One Man Brand
One Man Brand
Casino owner, real estate tycoon, TV star, best-selling author-Donald Trump has done it all, and it all promotes his business empire
F. Scott Fitzgerald once wrote, "There are no second chapters in American lives." But Fitzgerald never met anyone the likes of Donald Trump, the modern-day magnate who has turned self re-invention into an art form, and who makes Jay Gatsby look like a small-time player.
A little more than a decade ago, Trump very nearly fell victim to the early '90s recession, and only by convincing 90 international banks to give him more favorable terms on debts totaling $900 million did "The Donald" avoid personal bankruptcy.
Today, in a financial world that knows no geographic boundaries, Trump is nothing less than the king of the planet. His properties are too numerous to count. It seems as though he owns half of New York City. Among his Manhattan holdings: Trump Tower, Trump Parc, Trump Palace and Trump Plaza. In Chicago, in a joint venture with the Sun-Times, Trump is planning the 90-story Trump International Hotel & Tower. In Palm Beach, Fla., Trump owns the exclusive Mar-a-Lago Club, only minutes from the Trump International Golf Club. In California, Trump recently purchased the state's largest parcel of land that fronts-for almost two miles-along the Pacific Ocean. Plans are already drawn up for luxury estates and a Pete Dye golf course.
And then there's Donald Trump the TV star. While NBC's The Apprentice is the brainchild of Mark Burnett, creator of Survivor, it's Trump that has launched the ultimate reality program into the stratosphere of television ratings. After a triumphant first season, names like Omarosa and Kwame are familiar to tens of millions of Americans. The words, "You're fired!" are now a household catch phrase. And Trump is as recognizable as the president of the United States. No wonder Trump, after considering whether to run for the nation's highest office in 2000, decided instead to pursue loftier goals.
Still, this modern Midas who has been dubbed the real Teflon Don by the investment community for his ability to overcome adversity, is facing his biggest challenge since the financial crisis of 1990. Trump's Atlantic City casinos are laboring under the weight of nearly $1.8 billion in debt as they strain to meet $225 million in annual interest payments.
Trump Hotels & Casino Resorts Inc. (DJT), which owns Trump Taj Mahal, Trump Plaza and Trump Marina, has been unable to make capital improvements and add rooms to keep competitive pace in the nation's second largest gaming destination.
Trump's Atlantic City albatross: high-interest bonds with yields over 17 percent and high interest loans backed by his casinos.
"It's this old junk bond stuff, and it's not exactly thrilling. What we're doing now is working to reduce the interest," Trump said.
All eyes on Atlantic City
Negotiations are underway between Trump Hotels and DLJ Merchant Banking Partners, an affiliate of Credit Suisse First Boston, and the bondholders on a $400 million bailout. Under the terms of the deal, Trump would step down as chief executive but remain as chairman.
The trickiest part of the deal is convincing the bondholders to agree to cut what they're owed. If they don't, auditor Ernst & Young said Trump Hotels could go bankrupt. To convince the bondholders to accept "a haircut," Trump has hired former Wall Street investment banker Scott Butera as executive vice president of Trump Hotels.
"I have complete faith in Scott. Nobody has better training," Trump said.
Still, Wall Street isn't so sure.
"He (Trump) still doesn't really understand the casino industry. He's a real estate guy," said Jane Padreira, a gaming analyst at Lehman Brothers. "The two businesses are completely different. One is database management oriented and the other is very tech-nology oriented."
Padreira noted the casino business has changed greatly since the early days of Atlantic City when entrepreneurs like Merv Griffin and Trump could drum up business simply by occasionally visiting the property and by overseeing various promotions.
Today, analysts explain, to thrive in the highly competitive casino industry, corporations must keep up with technical advances. They must develop integrated marketing programs to reward player loyalty-and to reach potential customers through various avenues including the Web.
Some analysts say Trump's Atlantic City casinos haven't kept up with these technological advances in recent years, and it's cost them market share in a resort destination that became increasingly competitive following the opening of the 2,002-room Borgata resort last summer.
"Every property has been cannibalized with the addition of the Borgata," said Andrew Zarnett, a gaming analyst with Deutsche Banc Alex Brown. "But, at the same time, the Borgata has proven that the Atlantic City market is pretty resilient, given that this year there were many strong months."
