Joseph Tanfani

(Reuters) – Former U.S. president Donald Trump’s slashing rhetorical style and divisive politics allowed him to essentially take over the Republican Party. He is so loved by his followers that many believe the false claim that he won 2020 elections because voter fraud.

But the same tactics that have inspired fierce political loyalty have undermined Trump’s business, built around real-estate development and branding deals that have allowed him to make millions by licensing his name.

Trump’s business brand was once synonymous with wealth and success, an image that now clashes sharply with a political brand rooted in the anger of his largely rural and working-class voter base. Many people associate his presidency now with the violent ending of the American Revolution, when supporters stormed and destroyed the U.S. Capitol in January 6.

Trump’s bitter rhetoric and piercing images are costing him money. Revenues from some of his high-end properties have declined, vacancies in office buildings have increased, and his lenders are warning that the company’s revenues may not be sufficient to cover his debt payments, according to Trump’s financial disclosures as president, Trump Organization records filed with government agencies, and reports from companies that track real-estate company finances.

One real estate broker in New York said that prospective tenants are shunning Trump’s buildings to stay away from Trump. His courses have been taken over by organizers of tournaments.

Trump’s focus on the political brand has increasingly overtaken his identity as a real-estate mogul, says one hospitality industry veteran.

“Prior to his political career, the Trump brand was about luxury – the casinos, the golf resorts,” said Scott Smith, a former hotel executive and hospitality professor at the University of South Carolina. “When he entered into politics, he took the Trump brand in an entirely different direction.”

Trump’s business also remains under the cloud of a joint criminal fraud investigation by the Manhattan District Attorney’s office and the New York Attorney General. Allen Weisselberg is the company’s chief financial officer. They were charged with scheme to evade payroll taxes. The investigation continues to determine whether Trump, or any of his representative, committed financial fraud in tax returns and loan applications. Weisselberg, the company and their lawyers deny any wrongdoing. They are challenging the charges.

As his development business struggles, Trump has announced his first major deal since leaving office — and it has nothing to do with real-estate. After being expelled by Twitter (NYSE) and Facebook (NASDAQ), Trump announced that he would create a new platform for social media. This was partly to give him an opportunity to express his political views.

Trump may be able to make money with this deal regardless of its success. Digital World Acquisition Corp is a public-traded blank-check acquisition firm that investors rushed to purchase shares. It plans to merge into the Trump Media and Technology Group. Digital World shares rose to around $2 billion. Trump’s new media company will have at least a 69% stake in the combined company, but Trump has not disclosed his level of ownership in Trump Media.

Trump also raised money to finance his political campaign, reporting $100 million as of June 30, and hints at a run for the presidency in 2024.

Eric Trump, the former president’s middle son and a Trump Organization executive, said in an interview that the company is now in “a phenomenal spot.” He cited a refinancing of a loan on San Francisco office buildings that gave the Trump business about $162 million in cash, according to loan documents and a release by Vornado Realty Trust (NYSE:), the venture’s majority owner.

“We’re sitting on a tremendous amount of cash,” Eric Trump told Reuters.

A spokesperson for Donald Trump stated in an email that the company has not suffered since Trump entered politics.

“The real estate company is doing extremely well, and this is evident in Florida and elsewhere,” Liz Harrington said in an emailed statement. “Considering the coronavirus pandemic, in which the hotel industry was hit particularly hard, Mr. Trump’s company is doing phenomenally well.”

Financial records show Trump’s real-estate business has declined. Income from the family’s holdings, heavy on golf courses and hotels, took a beating during 2020 amid the coronavirus pandemic. Revenues at his Las Vegas hotel, for instance, fell from $22.9 million in 2017 to $9.2 million during 2020 and the first 20 days of 2021, according to Trump’s financial disclosures.

Trump has now made a second bid to buy his lease for the Trump International Hotel, a high-profile property that is housed in a Washington, D.C., former federal building. He failed to find a buyer for the initial asking price of 500 million. The House Oversight Committee released documents earlier this month revealing that the company is still paying $3 million each year in federal lease payments. Those records show Trump’s Washington hotel lost more than $73 million since 2016.

The damage to Trump’s business image started early in his presidency. One consultant for Trump, arguing in a 2017 public hearing for a lower tax bill at his Doral golf resort, said Trump’s politics had damaged his business model.

