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Donald Trump’s success is not just real estate sales but a combination of financial, administrative。s, media and brand licenses.
In the first half of the career, Mr. Fred Trump’s real estate base and credibility, he entered into a large-scale development in Manhattan. Using bank loans, tax benefits, and joint projects, we have developed a larger project than our own funds.
In the second half, we will transfer the specific gravity from the development model that owns the real estate to the license and management model that lends the name "TRUMP". This was a transition from real estate business with heavy assets to asset-light business that monetizes brands.
In this article, we will organize the real estate business of Mr. Trump in a structured manner with the perspective of investors.
First Con まず
Mr. Trump’s real estate business is not a story that he bought a good land and built a good building.
Of course, the location and the building are important. However, the essence is not only there.
The following four things he liked:
- Use others’ capital to show your investment scale
- Incorporating government tax benefits and urban redevelopment
- Sell real estate as a symbol of wealth and success
- At the end, the name itself is not a property.
There is a word “all locations” that is often referred to by real estate investment.
In addition to the location, the capital composition, negotiating power, media exposure and branding were quite large.
This is the difference between ordinary real estate investors.
Recent Changes
Theランプmark of Mr. Trump is quite different from the first and second periods.
In the first half, heavier real estate development. The second term is a brand business that lends the name.
| Time | Main Models | Revenue | Risks |
|---|---|---|---|
| Previous | Development, ownership, and regeneration | Revenue, Rent, Hotel Revenue | Loans, economic changes, construction costs, vacancy |
| Second term | License Management | Brand fee, management fee | Brand damage, failure of contractor, litigation |
This conversion is very large.
Real estate is a strong and heavy business. Buy Land Building Back to debt Vacancy and interest rate will come at the same time if the spect is bad.
Trump suffered by his weight. At the beginning of the 1990s, debt problems have been faced, mainly in casinos and hotel businesses, and affiliates have applied for multiple times.
From there, we will ask you to rent a name rather than having a property.
In terms of investment, it is a transition from a heavy asset model to an asset light model.
First term: High leverage urban development
The starting point of Mr. Trump is Mr. Fred Trump’s real estate business.
My father was developing a rental housing for intermediate grades in Queens, Brooklyn, NY. It is a real estate business.
Donald Trump moved to Manhattan’s luxury hotel, office and commercial facility.
The important thing here is that you won’t win with your own funds.
For large-scale development, bank loans, joint ventures, administrative tax benefits, and所有者s with existing owners are required. Trump took it.
Grand Hyatt New York The city of New York in the 1970s had a long history of financial crisis, and it was necessary to revitalize the city. Trump is known for its long-term tax benefits in redevelopment.
In other words, it is not only cheap.
The need for administrative urban redevelopment and their own development plan.
Here is the rumors of real estate finance.
How to use leverage
The characteristics of real estate investment are that loans can be used.
Rather than buying a 100 million yen property with self-financing of 100 million yen, you can buy a few million yen property. Hopefully, the return to ity will be greater.
The characteristic of Mr. Trump is that he used this leverage very largely.
However, leverage is not magic.
In the rise section, the self-capital interest rate is pushed up, but in the lower section, the debt burden is weighted at once.
From the late 1980s to the early 1990s, Trump’s related business was suffered due to the deterioration of real estate market and casino business. This is not an individual bankruptcy, but an affiliate reconstruction procedure.
It is quite dangerous as a business.
However, in the sense of negotiating, he was committed to listening to creditors, restructuring debts and maintaining the brand.
Here is the fear of real estate.
The leverage looks genius while winning. When you start losing, the ability to negotiate with banks, creditors, and co-operators will become a living condition.
Revenue source of administrative
In real estate development, not only land and building, but also regulation, taxation, licensing and urban planning are valued.
Trump emphasized this part.
As for the Grand Hyatt project, the development subtraction changes greatly by都市 urban redevelopment and tax benefits. Fixed asset tax, usage change, volume rate, infrastructure development, administrative support. These are not visible in surface yields, but they move the actual investment returns.
A common failure in real estate investment is to see the property price and rent only.
In a truly large project, it is worth moving including the relationship with government, tax system, redevelopment designation, peri al infrastructure, and local security improvement.
