to work for them. For example, imagine the sovereign wealth funds of Abu Dhabi or the sovereign wealth fund of Norway. They just wanted to diversify their wealth and make money somewhere. No matter how well he did it, I do not think Trump was on the same scale as the wealth of Abu Dhabi. What I'm saying is that I do not think lenders have a lot of experience with people who buy huge things in cash.
Was Michael Cohen involved in any of these deals, and in your coverage, have you come across anything that suggests that these funds have aroused the interest of any investigations swirling around Trump and his allies?
No, not that I have much good visibility [into] what Robert Müller did, but I have found no evidence that this is part of an investigation. As far as Cohen was concerned, the way we looked for these things was the sales documents Trump lawyers used to sign the deed and the company documents. These things are all bought through LLCs, which Trump lawyers signed the LLCs that were created to buy the real estate. The only one involved in Michael Cohen's property was on 806 North Rodeo Drive in Beverly Hills, which buys  for all cash for approximately $ 10 million in 2007 and sells at a loss next year.
What do you think are the biggest unanswered questions about your story?
I appreciate two things. One would be: Did I see the whole universe? Are there any other cash transactions I did not find? And number two is: what was your cash flow? Eric Trump has said that their existing real estate is making so much money that it's not a big deal to dive into it to buy a $ 80 million golf course, in the case of Turnberry [in Scotland]. Nothing I have seen from the outside indicates that this liquidity is there, but I have not seen much from the outside. The next question concerns the sources of their cash flow from that time and where their money comes from. That would help us understand the context around Eric's explanation a little more.
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