The power of Trump
There is no denying the magnetic power of the Trump name. While Donald Trump Sr. is making headlines in the United States as a possible presidential candidate, his son Donald Trump Jr. is stamping his own mark on the corporate world.
As executive vice president of The Trump Organization, Donald Jr. works in tandem with siblings Ivanka and Eric to expand the company’s real estate, retail, commercial, hotel and golf interests nationally and internationally.
Donald Jr. has led the way for the Trump Organization to expand globally by directing project acquisitions and development in Eastern Europe, Southeast Asia, the Middle East, South America and China.
The original apprentice, Donald Jr. is regarded as an emerging business leader who, like his father, understands the power of the Trump name. He talks to GlobeAsia in an exclusive interview by email on where he intends to lead the company.
In your view has the US property market recovered from the 2008 crisis?
The US property market has made some recovery from the 2008 crisis but we are by no means out of the woods yet. We are not experiencing the stress that was omnipresent two to three years ago, but in my candid opinion much of that is that people have grown accustomed to a lower bar and worse performance. Acquisitions have started to transpire but at numbers that do not make much sense. The logic seems to be that purchases, especially in the commercial sector, are at a discount to the 2006-2008 frenzy so they must be good. To me, the reality is that while purchase prices are down, rents which lock in for longer times are down even more on a relative basis, making the deals in many cases worse than they were during the boom times. There is still a glut of inventory which is slowly being absorbed but until that happens there will not be a significant recovery or rise in various real estate sectors and that is likely to take some time.
What are the new emerging trends in the global property market?
With real estate, it is always hard to speak globally about trends as each country (and even each neighborhood) is likely in a different stage of its own development and place in the cycle. That being said, we are seeing a real trend in developing nations of consumers wanting international-standard properties. We see this around the world and it is a huge opportunity for our organization. In cities like Mumbai and Sao Paulo, pricing for property compares and sometimes exceeds Manhattan. However, the quality of the product traditionally has not been at an international standard. The wealthy in these places are traveling more and now know the difference. Our model has been to work with local developers to bring our luxury expertise to new markets and by our involvement give comfort to buyers that they know it will be the best in the world.
Second, we are beginning to see debt being used more in international projects. Debt frequently is criticized, but at the right levels it makes sense. Even including the recent downturn, the United States had a very positive run of capital appreciation in the real estate sector over the last 20 years due to economic growth and new methods of financing real estate. In many nations, there is little debt available for construction or even mortgages for stabilized properties. As these nations grow rapidly and capital becomes more available, we should see significant capital appreciation as capital chases limited assets.
How will these trends impact Asia and Indonesia?
It is hard to generalize about Asia as it is so diverse, but we are generally very bullish on the continent. Our organization is spending a lot of time there as this is where the wealthy classes are growing the fastest. We are looking to Asia as a place where we can grow our brand rapidly. We see Asians disproportionately represented in Trump properties around the world. It is clear that they understand the benefit of being associated with a brand and are willing to pay to have the best. Though today they may not have that product domestically in some places, they will be just as willing to buy it there when it becomes available.
Indonesia is a great opportunity for a company like ours. There are already some of the best resorts in the world in Bali and Java. We think that, though prices are still low compared to the rest of the world, there is a robust domestic market forming in Indonesia. We are working to find opportunities with local partners to deliver a product that Indonesians previously have not seen.
How was the Trump Organization impacted by the crisis and how is it positioned to move forward?
While no one was immune to the downturn, I think that The Trump Organization was able to weather the storm better than most. The primary reason for this is that during the downturn of the late ‘80s we learned our lesson about how excessive leverage, while great on the way up, can really come back and bite you hard on the way down. When deals stopped making sense and only worked with excessive leverage and projections that would have been historically high selling prices we prescribed to the theory of, if it sounds too good to be true it probably is. From there we decreased many of our equity holdings and were able to utilize our biggest asset – our brand – to continue to stay in the game but with significantly less real dollar exposure in deals.
Going forward we plan to use much of the same strategy till we believe the markets have normalized to a point where we are not competing against money that simply has to be put to work due to lack of aligned incentives between investors and many real estate funds.
What are the main challenges facing young global corporate leaders?
Age is viewed very differently in different places. Even within the United States, this is true. In Silicon Valley, a 35-year-old tech executive is a seasoned professional. Most New York property developers are closer to twice that age. Outside of the United States, and especially in Asia, age is revered to a greater degree. It is important to be aware of those differences when dealing with people. Their preconceptions will impact your ability to get things done. It is important to address them directly and respectfully.
The Trump brand name is globally known. How do you intend to shape it in your own image?
The Trump brand is globally known and has done amazing things for the past 30 years. If there is anything that my siblings and I can do to perpetuate that and our family business it is to take the foundation that my father has painstakingly built and continue to do much of the same in the future, but expanding into markets that we have previously not developed. GA