Tom Barrack has worked with Donald Trump on a number of projects, ranging from New York City condominium conversions to a Washington DC luxury hotel. Now, the Colony Capital co-founder has endorsed the American businessman and television personality for a new piece of real estate: the White House.
Last month, Barrack broke ranks with his peers to publicly back Trump as the Republican presidential candidate, joining his banner to a man whose campaign has divided the party and garnered little support from the private equity real estate world. No leaders PERE spoke with in the last month could name a single other public supporter for Trump’s candidacy, despite his decades in real estate. Multiple executives have told PERE the industry mirrors Wall Street generally in seeking stability in a candidate, a quality they say Trump lacks with flip-flops on policy positions, controversial statements and little international support. Trump’s momentum has not slowed among voters, but what his candidacy means for the private equity real estate sphere is still unclear. He has joined other candidates decrying carried interest, long a touchy campaign issue, but his frequent changes in policy stance seem to leave nearly any campaign platform open to modification or a complete about-face.
In the following conversation, Barrack elaborates on the man who has attached his name to real estate, steaks, vodka, television shows and now, the highest elected US office.
PERE: When did you first meet Donald Trump?
Tom Barrack: I was working for the Texas family office, Robert M. Bass Group, when I met Donald in 1986. We had purchased 20 percent of the publicly issued common shares of Alexander’s department stores. Alexander's most famous location was 3rd Avenue and 58th Street, which is now the site of The Bloomberg building in Manhattan. Steve Roth, of Vornado fame, also owned about 20 percent of the shares. Donald was anxious to acquire our Bass-held interest and I first met him during the negotiations to sell our position to him in 1986. He was about 37 years old at the time and was bright, aggressive and already a power within NYC real estate.
PERE: Have you worked with Donald on more recent deals?
TB: I have done several deals with Donald, the most notable of which was the sale of the Plaza Hotel. I have also partnered with him on several projects, including the conversion of the Mayfair Hotel on Park Avenue to condominiums and Daniel’s restaurant. Our latest collaboration was on the Old Post Office Pavilion Hotel in Washington, DC, [in 2012] in which we were partners until Donald bought us out.
PERE: This is the first time you’ve endorsed a candidate since you worked for Ronald Reagan. Why back someone now?
TB: I have not contributed any money to Trump, Rubio or Cruz. I’m not in the business of committing money to anyone, nor does my firm back anyone by endorsement or financially. To me, this isn’t about politics – this is about having a dialogue and an attempt to penetrate a somewhat closed political system by an outsider.
My objective is simply to share my personal point of view of the athlete as he proceeds through the tunnel to the stadium. As we all know, policy in America must be generated by a ‘common denominator,’ not by one person’s point of view. My enthusiasm for Donald is based on his ability to get things done, consolidate differing constituencies, and administer a multitude of complex business and regulatory issues with grace and ease as he adapts to changing situations.
He does not need celebrity, wealth or power; he already has them. Ultimately, whether he becomes President or not, he has been successful in enticing more and new voters into the arena and has changed the dialogue and debate from concept to reality, releasing the polarity of views that exist in this amazing country.
PERE: Speaking of industry, you’re the only executive your peers could name who has publicly supported Trump [at press time]. Why have private equity real estate leaders remained silent in this race, and will anyone join your endorsement?
TB: The reality is that it is not to anyone’s benefit to back candidates this early in the process. Businesses cater to politicians who best serve their interests and that will take a bit of time to clarify. What is good for our industry – predictability – may not be what is good as judged by the average American. Carl Icahn and Andy Beal have both endorsed Trump and have voiced their concerns that the continuity of capitalism and the perpetuation of ‘entrepreneurism’ as we know it are essential to the ‘American Dream’. By the way, none of his friends who endorse him want any jobs. Nobody wants to be a cabinet secretary; nobody wants to be an ambassador. Others will follow, but, at the moment, most will smartly elect to stay out of the fray. It is easier to choose a victor once victory has been achieved.
PERE: Trump inherited his father’s real estate business before moving on to a series of other ventures. How would you respond to criticisms that Trump’s business track record is less successful than he claims?
