The New York Times reported last week that according to tax filings, Donald Trump’s 19 golf courses have lost a combined $315.6 million since 2000. The investigation found no property in the portfolio lost more money than Trump National Doral ($162.3 million since ’12). The claims that Trump paid just $750 in federal income taxes in ’16 and ’17 have many speculating the President inflated business losses to reduce his overall taxable income (Trump has refuted the report). An ongoing investigation by the N.Y. Attorney General into whether the President and his company illegally inflated the value of assets—including Trump National Golf, Los Angeles—would seemingly support the doubters’ narrative. However, Larry Hirsh (president, Golf Property Analysts) says it is certainly possible that the losses reported on Trump’s golf portfolio could have occurred. “It’s been speculated there is significant debt on his properties, and it has been reported that some people have resigned membership at his clubs because of his controversial politics,” Hirsh said. “[Along with an overall decline in participation in the sport,] it stands to reason there would be some stress [on the business], as there has been with many golf properties.”
Our Take: It is indisputable that Trump got into the golf course ownership business at the wrong time. Participation in the sport has steadily dropped since the early 2000s, leaving many markets with an abundance of courses. Bob Gorman (president, Gorman Group) said with supply outweighing demand, courses struggle to make as much money as they used to.
As revenues declined over the last two decades, many operators have found themselves unable to service the debt on their properties and have been forced to shutter their doors. “Just about anybody in the golf business would tell you that debt is a killer because [course ownership] is not a high-margin business [in the best of times],” Hirsh said. For perspective, in 2000 there were around 15,500 courses nationwide. According to the National Golf Foundation, today that number is closer to 14,000.
If Trump is losing money on his portfolio of golf properties as reported, Gorman said he would “bet big money it is because of the debt.” He reasoned, “For a golf course without a hotel to lose $1 million [annually on operations] would be a lot.” For what it’s worth, the NYT reported Trump has a $125 million mortgage on the Doral property coming due in 2023 (Doral is said to be seeking a delay on loan payments). He bought the property for $150 million in 2012.
Golf course ownership can be a profitable business (though it has been a struggle in recent years). Hirsh said being cash flow positive “depends on [the debt obligations], the market and how the property is managed and operated” (see: tight on expenses—not exactly Trump’s forte). Without access to the financials for each of Trump’s courses it is difficult to opine on how the properties are being operated. But the golf course appraiser said, “Of those I’ve seen, they’re maintained at a very high (and expensive) level, and cutting those costs could impact membership.” The NYT investigation found the President has invested heavily in upgrades on several golf courses, including Trump Turnberry in Scotland ($150 million) and Doral ($213 million). Considering the amount spent on improvements, it is reasonable to believe much of the losses could be attributed to depreciation.
Trump’s polarizing personality could be another reason why some of his courses are operating in the red. Hirsh recalled being in a meeting at the Doral property “when Trump was first talking about running for President and [a course executive] stated that revenues had already been impacted by his politics.” Remember, membership cancellations aside, golf courses tend to host events for charities and community organizations, “and those organizations don’t want to be associated with [political] controversy,” the Society of Golf Appraisers (SGA) member said. Courses operating at a profit have managed to expand their use.
Since May, many golf courses have experienced an increase in rounds played, “and private clubs have seen strong membership development, as a result of limited recreational activities during the pandemic,” Hirsh said. It remains to be seen if that trend sustains or if people will play less as their entertainment options increase. The rise in participation does not mean the industry has benefited from the pandemic. Without an ability to host events and with limited F&B golf course revenues remain depressed.