Thread by @DanAlexander21

1/ I’m at the court house in Manhattan again this morning to watch the New York attorney general’s fraud case against Donald Trump.

Also in attendance: the former president. Follow along here for updates all day.

2/ Doug Larson, who valued Trump's 40 Wall Street, is fielding questions from Trump's team about appraisals he conducted on the property. Trump valued it even higher than those appraisals--but Larson's numbers were already too high. Let's do some math.

3/ The net operating income that Larson used to calculate the value of 40 Wall Street in 2015 was about $23 million, he is testifying. But SEC documents say that the actual NOI at the time was lower than that.

4/ When lenders are analyzing commercial real estate loans, they scrub the financials and come up with an underwritten net operating income, often by making adjustments to the actual profitability figure. That's what happened here, and you can see why below.

5/ These adjustments were largely about what would happen to the net operating income in the future. So, what did happen in the future? Here's what the SEC docs say:
2016: $17.4M
2017: $20.4M
2018: $20.7M
2019: $18.1M
All well short of the NOI used in Larson's appraisal.

6/ Then covid-19 hit, and things got uglier.
2020: $14M
2021: $12.7M
All of which is to say that this appraisal was based on an overly rosy profitability figure. The final valuation, therefore, wasn't too low--as Trump claimed--it was too high.

7/ Despite all of this, Trump's team is trying to make the point that "banks tend to be very conservative." Larson, the real estate pro, responds, "Not always."

8/ Interesting: Trump's lawyer suggests that the former president sold his hotel in Washington, D.C. for $389 million. That's a different figure from the $375 million that has been widely reported.

9/ Trump's lawyer is now arguing that it's difficult to value trophy assets. He's praising Trump's properties, in front of Trump. At one point, he refers to the "Tiffany location," which was the subtitle of the chapter about Trump Tower in The Art of the Deal.

10/ Larson is off the stand. Now testifying: Jack Weisselbeg, the son of Trump's former CFO Allen and an employee at Ladder Capital, a big Trump lenders. Ladder's CEO told me Jack works in sales and "has zero capital commitment authority at my company." We'll see what he says.

11/ We're back after the lunch break. Trump is still in the courtroom, sitting with his legal team. Jack Weisselberg reenters the room and takes his seat in the witness chair.

12/ Jack Weisselberg explains how real estate debt gets securitized. His firm, Ladder Capital, often pools together loans and sells them to the market as bonds. This is what they did with Trump's debt at Trump Tower, 40 Wall Street, and the Trump International Hotel & Tower.

13/ Jack Weisselberg says he doesn't know who ultimately buys the bonds. It could be pension funds or other investors. Basically, lots of random people held Trump's debt. I'd guess a lot of them didn't even realize that they were Trump's creditors.

14/ When asked about his contacts in the Trump Organization, Jack Weisselberg confirms the obvious: "That would be my father." Former Trump CFO Allen Weisselberg, that is.

15/ Now we're looking at 2011 emails between the Weisselbergs, discussing a potential loan at Trump Tower. Allen: "We are looking for a forward commitment in the amount of $65 mil., and a term of ten years to take effect in August 2012."

16/ The Trump Org ended up with a loan that started in August 2012 and lasted 10 years, just as Allen had suggested. But Ladder provided even more money, $100M instead of $65M. Here's a snapshot of the bond prospectus. Trump personally pulled out $68M as part of the deal.

17/ I covered this particular loan--and the history of Trump Tower--in a feature story published earlier this year. Headline: "Donald Trump Has Been Lying About Trump Tower For Decades" forbes.com/sites/danalexa…

18/ Donald Trump is sitting ~15 feet from Jack Weisselberg as he testifies, next to attorney Chris Kise. I can't see his facial expression because I'm probably about 30 feet behind them, with a direct view of the mane. Trump is shaking his head every once in a while.

19/ Interesting: On the screen is an email from Jack Weisselberg, which appears to be referring to Trump. "They are skittish on a CMBS loan," it says. "He’s also nervous about Gucci’s rent becoming public knowledge, as he tends to embellish from time to time."

20/ The AG's office asks Jack Weisselberg if there is something about a CMBS (commercial mortgage backed security) loan that would make financial information become public. "Yes," Jack answers. Indeed, he's right. Here's the public document, showing Gucci's rent.

21/ Now they are turning to 40 Wall Street. The history of that building--including its debt--is in this story, published last year. Headline: "Exclusive Recording, Documents Bolster Trump Fraud Lawsuit." forbes.com/sites/danalexa…

22/ Something important to know about 40 Wall Street: Trump does not own it outright. He has what's called a leasehold, which means he has to pay rent to the family that owns the land while he operates the building. On Jan. 1, 2033, the rent Trump owes appears set to skyrocket.

23/ We're on a brief break now. Be back shortly.

24/ We're back. The AG's office is zeroing in on the ground lease at 40 Wall Street, questioning Jack Weisselberg, who is both a sales guy at one of Trump's lenders (Ladder Capital) and the son of former Trump CFO Allen Weisselberg.

25/ We're looking at an email from Jack Weisselberg to the people at Ladder who would ultimately approve the 40 Wall Street loan. They knew the ground lease was a problem. "We believe the payment will increase to roughly $16.4 million in 2033."

Let's do some math.

26/ Last year, Donald Trump owed $2,315,000 of ground rent at 40 Wall Street. An increase to $16,400,000 would be $14,085,000 higher than last year. That's a big problem for Trump. You can see here that his net operating income in 2022 was just $12,537,460.

27/ Put it another way, if Trump's ground rent were $14.1M higher last year, this property would have LOST $12.5M - $16.4M = $3.9M. And that's before making any debt payments. This Ladder Capital loan is due two years from now. Trump needs to turn things around quickly.

28/ The problem isn't that Trump will fail to make his payments in the short term. It's just hard to imagine lenders jumping to refinance his debt. Why would anyone want to write a big loan against a property that might be bleeding money soon?

29/ We're getting close to the end of the day. Attorney General Letitia James, sitting on the right side of the court room, pulls out a little mirror and appears to be checking her makeup.

30/ Waiting outside the courthouse, where we expect Attorney General Letitia James to make a statement shortly.

31/ The attorney general with the final words of the day. Thanks for following along, everyone.