Former President Trump’s real estate firm used an “inflated” valuation of one of its New York properties to obtain a multimillion-dollar tax break in 2016, the attorney general has charged.
In court documents filed this week, Attorney General Letitia James (D) alleges an evaluation of Trump’s Seven Springs property in Westchester County, NY, was based on “questionable assumptions” about its development prospects. The estimate, James said, claimed that more than twice as many homes could be built as allowed under restrictions.
The Cushman & Wakefield appraisal valued Seven Springs at $56.5 million, two decades after Trump bought it for $7.5 million. He then received permanent preservation relief — a promise never to develop the property — in exchange for a “multimillion-dollar benefit” on his federal taxes, James said.
The allegations are part of a lengthy petition James filed in state court in New York City this week, demanding that Trump be forced to give affidavit in their wide-ranging probe into the financial and business dealings of the real estate mogul and former president do.
James said Trump and his children, Donald Jr. and Ivanka, are closely involved in the matters at hand, including frequent communication with employees working on the Seven Springs plans and the firing of a consultant on the project.
The court documents cite a speech Trump gave to the National Association of Realtors in 2019, in which he falsely complained about how federal wetland regulations were impeding development of the property. James says the comments are evidence that Trump, who owns 100% of the Seven Springs property, was personally involved in its development.
“To date in our investigation, we have uncovered significant evidence that suggests Donald J. Trump and the Trump Organization mispriced and fraudulently valued multiple assets and misrepresented those values to financial institutions for economic gain,” the attorney general said in one Explanation. “The Trumps must comply with our lawful subpoenas for documents and testimony because no one in this country can choose whether and how the law applies to them.”
years of struggle
After purchasing the property in 1995, Trump attempted to develop first a golf course and then a luxury residential community. Seven Springs is a 216-acre estate and mansion built by financier Eugene Meyer a century ago.
Trump encountered numerous hurdles at several stages of development, including local resistance and concerns about the impact on neighboring Byram Lake drinking water reservoir. The three cities on which the property is located agreed on a slimmed-down residential plan before the 2016 easement.
During his presidency, Trump complained that federal wetland regulations prevented his development of the property, saying in the 2019 National Association of Realtors speech, “You would have a puddle on your land, and they would consider it one of the big ones.” lakes of the world.” Local zoning codes, however, posed the biggest challenges for development (Green cable, May 20, 2019).
Michael Gerrard, a professor at Columbia University Law School, represented the city of Mount Kisco in a 2004 lawsuit against the Trump Organization over concerns that developing a golf course on the property would result in pesticide contamination of Byram Lake.
He doesn’t recall the value of the Trump property that came up during that lawsuit, though Trump constantly threatened to build homes on the property if the golf course idea failed.
Gerrard represented other clients looking to develop properties in nearby Bedford, NY in the 1990s and early 2000s and says it’s common knowledge that “Bedford residents are interested in preserving the rural character of the area.” and that strict environmental and zoning regulations apply there.
Indeed in 1999 when The New York Times Writing an article about a dispute between Bedford and one of Gerrard’s clients, an elite private day school that wanted to build a new high school on more than 100 acres, the Gray Lady described the residents of Bedford as “almost as protective of the semirural character of the city as they are from their own children.”
“All real estate developers have long known that building significant projects in Bedford requires a lengthy environmental and zoning assessment process,” Gerrard told E&E News.
James said the biggest hurdles to development were not considered in the 2016 inventory. Trump Organization officials didn’t tell Cushman’s reviewers about limitations on the number of homes that could be built, road access issues and local restrictions on how many homes could be built at one time.
This meant appraisers considered the company’s plans to build 24 homes, but in reality only 10 could be built, which “would be a significant issue relevant to the value of the property – and in all likelihood would have reduced the appraised value.” ‘ James said in his filing, paraphrasing the testimonies of reviewers.
The fewer homes would cut the value of Seven Springs by about half and severely limit Trump’s tax break, according to the attorney general’s filing.
James further alleged that Trump’s annual “financial statements” — estimates of his net worth given to investors, banks and others — included further inflated values of Seven Springs, as well as some other properties.
Despite the $7.5 million purchase price and Cushman’s estimate of $56.5 million, Trump claimed the property was worth $291 million as of 2014.
That same year, another of Trump’s sons, Eric, gave an interview forbes on the property and described the family as “always building”. But Eric Trump described uncertainty in plans to “build 14 homes” on the property.
“Whether we actually build those 14 houses is another story,” he said. “We’ll see when and how and ultimately if we go ahead with this plan.”
Subsequent statements did not include specific values for Seven Springs and placed it in an “other assets” category, which James said “helped disguise a significant fall in value” of the property.
LA golf course
James’ petition also alleges the Trump Organization used an inflated valuation of part of the Trump National Golf Club Los Angeles to obtain an additional tax break. The company valued $25 million on land it had donated for a conservation easement.
The evaluation “materially overstated the value of the Trump Golf LA donation by overstating the speed at which the site was able to be developed and by not evaluating a reduction in affordable housing needs made possible by the donation,” which is what Trump brought in millions of dollars in tax breaks, James said.
A Trump spokeswoman fired back after the release of her allegations against James.
“The only one misleading the public is Letitia James. She betrayed New Yorkers by basing her entire candidacy on a promise to get Trump at any cost, without seeing a shred of evidence and in violation of every ethical rule imaginable,” the spokesman said. “Your allegations are unfounded and vigorously defended.”
Efforts in Congress to address the abuse of conservation tax breaks have accelerated in recent years. Lawmakers from both parties have, among other things, been looking for ways to stop inflated valuations (E&E News PM, August 25, 2020).