When Leticia James takes over Trump Tower, what happens next?
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[i][b]Photo above [/b]- NYCHA (New York City Housing Authority) - which manages this lovely building - may soon take over Trump Towers.[/i]
Two-fer today! There are 2 links at the bottom, even though I know most people don't like to read them. In any case, Trump may lose his iconic flagship property – the 58 story Trump Tower skyscraper. This will be a crisis for him, no?
Um . . . maybe. Let's think this through. Leticia, are you paying attention? School is about to start.
Let's NOT quibble over the guilty verdict for Trump's overstated real estate values. It's impossible for anyone who is not both a tax expert and accountant to even guess what these things are worth. The guilty verdict is what is. But let's perform a thought experiment. Attorney General Leticia James takes possession. Now what?
Well, Leticia certainly won't be appointed trustee. She'll have to hand operations over to . . . who? Some NYC government agency? An REIT (real estate investment trust)? Some well-connected cronies of New York's political elites, who receive hefty fees for managing it? These are all plausible. And they might make things worse for NY.
Which government agency could run Trump Towers effectively? Collect the rents on time? (NYC public housing has years of unpaid back rent they already can't collect). Perform maintenance and repairs. Fend off tenant lawsuits, and demands to renegotiate rents?
Don't scoff at the last one. Since 2020, a BUNCH of Trump Tower tenants have demanded rent cuts. And got them. Why? Covid 19 shutdown vacancies. Corporate flight to lower tax locations. Work from home. Streetside dystopia. The Trump organization rightly figured half a loaf was better than none. Will tenants be MORE confident when Mayor Adams and his agencies? Or will some of them skip the negotiating table and head straight for the exits?
By the way, this business about corporate flight, covid shutdowns, and NYC drug and homeless dystopia - that's the fly in the ointment when setting real estate values in the first place. Last years assessed value might be higher than this year's. What's the vacancy rate? What's the cash flow?
Um . . . cash flow. The magic word. Apparently (according to Forbes) NY keeps changing the tax rules, and jacking up the tax owners must pay. It turns out (in 2020, at least) that Trump Tower taxes were about equal to the building's entire cash flow after expenses. Are we beginning to see why Donald might actually be okay with Leticia winning this one? Can NYC even collect property taxes on a building it now legally owns, or will it be exempt, like city hall, Gracie Mansion, and the subway stations?
Turning Trump Tower over to a REIT or some campaign contributors to city council to run is simply going to cost MORE money than it takes today to keep the lights on. Those guys will insist on a piece of the action, but probably not add any value. Interim administrators are not going to be the final owners. Why would they lift a finger beyond the bare minimum to keep the Tower alive? This is the same equation that's at work with government subsidized public superchargers. Once you get your government subsidy, the only question is how little you can spend afterwards and not get sued.
Trump Tower is now almost 50 years old. It replaced the Bonwit Teller building, which was built in 1929, and also lasted about 50 years. At the end of its life, Bonwit was outdated, outclassed, and unloved. So maybe Trump Tower is nearing the end of its useful life? Yankee Stadium lasted 70 years. The Giants Stadium only 35. Shea Stadium less than 50. That's just the way buildings are.
If you want to see what happens when the government tries to balance its budget against its overtaxed residents, look no further than the George Washington Bridge. It costs $23 (on way) to cross during surge pricing. You pray you make it alive, and the delay won't be more than 30 minutes. (New York residents, please chime in here for authenticity).
Leticia James is about to take another $12 million off the NYC tax rolls. And sign up for who knows how much in management fees, repairs and maintenance. Mayor Adams is holding emergency closed door meetings with corporations who want assurances that Leticia isn't coming for them next, with hundreds of millions in fines.
In the meantime, Trump will retreat to Mar a Largo. Where he enjoys a respite from New York State AND New York City taxes. And he can stop worrying about whether another round of rent cuts at Trump Tower will result in immediate bankruptcy. It will all be somebody else's problem.
I would imagine that she will contract the professional services of reputable property agents to maintain the building and manage tenant relations, just as the Trump organisation presumably did in the past. The challenges you describe are similar to those faced by all owners of commercial buildings over the past five years. If the building fabric is halfway decent it should be possible to refurbish and refit as premium office space (some of the most 'modern' and sought after offices in my city are over 200 years old).
