Trump's Quest for Cash Could Signal Trouble

By TOM FURLONG and ROBERT E. DALLOS

April 28, 1990 12 AM PT

TIMES STAFF WRITERS

NEW YORK —

Flamboyant developer Donald J. Trump has put his Trump Shuttle airline up for sale and is seeking to refinance loans on some of his other properties, moves that he said were designed to raise cash for further acquisitions.

However, the moves also raised questions among some real estate experts about whether Trump has run into financial difficulties.

In telephone interviews Friday, the New York real estate magnate said he has put Trump Shuttle up for sale for about $600 million, less than a year after he acquired it from troubled Eastern Airlines for $365 million.

Trump also confirmed that he wants to raise “hundreds of millions” of dollars by refinancing mortgage loans on several major properties that he owns in Manhattan, including the Plaza Hotel.

Trump said he wants to use the money to buy property at bargain prices in coming months.

“Cash is going to be king over the next couple of years,” said Trump, who also owns three casinos in Atlantic City, N.J. Trump is also part of an investment group trying to build Los Angeles’ tallest office building on the site of the historic Ambassador Hotel.

Trump’s remarks come amid growing doubts about the future of his financial empire, particularly in Atlantic City, where he controls about one-third of the city’s casino business. Casino industry revenues there have stopped growing in recent months even as Trump opened a huge new casino, the Taj Mahal, early this month.

“Atlantic City is not in the best shape right now,” said Julien J. Studley, a real estate investor and consultant in New York.

Trump has scarcely been out of the news in recent weeks, primarily because of his messy public fight with his estranged wife, Ivana. Trump denied he is trying to raise money to settle the divorce, saying “that is not true at all.”

The Trump Shuttle flies in the busy East Coast corridor, shuttling businessmen and others between Boston, New York and Washington. Part of Trump’s grand design was to ferry gamblers from those cities into Atlantic City, but the airport terminal there is not big enough to handle large volumes of commercial traffic.

Although the Trump Shuttle has a valuable franchise, airline experts contend that the $600-million asking price is far too much. In fact, some say, it’s not worth the $365 million that Trump paid.

Airline industry assets have decreased by a third in recent months and “the same would be true of the shuttle,” according to Edmund S. Greenslet, an airline analyst based in Ponte Verde Beach, Fla. He placed the value of the Trump Shuttle at between $200 million and $250 million.

Trump’s public remarks about why he wants to raise cash were greeted with skepticism by real estate industry insiders, who often do not take the brash-talking promoter at his word. Because Trump’s empire is privately held, he is not required to disclose how much his companies make.

“That’s the great thing about Trump,” said one real estate financier who says he likes the 43-year-old builder. “You never know with him.”

One New York banker, who asked not to be identified, said that Trump needs to raise cash because U.S. commercial banks are under severe pressure from banking regulators to tighten the spigot on credit.

“He’s in an expansion mode at a time when credit is being restricted,” the banker said.

The real estate recession that has gripped the Northeast also may hurt Trump. “In New York City, residential real estate is making heavy weather of it, and even (Trump) may not emerge unscathed,” said publisher James Grant in a recent issue of his newsletter, Grant’s Interest Rate Observer.

Trump is currently building a luxurious residential high-rise on the Upper East Side of Manhattan that may be headed for trouble if the housing market does not improve by the time the building opens next spring, some real estate experts believe. The prices of the apartments are expected to range from $350,000 to $6 million.

“I think it’s going to be difficult for anyone to make a lot of money selling condominiums in New York,” Studley said.

Trump is counting heavily on his Atlantic City casinos to generate cash for his overall operations, but if the gambling revenues falter, he could be in trouble, Studley and others contend.

Public reports show that one of Trump’s casinos in Atlantic City, Trump Castle, is anything but robust financially, while his new $1.1-billion Taj Mahal casino opened several weeks behind schedule and more than $50 million over budget.

A recent research report from the Salomon Bros. investment firm recommended that bondholders of Trump Castle Funding Inc., which financed construction of that casino-hotel, sell their securities because the facility has an uncertain future.

Trump Castle, located on an inland marina well away from the Atlantic City boardwalk where 10 of the city’s 12 casinos are located, faces a cash deficit at the end of this year and probably will be hurt by competition from the Taj Mahal, the report said.

Trump dismissed the Salomon Bros. study, saying it was prepared by “fools.”

According to documents on file with the Securities and Exchange Commission, the cost overrun at the Taj totaled $53.2 million and resulted from cost increases for design changes that will “improve operating efficiency as well as the perceived and actual quality of the facility.”

The Taj needs to generate more than $1 million in revenues daily to pay its bills, and though the casino has been jammed with people since it opened, casino regulators still do not know if the casino will be a financial success.

“So far, they say, the numbers look good,” said Anthony J. Parrillo, director of New Jersey’s Division of Gaming Enforcement. “The crowds have been huge, but it’s still too early to tell.”

Tom Furlong reported from Los Angeles and Robert E. Dallos reported from New York.

WHAT TRUMP OWNS CASINO-HOTELS

Trump Plaza

Trump Castle

Taj Mahal, Atlantic City

APARTMENT BUILDINGS

Trump Tower, condominium and office tower on 5th Avenue and 57th Street

Trump Plaza, apartment tower on 3rd Avenue and 60th Street

Trump Parc, condominium tower on Central Park South

Trump Palace, condominium tower on 3rd Avenue

Trump Plaza of the Palm Beaches in Palm Beach

100 Central Park South HOTELS