Seeing bargain prices, he invests in courses as demand slows
Donald Trump is betting his name will boost the value of his golf courses even as the premium for the brand declines on condo properties and ratings slide on his show, The Apprentice. The real estate developer turned TV personality has acquired nine golf properties in the U.S., including four since 2008. In July he started building a £750 million ($1.15 billion) golf course and resort in Scotland.
Trump says putting his name on the courses increases membership and the fees he can charge. Elsewhere, the record is mixed. The Trump name hasn't prevented the failure of real estate developments in Florida and Mexico. Nor has it helped his New York condos sell for more than comparable apartments in the city, according to Sofia Song, vice-president for research at StreetEasy.com, which compiles real estate listings. At the same time, Trump's hotels in New York and Chicago are outperforming their competition based on occupancy rates and room prices.
With the Trump name appearing on vodka, health products, mattresses, furniture, cuff links, shirts, ties, and a seminar company, the brand has been devalued, says Josh Feldmeth, chief executive officer of the New York division of consulting firm Interbrand. "He has cashed out."
Trump, 64, says the popularity of his brand continues to grow and has helped him navigate the recession better than most developers. "The name is hotter than ever," he says during an interview at his 26th-floor office in Manhattan's Trump Tower, where he has a view of Fifth Avenue, the Plaza Hotel, and Central Park. "It's been hot as a pistol." After taking a break to greet Kate Gosselin, star of the onetime reality show Jon & Kate Plus 8, Trump says: "If Trump wasn't doing well, the stars don't come up and kiss my ass."
The brand was worth $3 billion in 2008, says Jonathan Low, a partner at West Palm Beach (Fla.) consulting firm Predictiv who was hired by Trump to conduct an analysis for the bankruptcy proceedings of Trump Entertainment Resorts, the operator of three Trump-branded casinos in Atlantic City, N.J. "Based on data we've received subsequently," says Low, "I don't believe it's diminished significantly."
Trump buildings in Manhattan—both those he owns and those he licenses his name to—command prices similar to or lower than comparable buildings, according to an analysis by StreetEasy.com of sales in the third quarters of 2008, 2009, and 2010 at six Trump buildings. "There's no obvious premium for the Trump name," says Song. Trump says the comparisons are unfair because the Trump apartments that sold often were smaller or had worse views than the ones they were measured against. He calls all the buildings "very, very successful."
The same can't be said of Trump-licensed condominiums in Tijuana, Mexico, and Tampa and Fort Lauderdale. At least 300 people have joined lawsuits against Trump, seeking refunds of their deposits on those projects, which weren't completed. Trump has denied responsibility and sought to be dismissed from the suits because he wasn't the developer. On Dec. 22 a district court judge overseeing one case in Miami dismissed 11 of 13 counts filed against the Trump Organization, including those naming it as the developer of the Trump International Hotel & Tower in Fort Lauderdale. In a separate case, a Broward County (Fla.) judge in October rejected Trump's motion to be dismissed from a lawsuit against the Trump International Hotel.
In addition to owning golf courses, the billionaire stars in Donald J. Trump's Fabulous World of Golf on the Golf Channel, which starts its second season on Jan. 31. The Apprentice series on NBC ended its 10th season on Dec. 9 in 82nd place, drawing 45 percent fewer viewers than the previous season, according to NBC (GE). The audience has shrunk 40 percent since 2007.
Trump is expanding his golf holdings as the number of private clubs in the U.S. fell 3.4 percent this year, to 4,256, from 2008, according to the National Golf Foundation. To Trump, the downturn represents a buying opportunity. "Golf clubs, I think, are some of the few cases where we're able to get great, great distressed deals," says Trump's daughter, Ivanka, the Trump Organization's executive vice-president for development and acquisitions.
Prices are so appealing that Trump says he is using his own money rather than licensing his name. He paid $3.7 million in December 2009 for a lease with an option to buy the Pine Hill Golf Club in New Jersey out of foreclosure. He changed the name to Trump National Golf Club Philadelphia after the nearby city, repainted the brown clubhouse white, and increased membership by 200, to 330, he says. In June, Trump won preliminary approval to develop a 1,400-acre estate north of Aberdeen, Scotland. "They wanted Trump," he says. "If my name was anything else...zero chance—zero."
The bottom line: Trump is betting the power of his brand will boost profit at golf properties, even as it has had mixed results in other projects.