Many gaming experts believe Atlantic City-with it's new catch phrase, "Always Turned On," and fresh focus on entertainment-is showing it does have the ability to re-invent itself.
"I think everyone here understands that if we are going to increase our market share with all the threats of additional gaming jurisdictions, we need to become a full service, well-rounded destination and offer something for everybody," said Jeff Vasser, executive director of the Atlantic City Convention & Visitors Authority.
And so, the Atlantic City of today offers more entertainment, more nightlife, more high end shopping and more convention space, and much more is on the way.
Name power
There are some who say Atlantic City's best marketing tool is not the historic Boardwalk Hall-with its recent $90 million facelift. It's not the expansive Boardwalk or the Marina District with its thriving nightlife. It's not even the magnificent Atlantic seashore, which has drawn vacationers to this resort destination since the late 1800s.
Atlantic City's greatest draw: Donald Trump.
"Donald's name and his promo-tional power in our market is not something you can replace very easily," Vasser said.
"His name alone is a very strong brand," said Rob Powers, spokesman for the Las Vegas Convention and Visitors Authority.
"If we run an event and we announce that Donald will be here, the event is a grand slam," said Mark Brown, chief operating officer of Trump Hotels. "The people come here in droves. They want to see him. They want to be near him. They want to touch him. You've heard Donald doesn't like to shake hands (Trump is a notorious germophobe.) Well, he shakes 1,000 hands every time he's here. He'd rather walk through a crowd than go through the back way. That's the real Donald Trump."
It's the public's intense hunger for information about the real Donald-his business dealings, his passions, his love interests, even his golf handicap (five) that helps the billionaire promote his various business interests.
"One of the great skills he has is his tremendous ability to market (his brand)," Zarnett said. "Look at the premiums he's able to attain from the sale of his buildings, his condominiums, especially in New York City. He's good at getting a higher price per foot. There's an inherent value of living in a Trump property. It's a pretty strong statement, and it speaks to the value of the brand."
Indeed, condominiums in Trump buildings in New York City are selling for nearly 40 percent above the city's $853-per-square-foot average. In late June, "The Donald" announced he was selling the Trump Building at 40 Wall Street for a minimum of $400 million, which equates to $330 per square foot. Not a bad return for a dilapidated office building that he bought nine years ago for $1 million. After he purchased the building, Trump gutted the interior and spent $65 million on refurbishments ranging from Italian marble floors to crystal chandeliers.
No wonder a recent poll by consultant Neil Ostergren, former president of the Hospitality Sales and Marketing Association, revealed the only two names in real estate that score consistently high are William Levitt and Donald Trump.
Taking over TV-land
Trump's persona and fame reach far beyond the brick and mortar walls of high rise buildings. Thanks to the success of The Apprentice, those familiar, piercing dark-blue eyes, the amber, comb-over hairdo (so well known it was branded the "Taj Ma-helmet" on Letterman's Top Ten), and all the other ingredients that make up "The Donald" entertain and enthrall more than 18 million television viewers every week."We actually trumped CSI. No one in the history of television has done that," said Craig Plestis, senior vice president of reality programming and development for NBC, who credits Trump for making The Apprentice such a hit.
"I think the magic of Donald Trump is that he is himself on the program, and he's the best in the show," Plestis said. "He has laser focus. He can see right through people, and he doesn't miss anything. It's really amazing when you witness it. And it works perfectly on reality TV."
Eric Deggans, TV/media critic for the St. Petersburg Times, said Trump comes across as a more personable rendition of Gordon Gekko, the fictional cold-blooded character played by Michael Douglas in Oliver Stone's 1987 film, Wall Street.
"Trump has become the common man's vision of the ultimate business success-the guy who makes tons of moola and spends his weekends at the Hamptons," Deggans said. "In a weird way, he's our modern day Howard Hughes. But you must remember, this is just an image, and Trump is smart enough to realize his image is an important part of the success of the program."
Others point out that Trump actually shows a compassionate and understanding side in The Apprentice. For instance: he was reluctant to fire Omarosa Manigault-Stallworth, the show's arch-villain.
