U.S. Markets closed

Exclusive: Donald Trump’s brand is taking a hit

Rick Newman
Senior Columnist

In Chicago, some embarrassed residents of the tony Trump Tower give their street address or say they “live by the river” instead of naming the building they live in to avoid association with Republican presidential candidate Donald Trump. In New York, media commentator Keith Olbermann declared, “I can’t stand to live in a Trump building anymore,” and said he’s moving out after “nine happy years.” And online, thousands of Trump protesters have called on retailers such as Starbucks (SBUX), Nike (NKE) and Gucci to move out of Trump buildings.

Trump revels in such controversy, of course, and often finds ways to turn it to his advantage. But there’s new evidence that Trump’s combative demeanor as a presidential candidate, combined with inflammatory statements about Muslims, Mexicans and other groups, may be financially harming the brand Trump has spent more than 30 years carefully crafting.

Redfin, the national real-estate brokerage, conducted an analysis of Trump condominium prices for Yahoo Finance and found that the value of Trump properties has suffered as Trump’s fame and notoriety has spread. A separate analysis by StreetEasy, an online real-estate search service, shows Trump properties are holding their own in the developer’s home market of New York. But Yahoo Finance also examined nightly rates at Trump hotels across the country and found modest discounts there too, compared with other luxury brands. On the whole, it appears Trump’s rambunctious presidential campaign isn’t helping his brand at all—and is hurting it in some areas.

Before Trump became a candidate, Trump properties bearing his name had a significant pricing advantage over other properties offering the same range of amenities—the “Trump premium,” as some in the industry referred to it. But that pricing advantage has disappeared this year. “We found that Trump units would fetch more than the competition in 2015,” Redfin analyst Taylor Marr told Yahoo Finance. “We can no longer attribute any pricing differential to Trump’s name being associated with the properties we studied.”

Redfin compared the value of condos in Trump buildings, which are typically at or near the peak of the luxury market, with similar buildings no more than half a mile away in nine different markets: three suburban communities north of New York City, Jersey City, N.J., Hollywood Beach, Fla., Sunny Isles Beach, Fla. Chicago, Las Vegas and Honolulu (Waikiki). The analysis controlled for size, number of bedrooms and bathrooms and other factors. (The full methodology is here.) Overall, the analysis covered sales of 161 Trump units and 920 comparable properties.

Here’s a summary of the Redfin findings. The Trump premium is the amount Trump properties sell for, above comparable units:

Source: Redfin

Redfin considers the 2016 Trump premium numbers to be statistically insignificant, which means if Trump properties have any pricing advantage, it’s very unlikely it’s due to the Trump brand. That means there is essentially no Trump premium anymore in the nine markets Redfin studied. The Trump name, as famous as it may be, no longer boosts property values.

In prior years, before Trump became a politician, Trump’s name could boost values by as much as 70%, according to court filings and other documents reviewed by Yahoo Finance. In court depositions, Trump himself attributed that premium largely to the fame he gained as star of the reality TV show, “The Apprentice.” The rising value of his name as a brand allowed Trump to license his name to projects run by others for millions of dollars and move away from the riskier work of constructing, financing and marketing buildings. These days, the majority of “Trump” buildings are owned by someone else.

Here are a couple examples of the comparisons Redfin made as part of its analysis. In March of 2015, a two-bedroom condo on the 53rd floor of Chicago’s Trump Tower—which Trump does own—sold for $1.675 million, or $1,046 per square foot. Two months later, a similar luxury condo on the 39th floor of 600 N. Fairbanks, about eight blocks away, sold for $1.4 million, or $822 per square foot. The 2015 Trump premium: $224 per square foot.

The story changed in 2016. In early June, a two-bedroom Trump Tower condo on the 33rdfloor closed for $1.9 million, or $795 per square foot. The next day, a slightly smaller two-bedroom on the 39th floor at 600 N. Fairbanks closed for $1.2 million, or $781 per square foot. The 2016 Trump premium: a mere $14 per square foot. The two sets of transactions aren’t exactly analogous, but they illustrate the change in the relative value of Trump properties.

Currently, 40 of the 486 units at the Trump Tower in Chicago are for sale, according to agent Susie Schechtman of Conlon Real Estate. That’s fewer than 10% of the total, but the number of units on the market seems to be going up. There were only 53 closings at Trump Tower during the last 12 months, so the 40 for sale now suggests a heightened pace of selling. “That shows you there’s a higher percentage of owners looking to sell or rent out their units,” Schechtman says. “People are probably choosing to go to other buildings.”

None of this data proves that the controversy Trump has stoked as a presidential candidate is causing the erosion of the Trump premium. Other factors could play a role. In Chicago, Trump Tower was one of the first luxury residences of its sort, but others have since gone up, giving buyers more choices. And a volatile stock market and economic turmoil in Europe and Asia could be crimping demand from foreign buyers.

Redfin didn’t have data for New York buildings, but a separate analysis by the local firm StreetEasy suggests Trump properties are doing better in his hometown than in the rest of the country. The StreetEasy “Trump Index” shows that during the last 12 months, the median sale price of Trump properties has risen by less than properties overall in New York City, but more than other luxury properties. On rentals, the Trump Index has outperformed the overall market but underperformed other luxury units. On the whole, it’s a wash.

An analysis of hotel rates supports the Redfin findings, showing a modest discount at Trump hotels compared with competing properties. Yahoo Finance checked rates at seven Trump hotels in the United States and compared those with other nearby hotels that have the same star rating on Hotels.com. For a three-day long weekend in August, the average advertised nightly rate at a Trump hotel was $44 lower than at comparable hotels. For a three-day weekday stay in mid-September, the Trump properties were $68 cheaper, on average. These are the average price differences between Trump hotels and other nearby hotels with the same rating, which in most cases is five stars:

Source: Yahoo Finance analysis of booking data provided by Hotels.com

Hipmunk, an online travel site, found a sharper drop in business at Trump hotels earlier this year, when it compared bookings for the first quarters of 2015 and 2016. Overall, bookings at Trump properties fell by 59%, though that may have been affected by a big stock-market swoon during the first six weeks of 2016. Hipmunk users also tend to be young city-dwellers who may not have the cash for a Trump-level stay in the first place.

For savvy consumers not bothered by the Trump name, discounts may await. At the five-star Trump International Hotel in Las Vegas, rooms in August go for as low as $129 a night—far less than the Wynn, the Venetian or the Palazzo. And in Toronto in August, you’ll pay $471 per night at the Ritz-Carlton and $400 at the Four Seasons—but just $238 at the Trump International, which rates just as high. Given Canadians’ sour attitude toward Trump, the price could go even lower if he actually wins the presidency.

Rick Newman is the author of Rebounders and Liberty for All. Follow him on Twitter: @rickjnewman.