At Trump Tower, Donald Trump saved $17.2 million from a tax break meant for industrial and commercial buildings. The benefits ran out in July 2016.
Donald Trump migrated to Florida after losing the 2020 election, abandoning New York for Palm Beach. The tax rates are better down south, but there’s one particular levy that the former president has not figured out how to escape. At Trump Tower, he had to pay $11.8 million in property taxes last year—more than twice the amount he was paying a decade ago.
What happened? Trump’s tax breaks ran out. Back in 2012, the real estate developer took out $100 million of debt, refinancing a loan with $27 million of remaining principal and sucking out $68 million for himself. At the time, Trump Tower was throwing off $18 million of net operating income, and his lenders predicted profits would soon surge to $20 million.
But the tax situation at Trump Tower was about to change dramatically. For more than a decade, Trump had benefitted from an exemption meant for fixed-up industrial and commercial properties. That tax break, scheduled to last 12 years, started burning off at a rate of 20% annually right around the time Trump refinanced his property. As the exemption faded away, Trump’s tax bill jumped, eventually decreasing annual profits by about $2.1 million.
The underwriters involved in the new loan, issued by a firm named Ladder Capital, accounted for the expiring tax exemption. According to lending records, they estimated that Trump’s annual taxes would jump from roughly $4.2 million a year to $6.3 million. But they apparently failed to factor in another, more significant dynamic simultaneously taking place at Trump Tower.
From 2010 to 2012, New York City nearly doubled its estimate of Trump Tower’s value from $119 million to $232 million. Like the exemption expiration, that change was scheduled to be phased into the property tax calculation over a five-year period, meaning the full effect would not take hold until 2017. The underwriters analyzing Trump Tower for the 2012 loan apparently did not factor in the increased assessment, even though it was publicly known at the time of the refinance. In 2017, Trump’s property taxes hit $10.6 million, and, according to lending records, his annual operating expenses reached $19.5 million, 59% higher than the underwriters had predicted.
Profits suffered. After an initial jump from $16.5 million in 2013 to $19 million in 2014, net operating income fell to $15.3 million in 2015, $14.1 million in 2016, and $13.9 million in 2017, before leveling off from there, according to documents filed with the Securities and Exchange Commission. In 2020, the last full year for which data is available, Trump Tower generated $14.6 million of net operating income.
Trump’s prize property has had to contend with other challenges beyond tax increases. The pandemic slowed retail on Fifth Avenue and shut down Trump Tower’s atrium, home to various Trump-branded eateries. Starbucks abandoned its coffee shop on the second floor. By October 2021, occupancy in the building was down to 79%, according to lending records.
Trump, whose business did not respond to requests for comment, will likely be okay. He refinanced the 2012 loan with San Diego-based Axos Bank to secure a fresh $100 million in February. Assuming Axos is charging a reasonable interest rate, Trump should still be making more than enough to cover his debt payments on the new loan. The future of Trump Tower, however, does not look as bright as it once did. It’s one more reason the former president might want to stay in Florida.