Trump's bluster causes tower to lose luster
Trump Tower, once the crown jewel in Donald Trump's property empire, now ranks as one of the least desirable luxury properties in Manhattan.
Thursday, May 16, 2019
Trump Tower, once the crown jewel in Donald Trump's property empire, now ranks as one of the least desirable luxury properties in Manhattan. The 36-year-old building has been turned into a fortress since Trump won the presidency, ringed with concrete barriers and the two main entrances partially blocked off. It hasn't been substantially updated in years. And Trump's name has been a huge turnoff in liberal New York City.
For anyone who owns a unit in the tower, the past two years have been brutal. Most condo sales have led to a loss after adjusting for inflation, property records show. Several sold at more than a 20 percent loss. By contrast, across Manhattan, just 0.23 percent of homes over the past two years sold at a loss.
While some corners of Trump's business empire have thrived, such as his Washington DC hotel, others have suffered from his high unpopularity. Rounds of golf are down at his public course in New York, a clutch of once Trump-branded buildings have torn his name off their fronts, and an ambitious plan to launch a new mid-tier hotel chain across the country fizzled.
The commercial portion of Trump Tower has been struggling for months to find tenants for more than 42,000 square feet of vacant office space, despite advertising rents well below the area's average.
Occupancy rate has plunged over the last seven years to 83 percent from 99 percent, giving it a vacancy rate that's about twice Manhattan's average.
"If I were looking for office space, that would be a building I'd want to avoid," said Edward Son, until recently a market analyst for CoStar Group.
Net income slightly rose last year, boosted by the tenancy of his 2020 campaign committee, which has spent more than US$890,000 (HK$6.94 million) over the last two years to rent space in Trump Tower, according to Federal Election Commission records.
Net income is still about 26 percent lower than what bankers expected when they evaluated Trump's fitness for a US$100 million loan in 2012.
Even so, Trump Tower regularly produces an annual profit for its namesake. Last year, the building generated US$10 million in net cash flow, after taking into account its annual US$4.3 million interest payment on the loan.
Condo owners hoping to run into the president have been disappointed. While Trump ran his presidential campaign out of the high-rise, he's only visited 13 times since his inauguration.
Michael Sklar sold his parents' 57th floor unit for US$1.83 million in October after they spent US$400,000 to remodel the property. His family purchased it for US$1.4 million in 2004, which comes out to US$1.84 million after adjusting for inflation.
"No one wants in that building," Sklar said.
After Trump's election, living in his tower became a hassle, Sklar said. His mother, who was battling cancer, took cabs to the building from the airport, and she used to be dropped off right in front of the entrance. After the election, security would force her cab driver to drop her off a few hundred meters from the front door, requiring a long and painful walk home. "The name on the building became a problem," Sklar said.
At least 13 condos in the tower have sold since Trump's 2016 election.
For the nine transactions where New York City records show what the seller originally paid for the property, eight sold at an inflation-adjusted loss. By contrast, just 57 homes in Manhattan sold over the past two years at a loss, out of 24,871 third-party sales.
"The luxury market is softening," said Matthew Hughes, a broker at Brown Harris Stevens. "But it's rare that someone owns an apartment here for 10 years and takes a loss."
One New York real estate agent, who didn't want to be identified, said that clients have repeatedly told him not to show them units in Trump buildings.
These days, gawkers sometimes outnumber the customers of the building's remaining retail stores.
"It's totally a tourist trap," said Barbara Res, a former Trump Organization executive who oversaw the building's construction. She remembers the building fondly, and said that when it was built, Trump recruited celebrities to purchase its condos and prominent brands to fill its retail space. "It's dated but it's a building worthy of respect," Res said.
Located just two blocks from Central Park, Trump built his namesake tower in 1983, complete with a 18-meter waterfall and mounds of pink Italian marble.
Advertised as having 68 stories - it's actually 58, city records show - the building was ahead of its time, Trump's lawyer, George Ross, wrote in his 2005 book, Trump Strategies for Real Estate. "He single-handedly created the market for high-end luxury residences in New York City," Ross wrote.
The Apprentice, Trump's reality show on NBC, was filmed in Trump Tower. Its launch in 2004 gave the building a new prominence and helped Trump revive his personal and corporate brands. In 2013 Trump pegged the value of his brand at US$4 billion, according to unaudited statements provided by his former personal lawyer, Michael Cohen.
By most measures, the tower should be doing well these days. It's in a part of Manhattan known as the Plaza District, named after the Plaza Hotel, that many real estate experts consider to be the nation's premier office area. Offices with views of Central Park easily fetch more than US$100 per square foot, said Craig Leibowitz, New York research director for JLL.
The office portion of Trump Tower is advertising five vacancies spread across five floors.
In January, prices for the open space ranged from US$72 to US$85 per square foot annually. Now the prices are listed as negotiable.
A commercial real estate broker said that his firm's surveys show that prospective tenants won't consider a Trump building until he's out of office.
One of the building's other problems is that Trump hasn't spent much money updating the tower in recent years, according to disclosures to investors.
"I don't think I would want an office in Trump Tower," Res said. "Why would you go there? It's a wonder he doesn't have 50 percent vacancy."