"She was brutal," Brown said. "If she was the last person on earth, I wouldn't hire her."
In real life, Brown points out, Trump hates to fire employees. "He only does it if you're doing a horrible job-or if you're stealing. If you're stealing, he'll drag you out of there."
But not everyone loves Donald Trump.
"Gallows humor" at a time when most Americans are feeling anxious about their jobs, is how Newsweek described TV's ultimate reality show.
Gary Handman, director of the Media Resources Center at UC Berkeley, agreed.
"I think a lot of people who watch the program recoil from the actions of the characters," Handman said. "It's like the line in Dostoevsky's The Brothers Karamazov: 'If there is no God, then everything is permitted.' Well, I think Trump is smart enough to understand the concept, and he certainly has a knack for self-parody. I think the guy's sort of a perverse genius in a way."
Vegas vision
While Trump's persona and demeanor have already made it to Las Vegas via TV viewers, he himself could soon become more of a permanent fixture in the desert gambling city-a place in which he has long-desired to become a major player.
"I don't have any doubt that Donald Trump's presence in Las Vegas would benefit this destination," said the LVCVA's Powers. "He's got a terrific reputation as a businessman and I'm sure he would find success here. After all, this is the hottest market in the world, and with the planned opening of Wynn Las Vegas, there's no question that Steve Wynn's new property will take Las Vegas to another level."
And speaking of the 2,700-room newest Wynn resort scheduled to open next spring at the site of the old Desert Inn, the place might have been doomed from the start if it weren't for Trump.
Although Trump is tacit on the subject, sources high in his organization confirmed it was the Donald who convinced Wynn to change the name from La Reve (the dream) to the more recognizable Wynn Las Vegas.
Trump did tell Casino Journal he and Wynn are good friends, and "The Donald" has played Wynn's former Shadow Creek golf course. "But I can tell you I've topped it many times by my course in Florida (Trump International Golf Club in Palm Beach)."
Such talk brings a smile to the face of Anthony Curtis, publisher of the Las Vegas Advisor.
"He certainly has a big ego, and he's dying to be a player in this market. But to his credit, he hasn't leapt at anything. He's biding his time and waiting for the right opportunity," said Curtis, who added Trump is more concerned-at least at present-with the fate of his Atlantic City hotels.
"Everyone understands the Trump brand is huge and they understand how important it is to keep the brand," Brown said. "They (the bondholders) love him and the name and the management team. They know we have the three best locations, and we need a cash infusion and we need to get the interest payments lowered."
While it's open to debate just how much the bondholders love Trump, there is no question there is no one like "The Donald"-in Atlantic City or anywhere else.
"Nobody knows the guy like I know him," Brown said. "He is tough, and he wants to win. The man is a walking laptop, even though he doesn't use one. And he's the hardest worker I know. I don't know when he sleeps."
What impresses Brown the most it Trump's amazing ability to multi-task and to get things done.
"In his office, he's doing 30 things at once. He's talking to this person, and addressing that problem. And all the while he's signing 100 checks. He signs them all before they go out."
Brown has faith that Trump will hammer out the pending deal with the bondholders.
"For him, it's all about the deal. He obviously doesn't need any money. The man clearly illustrates the power of positive thinking."CJ
SIDEBAR:
Trump would like to expand, renovate Atlantic City properties
Though burdened with immense debt and a lack of significant capital to expand and renovate, officials with Trump Hotels & Casino Resorts know there are things that need to be done to grow their Atlantic City properties-Trump Taj Mahal, Trump Marina and Trump Plaza
"The biggest issue is lack of rooms," said company COO Mark Brown. "We have to turn thousands of people away every weekend. We have the land at every single hotel to build another tower. At the Taj, I could build four more towers and fill them."
Construction of new tower at the Taj is planned as soon as the cash becomes available.
"I would have liked to have started construction yesterday," Brown said.
Chairman Donald Trump said he also plans technological improvements at his Atlantic City properties, such as more cashless slot machines and an improved player loyalty card-one that likely can be used at any Trump property.
Such innovations are already in place at one of Trump's Atlantic City competitors, Harrah's Entertainment.
"I can tell you I have great respect for what Harrah's is doing with regard to encouraging player loyalty," Trump said. "And I agree with what they're doing."
