Donald's luck

Lesley Riddoch, The Guardian, 4 November 2008

Donald Trump's plans for an exclusive golf enclave in Scotland have been rubberstamped despite environmental concerns

Donald Trump has been given the freedom of Scotland. Permission to build a minor new town among the sand dunes north of Aberdeen. Carte blanche to construct a clubhouse with more non-vernacular turrets and spires than Sleeping Beauty's castle. Licensed to kill the planning system that once prevented development in sensitive and protected habitats.

Trump's £1bn resort, complete with centrepiece hotel, leisure complex, shops, restaurants, 950 timeshare flats, 500 private homes, 36 villas, a golf academy and housing for 400 staff is more than a golf course – it's a billion-pound stunt worthy of 007 himself.

In short, The Trump's been given the Full Monty. A terrible pun. But a billionaire with no shame, little sense of style, large amounts of hair and unlimited ambition has injected a strong sense of theatre and unreality into the sober business of Scottish planning.

For more than a year, every step taken by the sharp-talking American has been followed, analysed and commented upon as if he were a reincarnation of Burt Lancaster's 's oil magnate in Local Hero.

What will the all-conquering Trump now bestow upon the little people of Aberdeenshire? And will any of the jobs, jacuzzis, and celebrity birdies compensate for the inevitable damage to wildlife and the famous shifting dunes of Balmedie?

Just like the dunes, the argument won't sit still.

Do golf-lovers like the plan? Not necessarily. A straw poll of Americans coming off the famous 18th hole at St Andrewsfound few backers. "Too cold," "No direct flights", "Not enough places to visit locally" and "Not quaint enough," were some of the replies.

Bear in mind that the most expensive flat in Scotland sits not in Edinburgh's New Town but smack-bang opposite that final Old Course green. There's big money in golf. But is it old, conservative Yankee dollars, or new, adventurous golf-mad yens? The jury's out.

Do golf-haters oppose the plan? Not necessarily.

Golf should be the world's most democratic game. Thanks to the handicap system a poor player on a good day can "beat" a good player on a bad day. The fact Scots dreamed up such an equitable game should be a matter of international pride – stronger evidence of our progressive national culture than free personal care or the Tartan Army. Instead, golf in Scotland has become a by-word for snobbery, exclusion and sexism.

If entering Trumpton is related to the possession of mere cash – not the same private parts or private-school pedigree as the club secretary – then Martha Burk, Michelle Wie and Laura Davies might be able to think the unthinkable and enter the clubhouse after winning an Open. And more ordinary Scotswomen might be able to play.

Do locals hate the disturbance? Again – there's no consensus. The fisherman who has refused to sell his home at the centre of the resort is still adamant he won't be moving. But many people in the nearest village are supporters of the scheme – oil widows tired with the barley-and-barbed wire landscape who hope the spa, swimming pools and restaurants will liven up the local scene.

Ironically, it may not be the planning process but the credit crunch that does for Donald and his plan to build "the greatest golf course in the world." Martin Ford is the councillor who lost his job as head of the planning committee when he used his casting vote to say no to Trump, triggering the SNP government's unusual decision to call the application in.

Ford has been abandoned by fellow Lib Dem colleagues but almost deified by conservationists and a wider, sceptical Scottish public. "Who's queuing up to buy executive homes now?" he said.

He's got a point.

Trump to Build Contested Scotland Complex

Eben Harrell, Time Magazine, 4 November 2008

The sand dunes of Scotland's northeast coast have a rugged, unadorned beauty and understated elegance. So when Donald Trump flew his private Boeing jet into Aberdeen airport in 2006 and announced, with typical Trumpian bombast, that he intended to construct a billion-dollar-plus development on the dunes that would include the "greatest golf course ever constructed," he set the stage for a protracted conservation battle that on Monday reached the highest level of Scottish government.

In a much-anticipated announcement, Scotland's finance secretary John Swinney gave Trump permission to go ahead with his $1.56 billion investment, overruling the local authority, Aberdeenshire council, which last year turned down Trump's development on the grounds that it would destroy the ecologically sensitive dunes.

While details of the development still need to be ironed out, Trump now has permission to build two 18-hole championship courses, a five-star hotel, a golf academy, spa, 950 time-share vacation villas and 950 holiday homes that will sell for a minimum of $1 million each.

