Four years ago, when Donald Trump was sworn in as president, the commercial real estate industry was brimming with optimism — one of their own promised to bring pro-business stability and economic prosperity to their multitrillion-dollar industry.
For a while, it seemed like Trump was delivering on that hope: He oversaw one of the strongest economies in U.S. history and implemented policies and programs that sought to reward the very industry that made him a billionaire, a household brand name and the leader of the free world.
In 2020, that all began to unravel. The country is in the midst of a pandemic that has claimed 400,000 American lives, the economy is in tatters, and the industry that made him is in upheaval as thousands of hotels, shops and offices sit empty.
Donald Trump in the final days of his presidency
Trump’s election represented the first time in American history that a developer not only ascended to the nation’s highest office, but also maintained ownership of his business interests while in power. His real estate background shaped the 45th presidency in a variety of ways, from his frequent trips to Trump-branded properties, to his involvement with the federal government’s real estate operations, to the regulatory and legislative policies his administration pushed.
“Donald Trump was a businessman, he was a real estate mogul, and he was sensitive to the needs of the business community and sensitive to the needs of the real estate industry,” said John Catsimatidis, a billionaire New York real estate executive who supported Trump during both of his presidential campaigns.
In the final days of Trump’s presidency, many of his longtime partners turned their backs on the developer-turned-president. Deutsche Bank and Cushman & Wakefield both said they would no longer do business with The Trump Organization, JLL backed out of a partnership to sell Trump’s D.C. hotel and New York City terminated its contracts with the company.
The moves, which came after Trump incited the Jan. 6 insurrection at the U.S. Capitol, marked a climactic end to a four-year term in which his business interests were frequently entangled with his presidency.
The government spent millions of taxpayer dollars at Trump’s properties with his visits, and hundreds of special interest groups and foreign officials visited Trump properties. With Trump still benefiting from his company’s revenues, watchdog groups say these practices presented clear ethical problems.
Through his businesses, Trump was on the hook for hundreds of millions of dollars in debt obligations during his presidency, an arrangement that raised ethical issues and could present financial challenges for him after leaving office. As he returns to the private sector, Trump now faces financial, legal and brand-related issues that could hurt his company.
“You are not going to see people paying to have [his] name on a building. That I know for sure,” Jeffrey Gural, a Manhattan property owner and former chairman of Newmark, told Bisnow last month. “His brand is damaged.”
As head of the executive branch, Trump also took control of the federal government’s real estate portfolio through the General Services Administration. And in some cases, such as the planning for a new FBI headquarters, he became directly involved in federal real estate decisions.
The Trump administration’s policy agenda impacted the commercial real estate industry through executive actions and legislative changes such as repealing regulations, lowering tax rates, imposing tariffs and creating the opportunity zone program.
While he may have come from a real estate background, after four years in office, industry executives are divided on the impact Trump’s policies had on the industry.
“As a president who knows real estate, I don’t think he did very much to help stimulate our industry,” said Peebles Corp. CEO Don Peebles, a Democrat who advised former President Barack Obama. “He did things that hurt the real estate business.”
Trump approached the presidency with a commercial real estate developer’s perspective, for better or worse.
“I don’t think it’s of any surprise that a real estate developer from New York would seek to enact and implement policies that are good for commercial real estate,” Sage Policy Group CEO Anirban Basu said. “The lens through which he views the economy must be heavily influenced by the performance of commercial real estate.”
Leaving The Industry ‘In Crisis’
The Trump administration has passed laws and regulatory changes that have benefited commercial real estate, though some executives say parts of his agenda hurt the industry.
President Donald Trump addressing reporters outside the White House on March 13, 2018.
Among the president’s main goals upon entering office were to cut regulations and to induce companies to bring jobs back to the U.S. Looking back on Trump’s presidency, Catsimatidis said he kept these promises.
“He was able to roll back some of the dumb regulations, and what happened? It induced people to create jobs, build their businesses and expand their businesses,” Catsimatidis said.
