Achi news desk-
Rejected by more than two dozen bond companies, Donald J. Trump has so far been unable to come up with the nearly half a billion dollar penalty due by Monday in his civil fraud trial.
Just days before the deadline, the former president’s social media company completed a merger — a move that is set to pump an estimated $3 billion into Mr. Trump’s coffers. That’s more than enough to pay the $454 million penalty he owes to New York state, but the merger restricts him from selling his shares for six months, or using them as collateral against a loan.
Unless those rules are waived to allow him to tap the infusion of cash, Mr. Trump faces the possibility that the state’s attorney general will move to freeze some of his bank accounts and try to seize his property in the city where he made his name as a real estate developer.
The buildings at the heart of the lawsuit – several that dot the Manhattan skyline, as well as a 212-acre property north of the city in Westchester County – sit like the smallest figurine inside a nesting doll Russian, protected by layer upon layer of legal. entities. Lawyers who specialize in bankruptcies, foreclosures and corporate insolvency warn that gaining control over, and attempting to liquidate, any of the former president’s flagship properties is an uphill battle.
And even if the attorney general succeeds in acquiring Mr. Trump’s real estate, unloading a 60-story skyscraper involves a spider’s web of transactions.
“People are really good at litigating and getting to the point of judgment,” said Brad Eric Scheler, senior counsel at the law firm Fried, Frank, Harris, Shriver & Jacobson, where he oversees corporate restructuring and insolvency. “But they never focus on the fact that collecting on a judgment is very difficult.”
Accused of greatly inflating the value of his real estate empire to get better loan terms and insurance, Mr Trump lost his civil fraud trial in February. A judge fined him nearly $355 million, a penalty that has now reached $450 million with interest. He has until March 25 to pay the penalty, but it is not clear what will happen if he doesn’t.
In a letter to the court clerk last Thursday, one of Mr.’s lawyers confirmed. Trump said they had contacted 30 bond companies through four separate brokers, and had been unable to find anyone who would underwrite such a large amount. The bond companies, the letter said, refused to accept real estate as collateral and instead required collateral in the form of cash or other liquid assets worth about 120 percent of the value of the judgment — or more than $557 million.
The former president had about $350 million in cash last year, a Times analysis found — not even two-thirds of what the bond companies are asking for.
Valuers and commercial brokers warn that it is difficult to know how much his assets are worth, with a number of variables at play, including his debts. The value of his real estate would also take a beating if he were forced to sell it hastily, something Trump’s lawyer also pointed out: “A ‘fire sale’ of real estate holdings would inevitably lead to huge, irreparable losses,” wrote the lawyer, Clifford Robert.
Here’s a look at the challenges the state faces as it tries to seize, or even pin down the value, of some of Mr. Trump’s best-known properties in Manhattan.
Who Really Owns It?
Mr. is not Trump owns almost any of his properties outright. They are protected by a maze of interlocking trusts and limited liability companies. According to the lawsuit, there are as many as 500 separate entities operating for the benefit of, and under the control of, Mr. Trump.
This creates a challenge for the court, say bankruptcy experts.
“Let me give you an analogy,” said Mr. Scheler, who has no direct knowledge of Trump’s assets, describing how Yellow Cab operators have been similarly protected. “Taxi fleets had each of their taxis in a separate corporation, so if the taxi was in a car accident and the insurance didn’t cover it, it would be limited to the entity that owned the cab.”
The Banks That Get Paid First
Even if New York Attorney General Letitia James succeeds in seizing property, if there are mortgages or loans against it, those debts will need to be paid off first, say lawyers who have represented distressed corporate clients.
“It’s 1,000 percent complicated and the reason it’s 1,000 percent complicated, is there are creditors and equity holders who are ahead of Letitia James,” said Leo Jacobs, a commercial bankruptcy lawyer. “Imagine 40 Wall Street is worth $250 million, and $200 million is collateralized against it. After transferring taxes and fees, she will be left with $1 million. Is the judgment worth enforcing? The answer is no, it isn’t.”
The attorney general could issue a lien against Mr. Trump’s property, but lawyers representing corporate clients warn that a lien is not the same as acquiring property.
“Giving a lien is kind of like a stop sign,” said Leni Morrison Cummins, a partner in the Manhattan office of the law firm Cozen O’Connor, who has mediated fraud claims before the New York Attorney General’s Office.
