Is Trump in Trouble Again?

As Trump’s casino business crumbles, his longtime biographer Robert Slater talks with the mogul about the state of his empire—and cuts through the relentless spin machine.

Donald Trump is a multibillionaire who boasts that there is no such thing as overexposure. So it is ironic, and troublesome, that he will say almost nothing publicly about his finances. That made it difficult to pierce the Trump armor to gauge just how he and his real estate and casino empire have been faring during America’s financial tsunami—at least until this week, when we learned that his casinos were bankrupt, a flashback of sorts to his near collapse in the early 1990s.

How deep are his troubles? As someone who has known Trump for years—I spent countless hours with him while researching my book on him in 2004 and 2005—I have a good sense of just how hard he is trying to spin the story and minimize the impression of damage.

Trump may be less exposed to losses during the downturn—but his personal reputation suffers when projects with his name attached struggle.

The bankruptcy is difficult for Trump not because his entire empire seems in danger, as it was in 1990, just before he wooed bankers to support his recovery plan, but because the casinos embodied all that he stood for: his constant search for positive publicity. His own version of personal branding (the name “Trump” was emblazoned all over his casino hotels, personalizing these edifices in a way that no other real estate mogul would dare). His love of the gaudy and glitzy.

When I spoke to Trump this week about the casino setback, he quickly shifted to the positives in his business and stressed that the Atlantic City casinos and the aches and pains they had caused him were just a fleeting blip on the screen. It’s reasonable to conclude that he has hundreds of millions of dollars in ready cash to scoop up undervalued real estate properties.

Trump was eager to tell me that his buying binge had already begun; this week, he noted, he had purchased the 800-acre Lowes Island Club near Washington, D.C. He did not disclose the price but said he planned to turn the two 18-hole golf courses into a premier golf destination. (Naturally, he intends to jettison the name “Lowes Island” and call it the Trump National Golf Course in Washington, D.C.)

Despite the recession, he argued, his name still has value. If the golf course purchase was not enough to convince us that all was well in the Trump empire, he made sure to note that a Macy’s report on the sales of his clothing line had shown it was one of the “hottest things out there.” Finally, he happily observed, his books remained best sellers and his new vodka line was selling well.

In our conversation, however, he never brought up his ongoing squabble with Deutsche Bank over his claim that it broke agreements in the financing of Trump International Hotel and Tower in Chicago.

Trump’s relentless optimism—and the fact that aside from his casino business, his empire is private—means it’s difficult to tell just how much the current recession is hurting him. But his investment strategy in recent years could limit his exposure to the real estate downturn. Trump often puts up very little capital for his own projects and instead offers the value of his name to buildings and developments. That means he may be less exposed to losses during the downturn—but his personal reputation suffers when projects with his name attached struggle.

When we discussed the casinos, he distanced himself from the management—as if some other Donald Trump had been in charge of the casinos. This from the same Trump who gave new meaning to the phrase “hands on”; the same Trump who negotiated personally with subcontractors and paid surprise visits to his building sites.

Indeed, after the casinos went public, he had little to do with managing them. As a public venture it was run by a board, of which he was still chairman. But the board outnumbered him and could easily outvote him, as it did when he recently sought to buy out the casinos and take them private again. But with his name emblazoned in neon over the Taj Mahal Casino Resort, he could not entirely divorce himself from the casinos’ bad news.

His main point in our conversation was to convey the impression that his empire was intact and would stay that way, despite the casino bankruptcies. He told me a number of times that the casinos were “substantially less than 1 percent of my net worth.”

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To bolster the image of Trump the business genius, he needed to convey to me and others that unlike in 1990, when he was strapped for cash, he was now sitting on a treasure chest of cash and salivating at the heady prospect of going on a bargain-hunting buying spree.

With ample cash in hand and bountiful cheap real estate, there was a certain logic to the Trump buying spree as a natural strategy. “There are things you can do (i.e., buy) today,” he told me, “that are just easier to do.”

