The New York Attorney General is suing Donald Trump and his associates for allegedly lying about his net worth to financial institutions, which he has been doing for years when speaking with reporters. Why would someone so rich care so much about what people think he’s worth? “It was good for financing,” Trump said in an interview in 2015.
However, despite Trump’s bluster, it remained unclear for a long time whether his lies were actually good for financing. After all, banks do background checks on borrowers. But documents submitted into evidence during the trial last week show that Trump’s longtime lender, Deutsche Bank, fell for many of his lies, giving the bank a distorted view of its most famous client.
A Deutsche credit report describing 40 Wall Street, one of Trump’s many buildings, is full of errors. The report incorrectly states that the building consists of 1.3 million square feet of premier office space. However, public records show that the building actually contains 1.1 million square feet of office space and less than 1.2 million square feet of total space. This difference in square footage could potentially lead to an overvaluation of the property by about $50 million, based on the assumptions made by Deutsche Bank in its report.
Trump‘s lies also affected Deutsche’s understanding of Trump Tower. “The 68-story building contains residential and condominiums that are owned by residents, along with 178.000 square feet of commercial space and 114.000 square feet of retail space,” the credit report said. But the building doesn’t actually have 68 levels — its floor numbers skip six through 13, leading visitors to think the building is bigger than it really is. It also doesn’t have 114.000 square feet of retail space, the SEC document says it has about 60.000. Deutsche Bank valued Trump Tower at 349 million dollars. Its credit report does not explicitly say how the miscalculation of square footage could have factored into its valuation.
The bank didn’t believe all of Trump’s numbers but underestimated the depth of Trump’s lies. The bank’s biggest mistake may have been in its assessment of Trump’s real estate collection, which consists of Mar-a-Lago, numerous United States (U.S.) estates, and three overseas golf resorts. Trump valued these properties, which the report suggests threw off an average of roughly 20 million dollars of annual cash flow, at more than 2 billion dollars. Deutsche Bank cut that estimate by nearly half, putting the properties at 1.2 billion dollars. But the discounted figure was still about 500 million dollars higher than the roughly 700 million dollars we came up with after consulting with a number of industry experts.
Deutsche appears to have taken a more careful approach with properties against which it held mortgages — Trump’s hotel in Washington, D.C., a golf resort in Miami, and property in Chicago. However, there are questions about whether it had full insight into the assets. In a credit report, Deutsche said the golf resort threw off 12.6 million dollars of net operating income in 2017. But an income statement submitted to Miami authorities, obtained through the Freedom of Information request, lists net operating income at just a third of that, at 4.3 million dollars.
At the Trump International Hotel in Washington, D.C., Deutsche believed the Trump Organization made a net operating profit of 7.6 million dollars in 2017. However, the House Oversight Committee released audited financial statements that call that figure into question. Those statements show cash flows on Trump’s assets below zero for the years ending August 31st, 2017, and August 31st, 2018.
The Trump Organization did not immediately respond to questions about whether it intentionally lied to Deutsche Bank. The bank appeared to confirm that it did not have a full understanding of the properties, Forbes reports.
E.Dz.