Mr. would not Trump can sell the property himself or take loans against it without paying the lien.
“It will prevent you from doing almost anything else with the property,” said Lisa A. Smith, a real estate attorney and partner in the New York office of the law firm Smith, Gambrell & Russell.
The Fine Print
For some of the buildings, the ownership structure is so complex that it becomes unclear what, if anything, the court could seize.
Take the sleek skyscraper at 1290 Avenue of the Americas. Nearly two decades ago, Mr. Trump acquired a 30 percent stake in an entity that owns the 43-story building in Midtown Manhattan near Radio City Music Hall. The remaining 70 percent is owned by the Vornado Partnership Trust.
The fine print of the partnership makes it difficult, perhaps even impossible, for Mr Trump to sell his 30 per cent stake. Initially, due to expire in 2044, the partnership states that “a partner may not, directly or indirectly, sell, assign, transfer or otherwise dispose” of any part of their partnership interest, without the prior written consent of the majority owner, according to an excerpt from the agreement shared during the trial.
In the legal proceedings, Ms James argued that Mr. Trump and his deputies inflated the value of this property by treating it as if it were an asset that could be bought and sold.
Now, if the same asset is seized, the state will face the same limitations they revealed during the trial — that it’s pretty much stuck in this partnership for another two decades, real estate attorneys say .
Owning Not the Building But The Right to Rent It.
Diagonally from the New York Stock Exchange, 40 Wall Street has long been one of the marquee properties in Mr Trump’s portfolio. Completed in 1930, it was briefly the tallest building in the world. In 1995, for $1.3 million, Mr. Trump the right to lease it, according to court records. A memorandum of offer for the building shows that the agreement continues for almost another two hundred years, until the year 2194.
That’s right — the right to lease it. He is not the owner of the building or the land it sits under. The arrangement, known as a “ground lease,” makes it harder to sell, real estate lawyers and commercial brokers say.
“Anytime a building has a ground lease, there’s automatically a stigma attached to it,” said Roshan Shah, a commercial real estate broker who was formerly a principal at Avison Young. “At the end of the day, the building is sitting on land that you don’t control.”
In 2010, 2011 and 2012, three different appraisals by Cushman & Wakefield valued his leasehold at between $200 and $220 million, if sold as is, according to documents published during the lawsuit. In 2015, a lender-ordered appraisal valued it at $540 million. By 2021, the former president claimed his leasehold was worth $663.6 million, a figure the court found inflated.
The value of the lease is a function of two things: how much Mr. Trump pays it in rent to the owner of the building and other expenses, and how much he earns in exchange for the dozens of tenants who occupy the skyscraper.
While stressing that they do not know the value of Mr Trump’s leasehold, multiple brokers and commercial analysts contacted by The Times said the asset is likely to be worth much less today than it was in 2015, and may even have fallen below $200 million.
The decline is attributed to the seismic shift in commercial real estate, as remote work required by the pandemic has continued. Looking at 380 buildings in Manhattan, one in four were appraised at values lower than their previous sale price last summer, found Andrew Lim, director of research at JLL, a real estate services firm.
The Triplex
“Triplex” Mr. Trump occupies the top three floors of Trump Tower on Fifth Avenue. He filmed his first television interview as president-elect under the frescoed ceiling of the penthouse.
Of all his properties in Manhattan, this may be the easiest to sell, or at least identify a value; it is a single flat, rather than a complex partnership or lease.
Brokers and an appraiser say its market value may not be tied to reality. The unit is close to what is known as “Billionaire’s Row,” where condominiums occasionally sell for up to $10,000 per square foot. In 2015, Mr. Trump and his associates claimed his worth was about $327 million, according to his financial statement.
But Trump Tower, where the triplex sits and which opened in 1983, has long been eclipsed by more modern high-rises, according to brokers and analysts. A fairer comparison, they say, would be units in the Olympic Tower, located five blocks south on Fifth Avenue and developed in the 1970s, where condominiums sell for an average of $1,958 per square foot.
Ondel Hylton, senior director of content and research for CityRealty, a real estate listing company, said the triplex could net as little as $2,000 per square foot, or $22 million. If renovated, its value could jump as high as $2,800 to $3,500 per square foot, or between $30.8 million and $38.5 million, he estimated.
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