“It’s actually not about the property, it is about the brand,” said consultant Jessica Vachiratevanurak, at a December 2017 hearing of the Miami-Dade Value Adjustment Board, in a video recording reviewed by Reuters. She cited a meeting she attended where top Trump Organization executives had described “severe ramifications” to his golf business from, for instance, tournaments and charity events being canceled by organizations wanting to avoid associating with Trump.

She stated that the resort’s revenues fell from $92million in 2015 to $75million in 2017. Trump’s presidential financial disclosure listed Doral revenues at $44 million last year.

Vachiratevanurak did not respond to Reuters’ request for comment.

“This is obviously false as Doral is doing very well,” Trump spokesperson Harrington said.

In Trump’s home base of New York, the Trump name has become increasingly toxic. The Trump SoHo hotel, lower Manhattan was one of the most prominent properties. In 2017, it was renamed the Dominick. In January, New York City canceled Trump’s leases for two Central Park skating courts and a carousel. Trump sued New York City for the wrongful termination.

At 40 Wall Street, the 72-story skyscraper that was among Trump’s proudest acquisitions, problems that started before the pandemic have gotten worse, according to reports from firms that track real-estate performance. After the Jan. 6 U.S. Capitol riots, some of Trump’s large tenants, including the Girl Scouts and a nonprofit called TB Alliance, said they were exploring whether they could get out of their leases. One commercial real-estate broker says many prospective tenants won’t consider the building because Trump’s name is on it.

The Girl Scouts did not respond to comment requests, and TB Alliance said it was “exploring all options” for leaving the Trump building.

“Most New York tenants want nothing to do with it, and that’s been the case for five years now,” said Ruth Colp-Haber, who said she has placed seven clients in the building over the years, but can’t interest anyone now. “It’s the biggest bargain going, but they won’t look at it.”

Mike Brotschol managing director of KBRA Analytics LLC, stated that 84% occupancy was recorded in March 2021. That is well under the typical 89% of downtown New York office markets. The rents Trump has been able to charge are lower, too – between $38 and $42 per square foot in a market where the average runs closer to $50, he said.

The property’s financials have tumbled into risky territory, the reports say.

Trump took out a $160 million loan in 2015 to refinance 40 Wall Street – personally guaranteeing $26 million.Last year, the building was placed on an industry watchlist for commercial mortgage-backed securities at risk of defaulting, according to reports by KBRA and Trepp, which also monitors real-estate loans. In the first quarter of the year, according to the KBRA report, the debt-service coverage ratio, a statistic monitored by banks, dipped to a number indicating that the building’s cash flow can’t cover its debt payments.

In the statement for Trump, Harrington blamed “the disastrous policies of Bill de Blasio,” New York’s mayor, for the downturn in the city’s office market. “Despite all these serious headwinds, Mr. Trump has very little debt relative to value and the company is doing very well,” she said.

About $340 Million in loans are available to the Doral resort in Washington and the Washington hotel. Deutsche Bank AG (NYSE:), Trump’s biggest lender. A senior Deutsche Bank (DE) source spoke to Reuters under anonymity. However, the bank is not interested in doing business with Trump. They also have no plans for extending the loans once they are due in 2023 or 2024.

Asked about the bank’s unwillingness to work with Trump, his spokeswoman said: “So what?”

Experts believe that there is little chance of Trump-branded developments. One hotel industry executive said hotel developers – worried about cutting themselves off from the millions of customers turned off by Trump – will likely think twice before signing any branding deals to put the Trump name on their properties.

“People have choices. You can go to the Ritz Carlton, you can go to the Four Seasons, and not bring the politics into it one way or the other,” said Vicki Richman, chief operating officer of HVS Asset Management, a hospitality industry consultancy and property manager.

Trump Organization tried to lower the price of its top-of-the-line luxury hotels brand by creating two new brands. Scion is a mid-priced product and American Idea is for budget travelers. In 2019, the Trump Organization pulled out of plans to launch both brands, citing political difficulties and inability to do business in an uncertain environment.

Harrington said nothing is off the table for Trump’s business.

“We have many, many things under consideration,” she said. “But we also have politics under consideration.”