I would not be surprised to find that Trump was indeed sitting on a pile of cash, but are we to believe that he was the only super-rich guy willing to take risks in this troubled economy? Far more likely, Trump simply wanted us to believe that he had found a way to keep his empire prosperous.

To augment his case that the Trump magic was still alive and kicking, he pointed to a few other conquests: In the last year, he boasted, he had signed Nike and Gucci to long-range leases in his Trump Tower in New York City. In May 2008, after purchasing a nine-bedroom Palm Beach home two years earlier for $39 million, he had sold it for $100 million.

In his mind, nothing highlighted the stability and durability of the Trump magic like The Apprentice, the television program that turned him into a media star in 2004. On March 1, when the eighth season of the show debuts, Trump will get one more chance to present himself as the feisty, combative, and most important, resilient CEO, who in real life was holding back the dark forces swirling around the American economy.

While I was researching my book on Trump, I came to understand why it was so important to him to cultivate an image as a business genius and media star.

What he never wanted to hear were assertions that he lacked management talents—of his buildings, of his people. He also could not stomach arguments that he had lost control of one of his projects. He was, after all, a control freak.

Thus it seemed all so bizarre that Trump would enter the difficult-to-manage world of gambling, where profits were harder to come by than in real estate; where casinos were run less as businesses than as entertainment centers; and where Trump possessed few of the skills for managing the slippery world of the casinos.

He must have known all this as he built one casino after another in Atlantic City. And yet he had became a major factor in the casino business. This had always surprised me, as listening to him five years ago I sensed he did not care that much for the casino business. The clearest indication of this was his indifference to the nitty-gritty of the craps tables or the slot machines. When it came to real estate, no one seemed more aware of how to erect a building, how to design a room, how to match colors, and all the rest. He loved the real estate game; he seemed unmoved by all that occurred within his casinos.

The only time Trump showed any animation about Atlantic City came when he spoke about the boxing matches that took place in his casinos, for which he made sure to have a ringside seat.

The one justification for his entry into the gambling world was his eagerness for one more gaudy, showy way to promote his personal brand, to market himself and his name —and in that way to bring profit to the entire Trump business enterprise.

Trump’s recent troubles pale in comparison to his struggles in 1990. When the New York City real estate market went south and his debt piled up to $975 million, he seemed to have no choice but to declare bankruptcy.

The banks insisted he make his routine payments, but he could not. Though he faced a far worse situation then he chose not to distance himself from events; he chose to fight, despite the long odds—he had little cash, he had few friends among bankers, and unlike countless others facing the same troubles, his story was fodder for the media day after day.

Casinos were, as now, central to his troubles. The $1.1 billion Taj Mahal, launched in April 1990, was the largest Trump project at that time and by far his glitziest effort, and it required him to carry a $675 million mortgage. After he missed a $47.3 million interest payment, he had to put the Taj into bankruptcy for several months. These, he said, were the darkest days of his career. He blamed the marketplace, not himself.

By convincing certain banker friends that they needed him as much as he needed them, he survived. Forcing his empire into bankruptcy, he told the bankers, meant they would be unable exploit his name or his assets, if tainted by bankruptcy. After that, his reputation recuperated and soared over the next two decades.

But this week, he was in full retreat. On February 13, he and his daughter Ivanka resigned from the casinos’ board. According to Trump associates, he felt a tad angry at losing control over events in Atlantic City. “He is a hands-on person,” a Trump associate told me, “and so when the casinos went public, he kind of lost control, and that has frustrated him.”

It was no wonder. Deep down he had to understand that not everyone was going to accept his insistence that he would get through this crisis unharmed.

Robert Slater is a business biographer who has written books on American business leaders, including Jack Welch, Bill Gates, Michael Ovitz, and Donald Trump. He also worked from 1976 to 1996 as a reporter in Time magazine's Jerusalem bureau. Slater is the author of No Such Thing as Over-Exposure: Inside the Life and Celebrity of Donald Trump. His latest book is an updated, revised edition of his 1996 best-selling biography of George Soros, SOROS: The World's Most Influential Investor.