In Chicago, Trump Goes Big On Risk
With recent high-profile purchases like the $150 million he forked over for the Doral Golf Resort and Spa and the $48 million he spent to acquire the debt from Fortress Investment Group and other junior creditors on his Trump International Hotel and Tower Chicago (the city’s second tallest building), Donald Trump is putting on an aggressive display of risk-taking not seen since his earlier days in the 1980s, The Wall Street Journal reports.
The latter may be Mr. Trump’s boldest gambit, as he has already sunk $73 million of his own money into Trump International Hotel and Tower. The junior debt on the project, which opened in 2008 and cost $850 million to build, was originally $130 million.
The Journal says the move shows a lot of backbone:
“The latest deal represents a vote of confidence by Mr. Trump in the project, which has been hurt by weak hotel-condo sales and falling prices, and caused years of friction between Mr. Trump and lenders.
He is betting that demand for high-end Chicago condos priced for more than $1 million each will rebound strongly.
The Chicago Bulls All-Star point guard Derrick Rose recently put down $2.8 million apartment in the tower.”
But there are so many all-star point guards looking to buy multi-million dollar apartments. Mr. Trump, who is the father-in-law of Jared Kushner, the owner of The Commercial Observer, told the Journal to “call me in five years,” adding: “I view my prior investment as a sunk cost.”
So far 337 of the 486 residential condos have been purchase. The building also has hotel-condo hybrid flats, which customers buy and then rent out as hotel rooms when the owners are not using the place. Of the 339 hotel-condo units, only 159 have sold by the end of 2011.
‘The construction loan from Deutsche Bank AG was worth $640 million at the time the project was first being built in 2004. When the loan matured in 2008, Mr. Trump did not have enough money to pay the $334 million balance, leading to an exchange of lawsuits before the bank agreed to extend the loan’s term to July 2013. The current balance on that construction loan is $125 million.