SIDEBAR:
Reached recently at his corporate headquarters in New York City, Donald Trump spoke to Casino Journal about his love for the casino
business and his plans for the future
CJ: First of all, congratulations on the success of NBC's "The Apprentice." Were you surprised by the show's success?
Trump: My friends told me not to do it. They told me that 95 percent of the shows that go on television fail. But we did the show, and it became the number one show on television. We knocked off CSI in the ratings.
CJ: You recently obtained a Nevada gaming license, as well as the unanimous support of the Nevada Gaming Control Board. Are you going to build a casino resort on the Las Vegas Strip?"
Trump: I don't know. I'm going to be announcing a deal in Las Vegas fairly soon, and the fact is I'm building a residential Trump International Hotel and Tower. I'm afraid I can't tell you the exact location.
CJ: And later on, will there be plans for a Trump resort on the Strip-perhaps at the site of the New Frontier or the Tropicana?
Trump: We'll see what happens. I have great respect for Las Vegas, and all I can tell you is we're looking at different plans, and we have some terrific ideas.
CJ: You've described yourself as a real estate developer of great buildings. Just how important is Atlantic City to you?
Trump: As you know, I've done the largest jobs in New York City, I'm doing a big job in Los Angeles, and a very big job in Miami. And while the Atlantic City properties represent a very small percentage of my net worth-less than two percent-they are still very important to me, and I'm very focused on reducing the debt. They are doing very well. They're doing beautifully. They always get rated highly. The problem is the high interest rates (on the bonds). It's this old junk bond stuff, and it's not exactly thrilling. What we're doing now is working to reduce the interest.
CJ: How is your relationship with the bondholders?
Trump: We've had a great relationship, but we have to cut the debt.
CJ: Your executives say adding rooms to your Atlantic City hotels is crucial. Do you agree?
Trump: Yes, we're so full (at all three properties) that we could build a tower at any size and fill it. We have the land.
CJ: What are your feelings on the future of Atlantic City?
Trump: I'm very optimistic about the future of Atlantic City. This resort destination has something that very few places have: the Atlantic Ocean. Atlantic City is bigger and better than ever in my opinion. It's been very good for me over the years, and it's been a very good experience, and I really think Atlantic City has a wonderful future.
CJ: What about your future in Atlantic City?
Trump: I think the outlook is very good. A lot of people ask, "why stay in Atlantic City? This (casino) business is not something you're supposed to be in." But I love the place. Still, it's true I don't agree with moves made over the years by the politicians-the way they've handled Atlantic City. I don't agree with the choice of where they put the convention center (seven blocks from the Boardwalk), for example. Still, I do think Gov. (James) McGreevey has rectified some of the mistakes made over the years.
CJ: It's been reported that through the deal being worked out with the bondholders, you would remain as chairman. Just how much involvement would you have with the operations, and how important is it to you to stay on as chairman?
Trump: Let me put it this way: I have a very big stake in the company (Trump Hotels & Casino Resorts). I would remain as chairman, but I'll be appointing my man (Scott Butera, executive vice president) to run the company, and the institution doing it (DLJ Merchant Banking Partners III, an affiliate of Credit Suisse First Boston) is my institution. I'm doing so many different things right now that it's important I appoint Scott to run the company, and I have complete faith in him.
CJ: You are quite unlike any casino owner or operator. In real estate you've taken brand recognition to such heights that your properties consistently sell for prices way above those of competitors. You are the star of one of television's most popular programs. Isn't it true that many people visit your Atlantic City properties solely because your name is on the building-and in the hopes of catching a glimpse of you?
Trump: It's true, and I'm there as often as I can be. My birthday was June 14.
CJ: Yes, wasn't it your 57th birthday?
Trump: Regrettably, it was my 58th birthday. And we had a birthday party in Atlantic City, and it was one of the largest nights ever (at Trump Taj Mahal). It was an amazing event. There were 7,000 to 10,000 people at the party, and it drove a lot of foot traffic at the hotel.
CJ: What would happen if you were forced to step away completely from Atlantic City-if your name were no longer associated with your hotels there?
Trump: Business would be cut to shreds, and I can tell you the bondholders also feel that way.
