The final outcome of the long haul of allegations of fraud regarding Trump properties is a major deal. The net value of these allegations is said to be $2.2 billion. The decision could effectively destroy Trump’s operations in New York.
There are some less obvious issues here. One of the matters raised included a premises stated to be 30,000 square feet which was actually 11,000 square feet. Trump used to live there for years. Consider this – The legal title of the premises could not possibly be 30,000 square feet. Yet, according to the information provided by Trump’s counsel, that was what it was said to be.
One of the more interesting, and nauseating, issues in this case was that Trump allegedly received financial benefit from these excessive valuations. He says he didn’t. He’s also appealing the decision.
That’s not really the whole story, and most of the rest of this article isn’t about Trump. It’s about property finances. How in the name of tape measures does anyone simply accept a valuation so far out of whack with the actual property size? Didn’t anyone look? Or at least condescend to check the size of the premises?
There are two sides to valuations. The owner gives a price. Somebody has to accept that price as a market value. Whether you’re a buyer, investor, insurer, lender, or whatever, you effectively sign off on that value if you accept it. You’re effectively defrauding yourself.
Why would you accept such an absurd valuation like 30,000 square feet? Given that a not-very-bright blindfolded chimp could see that it was wrong, why sign off on it? Could there have been some incentives involved? Or just genetic stupidity on a systemic basis?
Trump said some time ago that ballpark valuations were common in the property sector. So they are. It’s normal. The pitch is always for a higher value, and it’s from the owner’s perspective.
What’s not normal is for the third parties involved to accept a valuation without checking it. Yes, people do get commissions for higher-value loans, too. …But to also be that far off base in terms of real values? No. Never.
“Hey, boss! I just wrote a loan for X million dollars for a 3-hectare matchbox in Queens!”
“Well done, you virile young effervescent termite, you!”
Great career move in the credit market you got there. Why not drop in and kill the entire US property market outright while you’re at it? Lending big money on the basis of whatever someone might be bothered to tell you isn’t great practice.
I’m no great admirer of Trump or the hyper-hysterical US property market. When it comes to doing bad business like that on an apparently routine basis, I’m a lot less of an admirer.
You could talk to any real estate agency or vaguely interested person in New York, and they’ll know the current prices for everything. …So how do you pull a stunt like this in such a savvy market? Apparently with the support of people in the property and finance sectors.
This has got to be a lot bigger than Trump. How many other works of fiction about properties were the basis of financial transactions? How much money has been moved around on this basis?
That’s what I mean by “a nice outcome”. For people who don’t deserve a nice outcome. At a time when people are homeless, driven out by ever-more-insane rents, based on valuations, what’s nice about it?
In New York, “rent” is a four-letter word with good reason. “Valuation” could be the next one.
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Disclaimer
The opinions expressed in this Op-Ed are those of the author. They do not purport to reflect the opinions or views of the Digital Journal or its members.
