Trump Organization Slashed Rent For Gucci, Its Biggest Tenant, By Estimated $7 Million A Year

Around the time that the pandemic set in, Gucci renegotiated its Trump Tower lease, apparently taking the artist of the deal to the cleaners.

At the corner of Fifth Avenue and 56^th Street in midtown Manhattan stands a storefront with three stories of glass windows. It’s the sort of real estate that for years drew big-money shoppers and, therefore, astronomical rents. But the market for such properties has soured, thanks to the rise of online shopping and surprise of Covid-19. Landlords in the neighborhood are hurting, including Donald Trump, who owns this particular location at the base of Trump Tower.

Gucci opened the space in 2008, after agreeing to pay Trump about $20 million a year until 2026. No other tenant in Trump’s portfolio paid anywhere near as much money. Six years before that deal expired, however, the retailer reworked its agreement, apparently getting the best of its landlord. A new analysis of court documents suggests that Gucci’s annual rent plunged from roughly $22 million before the pandemic to about $15 million today, impacting one of the former president’s most important cash streams.

The renegotiation took place in 2020, though the exact month remains unclear. Covid-19 shut down the country in March of that year, creating an enormous challenge for both Trump’s presidency and for his real estate firm. In March and April, the president’s clubs and hotels furloughed or fired over 2,400 workers. Even though Trump had handed off day-to-day management of his business to his sons Eric and Don Jr., the president was clearly aware of the issues. “I wouldn’t say you’re thriving when you decide to close down your hotels and your businesses,” he explained from the White House briefing room.

With Gucci’s lease set to expire in 2026, Trump ideally would have been able to wait out the pandemic and then renegotiate the deal once the real-estate market stabilized. But the Trump Organization faced pressure to act faster. In June 2020, the president’s personal balance sheets listed just $93 million of cash on hand, and he owed $100 million against Trump Tower as part of a loan maturing in September 2022.

Rather than try to pay off the debt with cash, the Trump Organization decided to refinance, making the Gucci lease a pressing concern. Gucci’s estimated $22 million of annual rent represented roughly two-thirds of the money flowing into the building. The next-largest tenant was likely only paying $2 million a year or so. Any lender would surely prefer to be comfortable with the Gucci lease before extending new debt.

“Having leases that are due before the maturity date of what you’re trying to negotiate is a big problem, especially if it’s two-thirds of the building’s cash flow,” says Nancy Wallace, a mortgage expert at the University of California, Berkeley’s business school. “So you would want to have a longer lease because I can’t imagine any bank would talk to you without that lease in place.”

It makes some sense, then, the Trump Organization was willing to exchange big rent in the short term for stability in the long term, reworking the deal at what seemed to be one of the worst times imaginable. Gucci promised to remain in place for an additional 12 years.

With its biggest tenant was firmly locked in, the Trump Organization proceeded to refinance Trump Tower in February 2022. Axos Bank made the loan, offering a fresh $100 million to replace the maturing debt. “It is our practice to underwrite commercial mortgage loans based upon in-place current rents and current leases, including any lease modifications or extensions,” a spokesperson for the bank said in a statement.

Representatives of the Trump Organization and Gucci did not respond to requests for comment.