Perhaps it was the age of the building that resulted in DT's 'miscalculation' 😅
If other corporations operating in NYC are as brazenly corrupt as the Trump family, then yes they should be worried . .
@wildbill83 Corruption feeds corruption and anyone who engages in or tolerates fraud is equally culpable . . I make no differentiation. Legitimate business that benefits us all cannot thrive where there is no trust or certainty. Trump set himself up for a public downfall by ill advisedly getting involved in a high profile defamation case.
@SusanInFlorida That is a good plan. In the UK there is an automatic presumption in favour of planning applications to convert office buildings into apartments.
I don't agree with the idea that such and such a corporation is destroying retail, or working from home is destroying the office sector. These are trends that were set in motion long before the pandemic and in a free market ultimately come down to choices made by consumers and workers, often for perfectly rational reasons (ie. traditional high streets had become bland and inconvenient, commuting is increasingly difficult and pointless if your colleagues and customers are scattered around the country). If people embraced change and stopoed trying to turn back the clock, the unknown would look less daunting).
@SusanInFlorida People here are freaking out at rumors that the local mall, which closed its doors recently, is being converted into homeless housing. I don't see it happening as the anchor stores, a Target, Bass Pro Shop, and a ridiculously overpriced department store own their spaces and are still in business, while the mall space connecting them is empty.
@LeopoldBloom the trend seen - until a few years ago - was turning malls into office space. there's minimal need for renovations. commericial style lavatories are already present, as are ample parking. you just leave a couple fast food joints on premises so that office workers don't have to go too far to get lunch.
but with WFH all the rage, office space is too abundant.
they TORE DOWN a mall near my mom's home recently. There was a sears, a pep-boys, a hair cuttery, a kmart, etc.
tore it down to the ground. built a brand new apartment complex - several buildings, 4 stories high. swimming pool, but no tennis courts. outdoor parking - no indoor/basement slots. the part of the mall containing the supermarket and several restaurants was preserved.
in the first year after the new apartments opened, there was . . .
- an armed carjacking in the parking lot - a hostage situation in an apartment (a SWAT team was called) - the grocery store was firebombed
this isn't even section 8 housing. but it's attracting low income residents from high crime areas, and thus relocation of criminal activities.
@SusanInFlorida The Sears in the remaining mall here closed and the plan is to tear it down and build an apartment complex on the parking lot. The other mall is mostly vacant and a shopping center across the street is also vacant. We could really use more housing here; Hyundai is building a battery plant and not all of the thousands of workers who will be moving here will want houses in the new suburbs with the absurd commute. Rentals here are sky high for what you get but there's no alternative.
@LeopoldBloom i'm just guessing here - but my theory is that having mortgage and commercial loan rates (approximately) triple after the Federal Reserve rate hikes . . . that might cause some delays and cancellations.
do rents on new apartments go up if the government raises interest rates at the moment construction begins?
@LeopoldBloom your mentioning something i've most omitted from my columns.
Algorithms - both the new AI ones and their "quant" predecessors - have functioned as a form of defacto price fixing. Whether its rents, gasoline futures, airfares, wheat futures . . .
and then there is simple human greed. like when Ford and GM - in the depths of pandemic business malaise - concluded the path forward was battery EVs which cost about double what regular cars cost. I would have loved to be a fly on the wall during strategy meetings when they came to THAT conclusion.
of course, these are the same strategists who decided that they would build only gas guzzling trucks, and almost no cars. And that all pickup trucks would be "full sized" with giant V8's and the ability to tow a boat or travel trailer.
Then they reversed course. The ranger and colorado pickups came to market. they're about the same size as "normal" pickups from about 25 years ago, though.
the car enthusiast magazines are partially to blame. they spend almost their entire reviews obsessing over horsepower, torque, bed load, towing load, and zero-to-60 times.
the average pickup buyer doesn't have a boat or a travel trailer. he uses it to go to home depot and get 10 bags of mulch in the spring.