TB: Any great entrepreneur, scientist or athlete learns from his failures. It is impossible to produce extraordinary results or returns while taking ordinary risks. As a consequence, unforeseen intervening events sometimes become outsized and disruptive to the intended outcome. Overcoming this requires adaptation, courage, and tenacity.
For example, some consider that the Plaza hotel was a bad deal because Donald bought it from the Bass Group in 1988 at $410 million and sold it for $325 million in 1995. It was actually a very good deal for him. In order to get the project, we had to buy the whole Westin company, when many groups were anxious to acquire the Plaza and other individual assets on a stand-alone basis. He did a good job in negotiating the individual purchase at a time when there were many competitors that would have paid more but with worse conditions. So when Donald’s New York real estate empire, like everyone else’s real estate empires from 1990 to 1992, had to be deleveraged, he was able to trade away the Plaza for the forgiveness of $600 million of debt on other projects.
Trump’s accomplishments include the manner in which he confronted and became accountable for his defeats. As Thomas Edison said: “I have not failed, I have just found 10,000 ways that won’t work.”
PERE: What differentiates Trump from other real estate magnates?
TB: First, Trump is a brand. There are very few other, if any, individual real estate entrepreneurs who have a brand name that is global and universally associated with quality, luxury and status. Second, he is a master jeweler, who continually and seamlessly strings together a ‘Trump Necklace’ of landowners, city officials, architects, land planners, unions, contractors, conglomerate retail tenants, global condominium buyers, foreign owners, hotel guests, producers, directors, viewers and sponsors. Perhaps most importantly, he created a media and entertainment persona that enhances the value of his real estate. The broad global viewer appeal of The Apprentice launched him from Donald J. Trump to ‘The Donald.’ The attributes which made his TV celebrity have carried over to the prestige of his brand as a developer and financier.
Finally, on a personal level, the beauty of the man is that if you call him, you’ll get a call back in 15 minutes. When you’re sitting with him, you feel as though you’re the only star in his galaxy.
PERE: Trump has never held an elected office. How could his business experience translate to running a country?
TB: I had the privilege of working for President Reagan. Because of his background, no one took him seriously as President for a long time. He in fact was one of our best because he surrounded himself with people who knew the things that he did not. As an actor, he too was an outsider and brought fear into the heart of the establishment. This is why it was called the ‘Reagan Revolution.’ I believe that Trump would similarly surround himself with the best, would adapt to varying constituencies and would lead and inspire, if allowed to do so. He knows how to negotiate; he knows what a consensus is. It is never easy for people in any venue to question established authority, but my belief is that we should thank them for doing so. This is how America was born.
PERE: How does Trump compare with the other presidential contenders?
TB: The other candidates are all very capable – they would all make good presidents. They have just never run anything, even the governor John Kasich. They are all bright, articulate, well-spoken and well meaning. They simply have not had the pressure on a Thursday night of knowing they had to make a payroll on Friday morning with no money in the bank. Nor have most of them ever been recipients of payroll checks in the private sector. This limits the tools they have to bring to the Presidency. That being said, I am sure that if elected they all would surround themselves with individuals who would enhance their own abilities. In my opinion, Trump has accomplished an amazing amount just by being an outsider from business, not politics, knocking on the door.
PERE: Do you have any concerns about Trump’s candidacy?
TB: No, because I’m not invested in that. I am concerned about the dialogue in America. I don’t have any skin in this game; there’s nothing that I want other than this dialogue of returning America to greatness through a renewed awareness that the business of America’s government should be a business.
PERE: What do people get wrong about Trump?
TB: I am an American Lebanese son of an immigrant and am very sensitive to the rhetoric. But these points of view of Trump as being incompetent and being just a blowhard are wrong. He is not a racist and in fact has Arab, Chinese and Mexican partners. He’s unbelievably capable. He is simply using hyperbole as a negotiation tactic to draw fences from which he will later step back in discussions and compromise with the various constituencies. He’s been entrepreneurial and self-promotional, but at the end of the day he knows how to run very complicated things and get deals done.