Trump handled it as a “negotiable revenue source”
This point is quite pragmatic, with the dislikes.
Branding Media
The biggest feature of Mr. Trump sold real estate as a symbol instead of a product.
If you are an ordinary real estate, the buyer will see the location, area, view, facilities and prices.
Trump said, “The Symbol of Success”
The interior of gold, large logo, high-grade appearance, exposure to tabloid paper, and behavior to show itself as a wealthy. Later, the TV show "The Apprentice" was added, and the name "TRUMP" was the business asset.
This strategy is quite modern.
They sell real estate and actually sell status.
He sells the story of his success.
The price premium cannot be explained only at the cost of the building. Payment to the brand is included.
Second term: Asset Light Type License Model
Since the 1990s, Trump’s business model will increase its brand license and management ratio.
This is very important.
There are buildings and hotels that are named “Trump” around the world, but they are not owned by Trump or Trump Organization.
Local developers have land, fund and build buildings. Trump provides name, brand, design supervision, sales support, management, etc., and obtains license fees and administrative fees.
This is the strength of the asset light type.
| 項目 | Model | License Model |
|---|---|---|
| Required Funds | big | Relatively small |
| Rent | heavy | Light |
| Revenue | Rent, Profit and Profit | Brand fee, management fee |
| Pain in scenic deterioration | big | Easy to control depending on contract structure |
| Maximum risk | Vacancy, Interest Rate, Construction Cost | Brand Value Damage |
It is easy to hear by saying "Only to rent a name".
However, no one pays for the name.
In other words, Trump’s commerce is closer to the brand monetization business rather than real estate business.
Going to this point, it becomes a company selling signboards of luxury real estate rather than the owner of the property.
Figure: Conversion from heavy assets to light assets
Investor Relations
It is not thanks to Mr. Trump’s real estate business.
Rather, it should be seen including a fairly dangerous aspect.
1. Leverage expands profit and loss
By borrowing, you can invest more than your own funds.
However, if the market conditions become worse, the debt will be heavy at once.
The most scary thing in real estate investment is not just the lower price of the property. Vacancy, interest rate rise, non-refinable, repair costs and taxes are coming at the same time.
Trump’s example shows both leverage strength and fear.
2. Government and tax system change investment return
Real estate can not be separated from tax and regulations.
Redevelopment, fixed asset tax, volume rate, application area, subsidy and infrastructure. These may affect the investment result larger than the surface yield.
It is easy for individual investors to buy real estate without seeing fixed asset tax, urban planning tax, depreciation, inheritance tax, and loan conditions.
3. Brands lighten revenue
If you have a property, your assets and abilities will be heavy.
On the other hand, if you have brand, management know-how, and sales skills, you can earn money from others' assets.
This is a way to communicate with hotels, franchises, eating out, laundromat FC, education and financial platforms.
You can use it.
Take profit more than you own.
This is the idea of asset light.
4. Media exposure can be both assets andはabilities
Trump increased brand value using media.
However, personal brand has a strong reputation risk. The political statements, laws s, scandals, support and unsupported sections of the individual will be bound to brand value.
This is common to the founder-dependent company.
Karisma pushes the brand. However, the same person becomes the maximum risk.
In the background that Trump succeeded to the King of Real Estate, there is a structure that goes beyond just land trading.
In the first half, we entered the large-scale development of Manhattan as the starting point of the credit and capital foundation of the father. We developed high leveraged real estate by銀行 bank loans, administrative tax benefits, urban redevelopment and media exposure.
In the second half, we will send a brand license and management operation from a heavy development and ownership model of the balance sheet.
In other words, I changed the heavy assets called buildings into a name.
This is the most interesting part of the investor.
Capital structure from real estate itself.
Brand from the building itself.
License from the owner.
Trump’s real estate business is an example of success, as well as a teaching material that can risk excess leverage and individual brand dependencies.
Reference
- The Trump Organization, Grand Hyatt New York
- The Trump Organization, Trump Tower New York
- PolitiFact, Donald Trump's companies have declared bankruptcy more than four times
- The Washington Post, Trump's name is on projects around the world. Here's what he owns.