Could Donald Trump be about to join the list of high profile businesspeople ‘collared’ by the credit crunch? There are reports from the Middle East and the US that some of Mr Trump’s projects are in serious trouble.
On Monday, Leighton Holdings revealed that work had been stopped on the Trump Tower project in Dubai at the order of the partner with Trump, Nakheel, a local property group controlled by the Emirates’ Royal family. Leighton said the suspension of construction at the $AED2.9 billion ($A1.22 billion) Dubai wouldn’t have a material financial impact on its 45%-owned Al Habtoor Leighton Group.
The project was worth $AED1.45 billion ($A610 million) to the Al Habtoor Leighton Group, which was created last year through the merger of Leighton International’s operations in the Arabian Gulf with United Arab Emirates-based Al Habtoor Engineering. Al Habtoor Leighton Group was constructing the Trump Tower, for Nakheel, in a joint venture with South African construction and engineering group Murray & Roberts. Because Nakheel is controlled by the Dubai Royal family, the decision to stop the project had official blessing and wasn’t just a commercial decision by a company.
And over in the US, media reports this week suggest Mr Trump faces legal action from Deutsche Bank over a 92 storey project in Chicago. The reports say the German bank is demanding Mr Trump pay a $US40 million personal guarantee relating to the balance of a $US640 million construction loan to build Trump International Hotel and Tower, which will be the second tallest building in the US when completed.
Mr Trump had earlier sued the bank trying to extend the maturity of the loan, claiming the credit crunch and economic slump had stopped him from selling units in the building. On Monday his gaming group Trump Entertainment resorts missed a $US53.1 million interest payment, which the group said was “part of a strategy to maintain sufficient liquidity”.
Mr Trump is also planning a huge (and controversial) golf resort in Scotland near the famous St Andrews course and there are rumours he could now walk away, despite the Scottish Government giving the project the green light. Question marks have lingered for years over Trump’s modus operandi, which usually involves substantial leveraging and a cluster of anonymous foreign investors, making him especially vulnerable to the vagaries of the financial crisis.
In some projects, the Trump brand is often seen to be more important than his actual equity stake — a classic case of style over substance that also lies at the heart of the mortgage meltdown.
Trump is still embroiled in debates over his net worth — last year, he came in at no. 314 on Forbes’ billionaire’s list at $2.9 billion, but later claimed to Vanity Fair he was in fact worth $9 billion. In TrumpNation: The Art of Being the Donald Timothy O’Brien claimed Trump was actually worth between $150 million and $250 million. Trump sued O’Brien for damage to his reputation.
Trump has flirted with bankruptcy before — in the early nineties recession he was forced to dump large portions of his asset portfolio. Could he about to join one of his failed apprentices?