A Brookings Institution deregulation tracker has found that the Trump administration repealed 43 regulations from 2017 to 2020, and it has proposed at least 200 additional regulatory changes. The affected regulations included financial, environmental, agricultural, health, housing and labor rules.
Huffines Communities CEO Phillip Huffines, a Dallas-based multifamily developer who worked on a fundraising committee to re-elect Trump, said that Trump’s tax and regulatory policies benefited commercial real estate.
“President Trump is the very first president we’ve had who’s from our industry,” Huffines said in September. “Because he’s a businessman, he personally took it upon himself to rewrite and revamp the entire tax code … He’s also done a good job in reducing unnecessary and unreasonable regulations that hinder the real estate market.”
Basu, who teaches global strategy at Johns Hopkins and chairs the Maryland Economic Development Commission, noted that some of Trump’s regulatory rollbacks, particularly around the environment, could have long-term consequences that are harder to measure.
“That deregulatory policy, for a time at least, lifted U.S. economic performance, though at what cost is not clear, because there is an environmental cost that one would need to measure ultimately,” Basu said. “But when we look at certain industries, they benefited from that.”
The White House
President Donald Trump discusses the opportunity zone program during a press conference April 17, 2019, at the White House
The president’s signature legislative accomplishment, the 2017 Tax Cuts and Jobs Act, impacted real estate in a number of ways. It cut the top corporate income tax rate from 35% to 21%, and it lowered most individual income tax rates, changes that Basu said spurred economic growth.
“The president’s reduction of key tax rates … helped to create an environment in which there was greater demand for commercial real estate and greater wealth to support commercial real estate valuations,” Basu said.
The tax law also created a program that sparked a wave of activity in commercial real estate: opportunity zones.
The opportunity zone program gave tax breaks to investors that directed capital gains into underserved communities. Governors of each state and D.C.’s mayor selected which zones would be eligible.
Billions of dollars have been poured into opportunity zone funds in the three years since the law was passed, and the funds have increasingly been invested into real estate projects over the last year. The White House said in August that the program had generated $52B of new investment in economically distressed communities.
A June report from the Urban Institute, based on interviews with 70 stakeholders, concluded that the economic benefits of the program were not flowing to the communities for which it was intended. Some of the opportunity zone projects that have moved forward would have proceeded without the program, it found.
The selection of the roughly 8,700 opportunity zones has also come under scrutiny. Florida Gov. Rick Scott created a zone that benefited an already planned superyacht marina project on the West Palm Beach waterfront following a request from the developer, one of his donors. Scott rejected lower-income tracts that the West Palm Beach government had requested, ProPublica reported.
Treasury Secretary Steven Mnuchin reportedly used his position to create an opportunity zone in Nevada that benefited notorious financier Michael Milken, who owned a 700-acre development site in the zone, The New York Times reported.
During last year’s presidential race, then-candidate Joe Biden proposed a series of reforms to the opportunity zone program to make it better support distressed communities.
“We cannot close the racial wealth gap if we allow billionaires to exploit Opportunity Zones tax breaks to pad their wealth, rather than investing in projects that benefit distressed low-income communities and Americans that are struggling to make ends meet,” Biden’s campaign website said.
Peebles said the program hasn’t lived up to its hype — Trump’s administration touted the potential for over a trillion dollars in investment — and that it has created tax benefits for investors while not providing sustainable economic benefits to communities.
“There was a big expectation for the impact opportunity zones would have,” Peebles said. “That signature real estate policy was much more of a tax shelter and gentrification of communities of color, so I don’t think that’s something we want to celebrate.”
Peebles also criticized other aspects of Trump’s tax law that hurt the real estate industry. He said the law changed the rules around tax credits for historic preservation projects in a way that reduced their value.
“That’s a negative to the real estate business, especially in major cities that have older landmark buildings that are functionally and economically obsolete that are hard to finance the restoration of them,” Peebles said. “The tax credits were meant to help offset the increased cost, and he diminished the value of those significantly.”
