On March 28, 2019, The Washington Post ran a political article claiming President Trump gave lenders and investors incorrect financial information. The Post claims these “Statements of Financial Condition” were “deeply flawed.” It further claims that Trump overvalued his assets when attempting to get bank financing.
The Washington Post doesn’t understand business.
For instance, the Post noted that in a financial statement concerning the value of land zoned for residential construction around his golf course in Southern California, Trump claimed the ground was zoned for 75 home sites. At the time the statement was made, the ground had only 36 lots.
This is not a deception nor incorrect information. It is simply the way that real estate development works. More than likely Trump realized that the ground which, at the time, was approved for 36 lots could be altered. Maybe the zoning restrictions changed or maybe he spoke with city planners who advised him that the planning board was receptive to building houses on smaller lots.
This often happens in areas where ground costs are very high.
Trump realized that there would be increased value by going to the planning board and re-dividing the land. He likely drew a new plan and began marketing the lots. Once the property is re-divided he would have to pay real estate taxes on 75 lots, not 36. That would more than double his property tax bill.
What any developer would do is to keep the current configuration until enough of the new lots were pre-sold, then go for planning board approval for the 75 lot configuration. Trump didn’t give incorrect information in those financial statements. Rather the Washington Post reporter was simply looking for a “gotcha” when none existed. The reporter should learn how real estate works.
Additionally, according to the Post story, “He (Trump) said Trump Tower has 68 stories. It has 58.” The reporter again doesn’t understand real estate. The building has 58 floors which may be loosely called 68 stories, since a story is 10 feet and the building is 664 feet tall. The floor numbers go up to 68.
It is not uncommon to skip some numbers when labeling the floors of a building. For instance, if the first floor is three stories high, the builder may call the second level the fourth floor since it is on the fourth story. Also builders tend to skip 13 as a floor number. That’s how a building with 58 floors could have 68 stories.
The point is that real estate developers must do whatever is possible to keep costs down and to encourage buyers to pay higher prices. That’s how they earn their profit. As such, a developer tries to keep the property tax bill as low as possible.
If a developer buys a 10-acre parcel of ground for say $100,000, perhaps with agricultural zoning, the property taxes would be low. He would maintain the agricultural zoning as long as possible. On the other hand, when seeking financing, the developer would note that the ground can be rezoned for residential construction and would permit 10 building lots. Each lot is worth $50,000. So the approved value of the ground is $500,000.
So for tax purposes, the ground is worth the purchase price of $100,000. For financing purposes, 10 approved building lots are worth $500,000. This is not a deception, but simply the way real estate development works.
It is obvious that the Democrats and the biased mainstream media still cannot accept the findings of the special prosecutor. Trump did not collude with the Russians and he was not guilty of any obstruction of justice. Still, they want to do what they can to discredit the president and find something where Trump can be caught in a “gotcha.”
It is for that reason, Trump should never release his tax returns. The returns would show a number of situations where the value of an asset for tax purposes is different than the value of an asset for financing purposes. The mainstream media would call these discrepancies “Trump lies.”
The Dems were proven to be less than truthful for the past two years when they assured the American public that they had personally seen evidence which would prove Trump colluded with the Russians. They were also less than truthful when they said they had evidence that Trump is definitely guilty of obstruction of justice.
It is time for the Dems to stop playing gotcha and start performing their primary duty, which is to legislate. After all, they do have a majority in the House of Representatives where most new legislation originates.
Michael Busler, Ph.D. is a public policy analyst and a Professor of Finance at Stockton University where he teaches undergraduate and graduate courses in Finance and Economics.