"We are greatly honored by the positive decision and believe that the people of Scotland will be extremely happy with the final product. We will stabilize the dunes. They will be there forever. This will be environmentally better after [the development] is built that it is before," Trump told The Scotsman newspaper.

The turnaround surprised few, since the Scottish government has been eager to attract investment as proof that Scotland can "go it alone" without tax subsidies from London. Aberdeenshire, with its decimated fishing fleet and dwindling offshore oil fields, has been a specific target for outside investment. Trump has promised to create 6000 jobs there, but that hardly mollified Scotland's conservation bodies. On Monday, the Royal Society for the Protection of Birds, one of the most vocal defenders of the dunes, accused the Scottish government of selling a "greener Scotland down the river" for Trump's money — loaded words, as the rallying cry of many Scottish Nationalists is that the Scots sold their country "down the river" for English gold by joining the 1707 Act of Union with England.

"The Dune system, with its precious wildlife, is too high a price to pay for the claimed economic benefits from this development," Aedan Smith of RSPB Scotland said.

Helen McDade of another conservation body, the John Muir Trust, was even more direct in a statement issued to the press: "The government's reasoning seems to be that it is OK to ignore any number of protections that are in place to safeguard Scotland's environment, provided there is a big enough buck to be made at the end of it."

But Trump's development is still far from a sure thing. Standing in his way is Michael Forbes, a fisherman and quarry worker who has refused all lucrative offers from the American billionaire to sell his ancestral home, which sits in the middle of the property slated for the development. Trump has said that he can build around the Forbes property, but conservation groups say there may be access requirements that would impinge on such plans.

Perhaps of greater concern to Trump is whether even his famous bravado can carry off a $1 billion-plus development at a time of anemic institutional lending. Trump says he has the cash to build it, but he has already seen other ambitious projects crunched by the credit crisis: according to the Philadelphia Inquirer, his company recently announced the postponement of construction of the $300-million Trump Tower Philadelphia. Scottish conservationists may yet take heart: if there's anything more delicate or unstable than their beloved sand dunes, it's the current global economy.

In Chicago, Trump Hits Headwinds

Alex Frangos, Wall Street Journal, 29 October 2008

Donald Trump's tallest construction project ever is facing some tall challenges.

Many real-estate developers are under pressure these days as lenders and investors rush to cut their exposure to the market. But Mr. Trump's 92-story Trump International Hotel & Tower in Chicago, which will be the tallest building constructed in the U.S. since the Sears Tower opened in 1973, may be especially vulnerable because it's getting hit by a triple whammy of colliding forces: the credit crunch, the reversal in the housing market and weak retail sales.

The shiny glass skyscraper is one of the few that the brash Mr. Trump developed without partners. The situation also puts pressure on one of the project's major lenders, Fortress Investment Group LLC.

So far, Mr. Trump has lined up buyers for a bit less than $600 million of condo units and condo-hotel units in a residential market that has virtually seized up. Yet he owes lenders as much as $1 billion when the loans are due, according to public records and several people familiar with the project. He has closed around $200 million in sales so far, with roughly $380 million still in contract. The retail portion of the giant building is for sale, at a time of rising vacancies for retail space in Chicago and one of the worst eras for retailers in years.

People close to Mr. Trump concede that the project, which contains 486 condo units and more than 300 hotel rooms, is caught in a tough spot. Still, Mr. Trump says the building can be successful if he sells the rest of the unsold units, which he estimates have a potential value of $475 million. "It could turn out to be a successful development depending on what happens in the market over the next two years," he said in an interview. "The job is on time and on budget, and it's a beautiful job and will become an icon of the Chicago skyline."

Most urgently, to stay current on the project's biggest piece of debt, a $640 million senior construction loan, originated by Deutsche Bank AG, Mr. Trump must negotiate by Nov. 1 to exercise an extension provision contained in the original loan that he took out in 2005. To extend the loan, Mr. Trump must prepay additional interest charges to Deutsche Bank. Deutsche Bank declined to comment other than to say it syndicated the loan to several other banks and that its exposure is less than $50 million. Mr. Trump is confident that the extension will be agreed upon.