While Basu said Trump’s real estate background influenced his approach to the presidency, he said the administration did hurt the industry in at least two ways: trade policy and the response to the coronavirus pandemic.
Trump in May 2019 raised tariffs on a series of Chinese goods from 10% to 25% and increased tariffs on steel and aluminum imports from Canada and Mexico. Basu said the tariffs increased the cost of construction and made it more difficult to build.
Trump throughout the 2016 campaign said America had been taken advantage of by China and other countries on trade, and Basu said the president’s “America First” agenda superseded his interest in supporting commercial real estate.
“If there had to be some collateral damage to American economy, including commercial real estate, it appears he was willing to live with that,” Basu said.
The president’s most impactful failure, Basu said, was his response to the coronavirus pandemic over the last year. He said the Trump administration should have taken a greater role in encouraging mask-wearing and other precautions, and it should have coordinated the purchasing of personal protective equipment and the rollout of the vaccines, rather than leaving those tasks to the states.
He said the administration’s “awful” response exacerbated the economic devastation caused by the pandemic and undid much of the economic growth Trump’s policies had spurred.
“The president implemented a series of policies that were very good for commercial real estate, that led to a lot of development of new properties, and then faltered in his response to the pandemic, causing arguably what had been a bubble created because of this environment to be burst and to leave commercial real estate in tatters,” Basu said. “And that’s where it is right now. It’s in crisis.”
The President’s Real Estate Arm
When he entered the White House, Trump took control of the largest real estate portfolio in the country.
The GSA owns and leases more than 376M SF of real estate across 9,600 buildings in 2,200 communities, with properties ranging from government offices to data centers to labs to courthouses. The GSA largely operates this portfolio without direct involvement from the president, but there were some notable exceptions during Trump’s term.
The search for a new FBI headquarters was well underway when Trump took office, with the GSA having narrowed it down to three locations in the D.C. suburbs. The FBI is currently headquartered in the J. Edgar Hoover Building, an aging, Brutalist-style building occupying a full block on Pennsylvania Avenue, six blocks from the White House.
The FBI’s current HQ, the J. Edgar Hoover Building on Pennsylvania Avenue.
In July 2017, the GSA canceled the search for a site in the suburbs to build a 2.1M SF campus. In February 2018, it recommended a plan to keep the FBI headquarters on Pennsylvania Avenue, demolishing and rebuilding the Hoover Building.
Democrats in Congress blocked funding for the plan, with some alleging that Trump intervened in the process to benefit his own business interests. An FBI relocation would lead to a commercial development on the site that could potentially include a hotel, adding competition for Trump’s hotel across the street.
In July 2018, Axios reported that Trump had become “obsessed” with the FBI headquarters project, ranting about it in multiple meetings and telling his chief of staff he wanted to oversee minute details of the project. Emails between Trump and GSA officials, which House Democrats obtained and released in October 2018, indicated that Trump ordered the agency to move forward with the demolish-and-rebuild plan.
GSA leadership maintained during congressional hearings that the reversal was driven by the preferences of the FBI. Public Buildings Service Commissioner Dan Mathews reiterated that position in a Jan. 13 interview with Bisnow.
“I’m not going to speak about the president’s involvement,” Mathews said. “We had a review of the whole decision-making process by the IG, and that was covered pretty closely, and it was very clear that the decision to stay in Washington was driven by the FBI.”
Last July, the White House attempted to insert $1.75B in funding for its FBI headquarters proposal into the coronavirus relief bill, The Washington Post reported. Trump discussed the proposal at a press conference that month, indicating that he had been involved in the reversal.
“They want to build it at the site that they have it,” Trump said, according to the Post. “They had options very far away from Washington and I said to them, ‘Frankly you have to be near the Justice Department.’ There’s nothing better than the site they have.”
Trump, going back to his real estate roots, even suggested an amenity for the FBI headquarters project: a running track for employees to work out.
“You could literally have quarter-mile tracks on top,” he said during the press conference.
