JPMorgan Signals Debt Markets Are Trump’s Friend Right Now

(Bloomberg) -- Vornado Realty Trust is looking to refinance debt on two office towers -- one in San Francisco and one in New York -- that it owns with Donald Trump, a move that could provide hundreds of millions of dollars to the former president’s business.

Vornado, run by Steven Roth, has tapped JPMorgan Chase & Co. to lead a $1.2 billion loan for a complex centered around 555 California St., one of the tallest buildings in San Francisco. Proceeds will fund improvements to the buildings and return about $617 million to the owners, according to a marketing document obtained by Bloomberg.

A similar deal on 1290 Avenue of the Americas in Manhattan is in the works, Roth said this month, though it couldn’t be determined if that loan will also pay a dividend.

While Vornado is the majority owner of the properties, Trump’s 30% stake in the towers is the most valuable part of his portfolio, making up about one-third of his $2.3 billion fortune, according to the Bloomberg Billionaires Index. The refinancing -- and potential cash windfall -- comes months after several banks tied to the former president said they would no longer work with him in the fallout of the deadly Capitol riot.

Trump has at least $590 million in debt coming due in the next four years on other properties owned by the Trump Organization, more than half of which is personally guaranteed. Some of those properties, such as the company’s Washington, D.C., hotel and its golf resort near Miami, have suffered from plunging revenue during the pandemic.

“We are one of the most under-leveraged real estate companies in the country relative to our assets,” said Eric Trump, executive vice president of Trump Organization.

Trump and Vornado are benefiting from an opportune time to refinance property debt as the Federal Reserve keeps rates at record lows and the government pumps money into the economy. With few sources of reliable income across markets globally, investors have turned to the relatively higher yields of securities like commercial mortgage bonds. Demand has extended even to office towers, even with the lingering uncertainty over when workers will return.

Despite Covid-19 shuttering offices and turning San Francisco’s financial district into a ghost town for more than a year, Vornado and Trump’s campus of three properties was more than 90% leased as of February, according to the marketing materials. The main tenants of the property include Bank of America Corp. and Morgan Stanley.

The floating rate loan is for an initial term of two years, with an initial rate of libor plus 2%.

Vornado tried selling the two assets it owns with Trump last year, but shelved the effort after not reaching their pricing goals.

“We found investors to be uncertain, distracted, and handicapped by inability to travel,” Roth, Vornado’s chief executive officer, said in a letter to shareholders earlier this month. “As markets improve, we may well revisit other alternatives for these two buildings,” he added.

Roth said in the letter that Vornado is in the process of refinancing 555 California and that the same process for 1290 Avenue of the Americas is “on deck.”

Eric Trump described the properties as “arguably two of the best commercial assets anywhere in the country.”

Still for Vornado, the connection to Trump may not be that helpful. In February, Roth emphasized Trump’s limited role in the ownership of the two properties.

“His role in the buildings is totally passive,” Roth said on an earnings call. “He’s OK with that and I’m delighted with that.”

©2021 Bloomberg L.P.