How Donald Trump Made His money

By infohub — Nov 27th, 2017

How Donald Trump Made His money

The 45th President of the United States, Donald J. Trump, has never been one to keep quiet about how much money he has. During his presidential campaign, he told his supporters many times, “I have always been good at making money” and “I am really rich”. He himself has claimed that his net worth is more than $10 billion, but many different sources have all reported much lower figures, with Forbes claiming that he is worth $4.5 billion. So, Donald Trump’s net worth is something that is unclear. Even so, that is still a lot of money, and many are wondering just how he made all his fortune. 

The commander-in-chief was a household name even before he became the President. He was born into a wealthy family, and in the 1980s, he made several successful investments in real estate in the Manhattan market. Eventually, in the 1990s, he transitioned to self-marketing. He bought football teams, beauty pageants, fashion lines, and television shows, and with every investment he made, his brand, which is associated with something brazen and boisterous, became more popular.

The Trump family wealth

During World War II, Donald Trump's father, Frederick Christ Trump, made a huge fortune by constructing and selling houses for soldiers who fought for America, and their families. This is how the Trump family fortune was started, and it was at his father's booming real estate company that Trump first got into the business. In 1971, his father, Frederick’s apartment rental company called Elizabeth Trump & Son Co. went under Donald’s management. He later renamed it, The Trump Organization. During this period, Donald Trump mostly focused on real estate investments – mostly, huge apartment buildings and condo associations in New York’s metropolitan area.

In 1980, Trump made a deal that brought in a huge wealth when he partnered with the Holiday Inn, Corp., (Harrah’s casino resort’s parent company at the time) to develop Harrah’s at Trump Plaza, a hotel and casino complex in Atlantic City worth $250 million.

Eventually, Trump bought out his partners and went on to rename the complex Trump Plaza Hotel and Casino. After Trump Plaza’s success, he purchased another Atlantic City property from Hilton Hotels for $320 million. He later renamed it, Trump Castle.

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Trump starts to face setbacks

In 1988, Trump bought the Plaza Hotel in New York for more than $400 million and spent another $50 million redecorating and renovating it under the direction of his then-wife, Ivana Trump. Even though it seemed like there was nothing that could halt Trump’s empire expansion in the 1980s, time proved even the most successful and ambitious investors are under the control of city bylaws.

Trump’s vision for a huge condominium tower on the site where he bought a Manhattan hotel and an adjacent apartment building was restricted by the rent control programs of New York. Then in 1985, Trump’s plans for building “Television City”, a complex on Manhattans West Side worth $88 million, was made impossible by opposition from the community and an extensive approval process.

These two failures were just the beginning of the many setbacks and bankruptcies the Trump empire would soon face. When the real estate market, which Trump built his empire on in the 1980s, started declining in the 1990s, many of Trump’s investments began to cost the company millions.

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The beginning of Trump’s bankruptcy

In the early 1990s, Donald Trump’s continuous business success ultimately came to a halt. The economy was slowing down nation-wide, which greatly reduced Trump’s income. Soon, it was difficult for him to make the interest payments on many of his debts that had built up. In fact, his annual loan payment totaled a whopping $300 million, while the Trump Organization and its subsidiaries had a debt of $9 billion, and Trump's personal debt came up to $975 million.

Trump decided to meet his four major lenders – Citibank (C), Chase Manhattan Bank, Bankers Trust, and Manufacturers Hanover Trust Co. (owned by JP Morgan Chase Bank today). Fearing that they would also end up losing huge amounts of money if they foreclosed Trump’s properties, the banks ended up loaning Trump $65 million to maintain his business for the time. They also agreed to put off the principal payments and interest on Trump's huge loans for a period of 5 years. Trump even had to sell his assets including the Trump Shuttle, his airline company and his yacht, which was bought by Saudi billionaire Prince Alwaleed Bin Talal, in order to pay down a portion of his debts. Trump also had to sell his controlling share of the Plaza Hotel and ended up turning his Florida beach house into a resort.