Peebles, a D.C. native, said he doesn’t know whether Trump’s business interests influenced his approach to the FBI headquarters, but he was disappointed to see the project remain in limbo throughout the last four years.
“I find it hard to imagine that he allowed that eyesore, the J. Edgar Hoover Building, to continue to be a blight on Pennsylvania Avenue,” Peebles said. “This building could have been demolished and a new building under construction now. Frankly, that’s an example where, as a president who owns real estate, he didn’t do our industry any favors.”
Trump, known for grandiose design at his luxury real estate properties, inserted his architectural preferences into federal government policy during his final weeks in office, signing an executive order making classical architecture the preferred style for federal buildings in D.C. The order didn’t mandate the use of classical architecture, but it said that its aim was to make federal buildings “beautiful.”
The American Institute of Architects condemned the order and said it would work with Biden to reverse it.
“Communities should have the right and responsibility to decide for themselves what architectural design best fits their needs,” AIA CEO Robert Ivy said in a release. “Though we are appalled with the administration’s decision to move forward with the design mandate, we are happy the order isn’t as far reaching as previously thought.”
‘A Huge Ethics Problem’
Trump has visited his own properties more than 280 times since he took office, directing at least $2.5M in taxpayer funds to his businesses, The Washington Post reported in October. This arrangement has created a host of legal and ethical issues that watchdog groups like the Citizens for Responsibility and Ethics in Washington have investigated.
Donald Trump tees off at the opening of the Trump National Golf Club, June 22, 2015.
CREW Executive Director Noah Bookbinder said the president maintaining ownership of a large global business while in office was unprecedented in American history.
“The thing we’ve seen is not just that the president kept his business, which creates the potential for conflict of interest problems,” Bookbinder said. “But this president has gone out of his way to drive business with the presidency to his properties and to make clear that anybody wanting to curry favor with him as president can do that by bringing business to him.”
A CREW investigation in September found that 145 foreign officials from 75 governments have visited a Trump property during his presidency, with Turkish officials the most frequent guests. It also found that special interest groups have hosted or sponsored 130 events at Trump properties during his presidency, and 48 administration officials have attended those events.
“It’s a huge ethics problem that we have the possibility that policies are being influenced by his businesses,” Bookbinder said. “It’s one of a number of really significant corruption issues that will tarnish this administration in history.”
The Trump property most frequently visited by federal, state and foreign government officials, according to CREW, sits just blocks from the White House: The Trump International Hotel. Public officials have visited the D.C. hotel 973 times, according to CREW, far surpassing Mar-a-Lago, which Trump dubbed the “Winter White House,” the next highest at 385 visits.
“[The hotel] has become a very visible place for influence over this president and this administration,” Bookbinder said. “It really is a center. It’s a place that’s seen as ‘you want to get in with this president, pop on down to the Trump International Hotel.’”
The entrance to the Trump International Hotel at the Old Post Office building in D.C.
The deal that created the hotel on Pennsylvania Avenue presented its own issues. The Trump Organization leased the property, the Old Post Office Building, from the federal government through the GSA in 2013. After a $200M renovation, the 263-room hotel opened in September 2016. When Trump decided not to sell his businesses or place them in a blind trust upon taking office, Democrats in Congress said the arrangement violated the Trump Organization’s lease with the GSA, which has a clause barring elected officials from benefiting from the agreement.
The GSA ruled in March 2017 that the Trump Organization wasn’t in violation of the lease, stating that the company had taken adequate steps to separate the president from the company’s revenues.
The GSA’s inspector general in January 2019 concluded that the agency “improperly ignored” constitutional issues around the Trump Organization’s lease at the Old Post Office building. The constitutional issues involved the emoluments clause, which prohibits elected officials from receiving gifts from foreign and state governments. The emoluments clause was also the basis for multiple lawsuits from ethics watchdogs and state attorneys general.
The Trump Organization in October 2019 retained JLL to market the D.C. hotel for sale.
“People are objecting to us making so much money on the hotel, and therefore we may be willing to sell,” Eric Trump told The Wall Street Journal at the time.
