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Customers like family businesses and feel better about giving them their money, even — and in the US especially — if they are already stinking rich and famous. Family companies have a more direct relationship with their customers.
“We have an identity. At Four Seasons or Ritz-Carlton, there’s no one really to identify with,” says Ivanka Trump, daughter of the famous Donald Trump. “If someone has a complaint, they literally write ‘Dear Donald Trump’.”
Private equity likes family businesses too. Most private equity firms partner with a business for five years or less, and they like a mature company. The fourth generation Smucker who is also the CEO, told me that he does the day-to-day decision making but he has professional managers for running the value chain and private equity to assist with strategy and financial engineering. Once family business owners understand that they are the biggest asset, hey can relax and plan for the next generations to get involved, even if that means not being in the business but being the custodian of wealth. Coke, Wrigleys, Firestone are all family business brand names that have passed down generations and are run by professionals but families have control, ownership or a blend of the two. People trust family businesses and they are the celebrities of business.
The Trump family is teaching a whole new wave of what it means to be a family business. Being a famous family business also saves money on marketing. Trump SoHo gained instant prominence in 2006 when Trump unveiled it on The Apprentice. The Trumps do not need to pay celebrities to attend their glitzy launch parties because they are the celebrities. When a new building or hotel opens, Ivanka does a profile “here” or a photoshoot “there”.
Even Don Jr pitches in. “I offer to get into the G-string, too. I’ll do whatever I can for the bottom line.” Trump’s brand strength also means he can license his name and manage hotels but get developers to pay for the construction. Trump is notorious for risking little of his own money upfront. And, of course, there is the F factor — family.
As products of obscene wealth and self-absorbed, pathologically competitive parents whose marriage collapsed on the front pages, Don Jr, Ivanka and Eric are prime candidates for dysfunctional, useless brats. And even if they can write their names in the sand with a stick, can they work together? For every successful family firm out there — Walmart, Viacom, Rothschild — there’s a Gucci. The Florence-based fashion house imploded when relations between family members got so bad one tried to murder another.
So, how are they doing in SoHo? It is a Wednesday morning in Manhattan and Don Jr, Ivanka and Eric are meeting the Trump Hotels’ boss, Jim Petrus, for a hotel performance review. Rooms are shifting, but not at the $500-plus a night Trump had hoped to be able to charge. The rate is less than $400. But SoHo is near Wall Street and Petrus hopes to sign lucrative corporate accounts. “We’ve 32 signed,” he says, reeling off a list of most of the blue-chip banks. While hotel rooms are selling — at the right price — sales of condos in Trump SoHo are sluggish. In Trump Hotels there are usually some pure hotel rooms and some condos that buyers can use for a certain number of nights of the year. Only about a third of the 391 units in Trump SoHo “are now in contract”. Bank of America recently effectively wrote off a loan on the project for a fraction of its $75m face value.
Donald Trump Jr concedes that “the real-estate market is less than stellar”, but insists Trump is performing better than other developers. “We’ve refinanced debt and made deals with banks because we have a proven track record of success and because our product continually outperforms our competition.” He anticipates a boost in interest in condos in Trump SoHo now that the hotel is finally open. Few doubt the mini-Trumps’ determination to succeed. Listening to them, it is clear they have inherited their father’s creativity and determination — some would say ruthlessness — especially Ivanka. In a meeting to discuss hotel openings, it is she who says that any outside firm contracted to Trump must agree to put up its employees at Trump properties when they travel. “When I send them their first cheque, I’m like, ‘By the way, as part of your retainer, you’re gonna give us all your people!’” Later, the conversation turns to a client who needs “a smack”.
The top Trumps are so steeped in business that at times they say bonkers things. Asked how his wife, the model Vanessa Haydon, feels about him being away from home up to three weeks a month, Don Jr replies that she knew his schedule before she married him, or as he puts it, “She bought with full disclosure,” as if his wife were a Park Avenue building he had just closed on.
It is no surprise that they should act this way. It is all they have ever known. The Trumps were schooled in business before they started going to school itself. “From a very young age, my father would say, ‘Remember, don’t trust anyone,’” Don Jr recalls. “That sounded weird to a four-year-old. To test me, he would follow up with, ‘Do you trust me?’ I’d say, ‘Yes. You’re my dad.’ He’d say, ‘You’re an idiot!’” Later Don Jr began touring buildings with his father. “We never played catch or ball, but I saw him complain about ceiling heights.”
Don Jr, Ivanka another family business grows. Donald Trump is the daddy — and the boss. Donald Jr, Ivanka and Eric, his children, are his real-life apprentices. He wants them to take over his business. Will he end up telling them: ‘You’re fired!’
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