The 71-story, 1.2 million-square foot tower at 40 Wall St. has a growing list of problems. Its vacancy rate has risen to 25%. The building is no longer producing enough cash to pay the mortgage that comes due soon. And the cost of owning the tower is poised to soar thanks to a massive increase in rent for the land underneath.
A lot of Financial District real estate owners face similar issues. 40 Wall St. is different because it’s one of three New York properties owned by President Donald Trump. The others are Trump Tower and 1290 Sixth Ave., a 2 million square-foot Midtown office building 70%-owned by Vornado Realty Trust.
“40 Wall Street is the best location, great building,” Trump said in a 2023 deposition for the financial-fraud case brought by Attorney General Letitia James’ office. “It’s, I think, pretty well full, even in this market.”
In fact, 40 Wall St. was 95% occupied 10 years ago. But time hasn’t been kind to the tower developed in 1929 and renamed Trump Building shortly after the future president bought it 30 years ago. In a report Monday, Fitch Ratings said annualized net operating income has fallen by 65% and the property generates only 80% of the cash needed to pay its $10 million in annual debt service. A year ago the building was producing 130% of the cash needed to pay bills.
40 Wall St. faces a “higher probability of default,” Fitch said, and estimated mortgage investors face a $30 million loss. The ratings agency downgraded a security that holds the mortgage to a highly speculative B rating.
An email to the press office address listed on Trump Organization’s website bounced back as undeliverable and nobody picked up the phone at the company’s Trump Tower office. An email to the White House press office wasn’t returned.
Trump acquired 40 Wall St. in 1995 for just $1.3 million. In 2015, he took out a $160 million mortgage on the property with the help of Jack Weisselberg, a loan originator at niche lender Ladder Capital Finance and son of longtime Trump Organization CFO Allen Weisselberg. The loan was packaged into a security and sold to institutional investors.
That 10-year interest-only mortgage comes due in July, Fitch said. If 40 Wall isn’t able to refinance by then, at what surely would be a higher rate than the current 3.67%, the loan would fall into maturity default and Ladder Capital could move to foreclose on the property. Ladder didn’t return an email seeking comment.
Foreclosing on the president seems unlikely. But a new loan would have to account for the fact that 40 Wall is surely worth a lot less than when it was appraised in 2013 for $220 million, according to documents produced in the attorney general’s case. Trump may have to fork over the difference between the building’s current value and its $160 million mortgage to secure a new loan.
But the cost of paydowns and higher borrowing expenses are relatively small in comparison to the financial time bomb ticking underneath 40 Wall St.
Although Trump owns the building, its land has been owned since the early 1980s by a consortium of German investors. Trump pays $2.3 million a year in ground rent, according to Fitch. However, the lease is poised to reset in 2033 and Fitch said the new ground rent would rise to $9.6 million a year to reflect the rising value of Manhattan land.
The steep increase in ground rent could cause 40 Wall’s operating expenses to double or more, depending on the rate for a new mortgage and if new tenants move in.
Trump said in his deposition that he isn’t concerned. He could make a fortune from turning the building into condominiums, though doing so would require raising a lot of cash. He said the ground-lease owners granted what he described as a “lollipop clause,” a real-estate industry term for the right to add apartments to a building.
“You can convert the entire tower of 40 Wall Street into condos and make an absolute fortune, far greater than the $500 or $600 million probably that the building is worth now, probably more than that,” he said. “There are people that would do anything to own Turnberry or Mar-a-Lago or 57th and Fifth Trump Tower or 40 Wall Street, you know.”