The Trump business eventually survived four bankruptcies, which was only possible because of a combination of deferment and bailout by more than seventy banks. Many believe that Trump’s purchase of the Taj Mahal Casino in 1988 was a major reason for his debt cycle. This is not entirely false, especially after Trump tried in 1989, although unsuccessful, to finance its sister casino's construction through mainly junk bonds.

The early 1990s were not the best time for the Trump Organization and their business prospects. In 1991, the Taj Mahal, Trump’s casino in Atlantic City, filed for Chapter 11 bankruptcy. Then in 1992, another Atlantic City casino, the Trump Plaza Hotel, filed for the same, because of which they had to restructure the organization’s debt. In 1991, because of the gigantic debt, Trump was forced to give up 50 percent of ownership in his Taj Mahal casino to his shareholders in exchange for extra deferments and lower rates of interest payments. Soon after this, Trump formed a single company called Trump Entertainment Resorts by combining his three casinos in Atlantic City.

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Trump’s fortune turnaround

In the mid-1990s, Trump’s fortune began to witness a positive change. In 1995, he formed Trump Hotels and Casino Resorts, Inc. and made the company open to public investments. He eventually ended up selling 13.25 million shares at $32.50 each. He made an impressive capital gain of $290 million over his own ownership stake in the beginning.

Another factor which contributed to the Trump fortune turnaround was the success of the Grand Hyatt building in the mid-1990s. Trump has initially invested in it when it opened in 1980. He reportedly sold back his stake to Hyatt for $140 million.

Then in 1995, Trump bought the old Bank of Manhattan Trust building with its address of 40 Wall Street, which would later become one of Trump’s most well-known properties. He himself claims the building cost him just $1 million, but this is likely not the case. Even though the building was made available at a discounted price after a deal with the then President of Philippines fell through, its price was probably not as low as $1 million. Today, the very same building, famously known as the Trump Building, has a net worth of $530 million, as reported by Forbes.

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“The Apprentice” and other television appearances

Trump even got into the world of wrestling to build his brand. In the 1980s, he appeared in the World Wrestling Entertainment’s (WWE) 'Wrestlemania' and this slowly made him widely popular among the public as a personality, and not for his organization.

But what really boosted his name among the media and the public was his reality TV show called, ‘The Apprentice’ which aired in 2004. In each season, the contestants competed against each other for a managerial position at one of Trump's many companies, which apparently paid six figures. During his presidential campaign, he released a press statement which stated that Trump accumulated $214 million from ‘The Apprentice’ and its spin-off show ‘The Celebrity Apprentice’, which ran for a period of ten years altogether.

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Trump’s books and controversies

Trump released his first book called ‘The Art of the Deal’ in November 1987. It was a huge success and was even on the bestseller list for 51 weeks. Till today, it has reportedly sold around 1 million copies.

 In 2016, ‘The Art of the Deal,’ was in the spotlight again after the co-author of the book, Tony Schwartz, in an interview with The New Yorker, said that he wrote “every word” in the book and all Donald Trump did was make a few red marks when he gave him the manuscript.

Schwartz says that he now regrets and wishes he had not written the book, as it was the book that skyrocketed Trump’s fame and fortune. He says that he feels bad for his part in “presenting Trump in a way that brought him wider attention and made him more appealing than he is”. In response, Trump’s camp issued a cease-and-desist letter to Schwartz and asked him to pay back Trump the royalties he generated from the books, as well as his advance.

According to The President’s latest disclosure, it was revealed that in 2015, ‘The Art of the Deal’ generated royalties worth $50,000 to $100,000. It also reported Trump’s book, 'Crippled America: How to Make America Great Again’ released in November 2015, made about $1 million to $5 million.

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Trump’s fortune today 

Although the Trump empire includes various industries, real estate acquisitions and development have always been its main money maker. Donald Trump's business style is basically building an empire based on his name. His willingness to stick his family name on a range of products, from mattresses and apparel to fragrances and furniture helped him to make his fortune. Such licensing deals add to his annual income.

He may have faced four business bankruptcies in the past, but Trump's real estate licenses and products with his name have continued to help him land his name on the Forbes 400 list for several years.



 

 

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