That sale process was scuttled by the pandemic, which has disrupted the hotel industry across the country, but has been especially painful for high-end properties with large conference facilities like the Trump International Hotel. The Trump Organization put the marketing process on pause in late March, the Washington Post reported, and CNBC reported in November the efforts to sell the hotel are on “indefinite hold.”
JLL confirmed to Bisnow last week that it would no longer be involved in marketing the hotel for sale.
“At this point, they could either just turn over the keys, or keep it and make it part of whatever media company the president decides to create,” D.C. hotelier Brian Friedman, who bid on the hotel, told CNBC. “I just don’t think they’re going to get the price they expected.”
Besides the use of his properties, having hundreds of millions of dollars of outstanding loans has created conflict of interest issues for the president while in office, Bookbinder said. Over the next four years, Trump faces deadlines for more than $400M in loans backed by properties in Chicago, Florida and D.C., the Washington Post reported in October.
“With the president in significant debt and with the public knowledge that he has significant debt, it created a situation where banks and lenders that have decision-making authority over what happens to the debt could have excessive influence with the president,” Bookbinder said. “It also provided an incentive for the president to want to make sure he could make as much money as possible so he could be able to pay off those debts.”
The Trump Organization’s dealings in foreign countries also garnered scrutiny throughout his presidency.
Trump pledged upon taking office that his company would not do any new deals in foreign countries while in office, and his sons, Donald Trump Jr. and Eric Trump, claimed that the company had gotten out of all international business. A Washington Post fact-checker found in November 2019 that those statements had been proven false, with the Trumps continuing to expand and cash in on their foreign investments.
The Trump Organization’s foreign business interests generated more than $200M in income between 2016 and 2020, according to nonprofit watchdog group Center for Responsive Politics. The company has also moved forward with new projects in foreign countries.
It received approval in September 2019 to build 550 houses in northeastern Scotland, and it immediately began marketing the homes under the brand Trump Estate, with some priced at more than $1.5M, the Washington Post reported. The following month, the Trump Organization received approval to build 53 houses on land around its golf course in southwestern Ireland.
Trump in February 2018 asked the U.S. Ambassador to Britain, Robert Wood Johnson IV, to see if the British government could help steer the British Open golf tournament to the Trump Turnberry resort in Scotland, the New York Times reported in July.
A real estate deal the Trump Organization proposed in Moscow during the 2016 presidential race became a focus of Special Counsel Robert Mueller’s investigation. Trump’s former lawyer, Michael Cohen, went to prison after pleading guilty for lying to Congress about the project.
Returning To A ‘Fairly Toxic’ Brand
Trump leaves office and returns to head a company that has faced substantial challenges over the last four years, from brand-related losses to the pandemic upending the hospitality industry.
His company laid off or furloughed 2,800 employees, the Washington Post reported in June. Four of the company’s five top-earning hotels and resorts temporarily shut down, likely causing tens of millions of dollars in losses.
Trump International Hotel and Tower in New York
The resurgence of the coronavirus in the second half of the year continued to hurt business at the company’s hotels. The Trump International Hotel in Manhattan had about 16% occupancy in November, the Washington Post reported — it needs to be about 70% full to break even. The property’s losses added up to about $9M last year, according to the Post.
Even before the pandemic, the Trump brand was removed by owners of at least 10 properties across the world, including residential buildings and hotels in New York, plus hotels in Toronto and Panama. His hometown has moved to cancel contracts with the Trump Organization to operate ice rinks in Central Park.
Trump’s estimated net worth dropped by more than $1.4B during the first three years of his presidency, according to Forbes, which attributed it in part to the damage to the Trump brand. Forbes pegs his current net worth at $2.5B.
“Before his term, Trump stood for wealth, success and over-the-top luxury,” Northwestern University marketing professor Tim Calkins told AFP News last week. “Now the brand has associations with anti-government views, racism and extremism. This makes the brand fairly toxic.”
