May 18, 2009
Donald Trump on Valuation and Ownership
Posted by Gordon Smith

Today's W$J quotes from a deposition of Donald Trump, who had been asked about his net worth:

My net worth fluctuates, and it goes up and down with markets and with attitudes and with feelings, even my own feeling.

This desposition relates to the defamation suit Trump filed a few years ago against Timothy L. O'Brien, author of TrumpNation: The Art of Being the Donald, for estimating Trump's net worth at only $150 million to $250 million. (Forbes attempted to value Trump's holdings at the time that lawsuit was filed and came up with $2.9 billion.)

More from the W$J:

In the deposition, Mr. Trump said that his 2007 estimate of his net worth -- over $4 billion -- is "a very conservative number, in my opinion." He also said $6 billion is a good number, counting his brand value. (In [a telephone] interview Sunday, he said he was worth $5 billion, not counting brand value.)

Mr. Trump was asked whether he has ever exaggerated in statements about his properties. "I think everybody does," he said in the deposition. "Who wouldn't?"

A follow-up question: Does that mean he inflates the value of his properties in general, nonfinancial public statements? "Not beyond reason," he said in the testimony.

I assume this will not be the basis for a new chapter in finance textbooks. Trump also has some interesting notions about equity ownership in the condominiums that bear his name. You and I would probably call these "franchises" or "licensing deals," but Trump calls them "equity ownership":

Mr. Trump often licenses his name to other developers in return for a fee or a cut of the sales. During the deposition, Mr. O'Brien's lawyer, Andrew Ceresney, noted that Mr. Trump had claimed publicly that he had a major ownership in one such project.

For example, in a November 2007 Wall Street Journal interview cited by Mr. Ceresney, Mr. Trump said he had sold out units at an eponymous condo-hotel project in Hawaii. "The building is largely owned by me," he said in the interview. But in the deposition, Mr. Ceresney produced the licensing agreement for the project. Mr. Trump wasn't a major equity holder in the project, it showed, a fact Mr. Trump didn't dispute.

"Because this is such a strong licensing agreement that I consider it to be a form of ownership," Mr. Trump said. "I'd rather have this than own the building," he said. Moments later he said: "I would say that it could be interpreted to be a form of ownership in the building."

In the end, of course, Trump is just playing the role of the salesman. The truth is malleable when you are trying to make the sale. The irony here is that he is suing O'Brien for doing the same thing.

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