Adding to Deutsche Bank's leverage in the talks, Mr. Trump agreed to a $40 million recourse completion guarantee on the loan. That means Deutsche Bank can both foreclose on the property and go after Mr. Trump personally for that amount in the event he doesn't complete the building. Mr. Trump discounts the importance of the completion guarantee and is confident that he will complete the building next year. Other than the completion guarantee, Mr. Trump has no personal recourse on the project and any problems in Chicago are unlikely to affect his other businesses.

Several people familiar with the project expect Mr. Trump to work out a deal to extend the loan. The hotel opened in January on the lower floors, even as construction continues above. If Deutsche Bank tried to foreclose on the loan instead of extending it, some buyers may attempt to avoid closing. The project would also lose its marketing agent extraordinaire, Mr. Trump.

The issues don't end with the Deutsche Bank loan, according to loan documents. Mr. Trump borrowed $130 million in a mezzanine loan originated by a lending unit of private-equity firm Fortress Investment. That loan contains stiff terms, including a $50 million "exit fee" to be paid when the loan is due, in addition to accrued interest. A loan document says Mr. Trump could have to pay Fortress as much as $360 million, depending on how long the loan accrues interest. Combined with the Deutsche Bank senior loan, he would owe more than $1 billion in total. Should Trump fail to sell more units, Fortress would be on the hook to take over the project and could see a loss on its investment.

Mr. Trump's challenges highlight the dangers of building very tall buildings. Because they take years to build, markets can change and leave developers in dire situations. In fact, very few supertall skyscrapers have been profitable for their original developers. The Empire State Building was dubbed the "empty state building," when tenants didn't move in. The Twin Towers of the World Trade Center required heavy taxpayer subsidy to stay occupied through the 1970s and 1980s.

During the last real-estate collapse in the early 1990s, Mr. Trump was pushed to the brink of bankruptcy because he was personally on the hook for hundreds of millions of dollars of debt. He later restructured his debt with the banks and worked his way back to doing real-estate deals, product endorsements and reality television.

These days, Mr. Trump adds his name to dozens of real-estate projects and other business ventures around the world, often through licensing agreements and small equity investments. Partners on those projects deal with the nitty-gritty of securing loans and managing construction while Mr. Trump lends his name and makes marketing appearances.

The Chicago project is different. He has no partners, he arranged the financing, and his family is managing the construction and marketing. (In 2004, Bill Rancic, the winner of Mr. Trump's reality-television show, "The Apprentice," worked on the Chicago project for a year.)

Gail Lissner, vice president at Appraisal Research Counselors, a Chicago real-estate tracking firm, says contract signings on condos in downtown Chicago were down 72% the first half of the year from a year earlier. And the supply keeps coming. Downtown Chicago will see nearly 10,000 new condo units delivered in 2008 and 2009, a substantial portion of which haven't been presold.

Mr. Trump recently began marketing to sell the 100,000-square-foot retail space in the building, which will be the last part of the building to open, at the end of 2009. But given the wretched retail climate, and the almost complete lack of real-estate financings, finding a buyer could prove challenging. Mr. Trump's son Eric Trump, who is running the retail portion of the project, is confident the project will eventually sign leases with high-end retail tenants. He says the Trumps will sell the retail portion of the project only if a buyer presents a good price.

The 339-room hotel, of which the Trumps still own more than half the rooms, has generated revenue. The Trumps sold around 150 rooms to buyers who can choose to earn room revenue after paying Mr. Trump various fees and assessments, according to marketing documents.

But the hotel business is in rough waters as travelers cut back. Among the neighborhood's 12 luxury hotels, including Mr. Trump's, the percentage of vacant rooms has increased each of the past three months, compared with the year-earlier period, according to data provider Smith Travel Research. And revenue per available room, a common-industry measure, is down three consecutive months.

Adding to the project's stress, Mr. Trump is now in competition with his own customers. At least 30 buyers of the hotel units have put those rooms back on the sales market at substantial discounts to what Mr. Trump is charging for similar units, according to local sales brokers.

Local real-estate broker Andrew Glatz, of Crown Heights Realty, is representing two dozen hotel units and six condo units for resale in the Trump project. He's sold three so far. "All our units are 30% below Trump. We can't compete with his marketing, so we compete with his prices," he says. "It's the most fabulous property in Chicago. They didn't spare any expense," he boasts. His clients can afford to sell below Trump's prices because they bought their units in 2003, before Mr. Trump raised prices substantially.