The Jan. 6 storming of the Capitol by supporters donning Trump hats and flags only compounded the damage. In addition to the real estate partners and New York City cutting ties with the Trump Organization, the PGA announced Jan. 10 it canceled plans to play the 2022 PGA Championship at the Trump National Golf Club Bedminster, citing brand-related concerns.
“It has become clear that conducting the PGA Championship at Trump Bedminster would be detrimental to the PGA of America brand, it would put at risk the PGA’s ability to deliver our many programs, and sustain the longevity of our mission,” PGA of America President Jim Richerson said in a video address.
After becoming the only president to be impeached twice by the House of Representatives last week, Trump was reportedly focusing more of his attention on his business-related issues. Trump was “more concerned with other actions that could have serious consequences for his post-presidential life,” including the PGA cancellation, Deutsche Bank cutting ties with his companies and Twitter suspending his account, the Washington Post reported.
The businesses cutting ties with the Trump Organization could create revenue and liquidity issues for a company that is reportedly facing hundreds of millions of dollars in debt.
The Trump Organization has loans coming due in the next four years totaling more than $400M. The company has taken out loans with Deutsche Bank on hotels in D.C., Chicago and Doral that were originally worth about $364M, and it took out at least $55M in loans on Trump Tower and a Manhattan condo building from Ladder Finance, according to a Post review of publicly available loan documents.
The company’s ability to pay back the loans could be made more difficult by the lagging profits at the hotels, which were already struggling before the pandemic.
Profits at the Chicago hotel fell 89% from 2015 to 2018 and the net operating income at the Doral hotel declined by 69% from 2015 to 2017, according to reports from the Washington Post. The D.C. hotel, despite the frequent visits from Trump supporters and public officials, had around 57% occupancy in 2019, compared with 75% for competing high-end D.C. hotels, the Post reported.
Catsimatidis noted that the amount of debt the president has isn’t necessarily an indication of the health of his business.
“Everybody has debt,” Catsimatidis said. “Unless you were looking at the balance sheet of the company, those numbers don’t mean anything.”
Eric Trump told the Wall Street Journal in June that the company paid down tens of millions of dollars in debt over the last few years. And he said he expects the company will launch a major expansion after his father leaves office that will focus on luxury hotels abroad.
The company’s risks are only heightened by the legal investigations it faces.
New York Attorney General Letitia James sued the Trump Organization in August, claiming it refused to comply with subpoenas involving her office’s investigation into whether the company inflated property values to obtain tax breaks and loans. The Manhattan District Attorney has issued subpoenas as part of a separate criminal investigation into the company’s financial practices.
The investigations both expanded to include tax write-offs on consulting fees, the New York Times reported in November. The expansion followed the Times’ report in September on Trump’s tax returns that showed he reduced his taxable income by deducting $26M in fees to unidentified consultants. Some of the consulting fees appear to have gone to Ivanka Trump, who was also an executive officer at the company, an arrangement that creates potential legal issues.
Despite the financial and legal hurdles his company faces, Trump has kept his close connections with the real estate industry intact. He has tapped real estate leaders to advise him on federal policy, has frequently taken their phone calls throughout his presidency and helped them escape legal trouble.
During his final day in office, Trump pardoned or commuted the sentences of 143 people, including several real estate executives: Dragon Global CEO Robert Zangrillo, Douglas Development President Douglas Jemal, Eliyahu Weinstein, Jon Harder and Gary Hendler.
In April, Trump formed a committee of business leaders to advise him on reopening the economy during the pandemic. The committee had several real estate executives on it, including Vornado Chairman Steven Roth, Related Chairman Stephen Ross, Irvine Co. owner Donald Bren, Starwood Capital Group CEO Barry Sternlicht and Blackstone CEO Stephen Schwarzman.
Throughout his presidency, Trump has remained accessible to the industry from which he hails, maintaining relationships that could benefit him after leaving office. Catsimatidis said Trump was accessible to him and other industry titans he knew from decades in the business.
“They knew him from New York. They felt that there was somebody to talk to,” Catsimatidis said. “You left a message, and he called you back.”