Tuesday, October 31, 2023
I’ve been thinking about the Trump trial in NYC.
And how an appraiser just might be the key witness of the entire thing. I’ll bet you didn’t have that on your bingo card!
Regardless of your political outlook on the presidential race, if you live and work in the world of real estate, you no doubt are somewhat interested in following the outcome of the trial in New York that centers on valuations of commercial real estate.
It’s with that interest that I’ve mildly kept watch on the case. It deals with questions of reps and warrants of multiple parties. What is kosher and what is not? Whose opinion should rule the day in property valuation estimates? What is the ultimate nature of risk?
This isn’t the first case in which estimated values of property have been stated differently by an owner based on the audience of the moment. It’s not the first case of a developer “splend-if-orizing” how far complete a project was at any given point in time. It’s not the first case of a lender relying on financial statements from a borrower that were … highly subjective.
But this is the first case I’ve followed that the testimony of an appraiser has played such a pivotal role, and with stakes so high. In a nearly made for TV moment on Tuesday, Oct. 17, testimony seemed to contain a bombshell that the Trump Org grossly misrepresented an outside appraiser’s opinion. Some even understood the testimony to mean that the Trump Org had falsely attached the name of Doug Larson to a valuation that he (Larson) did not actually conduct.
On Tuesday, it looked like very bad news for the defendant. Larson said the cap rates, comps and ultimate valuations were incorrectly calculated. It seemed pretty cut and dried. Doug Larson didn’t agree with the valuations that his name was placed over. It appeared as though Trump had fraudulently misrepresented that a third-party appraiser agreed with the values represented, in a move to further convince lenders and auditors that the values represented were legitimate. Game Over.
Larson said his opinion for one piece of real estate in question was in the neighborhood of $220 million,while the Trump Org represented its value at $540 million. Definitely not a rounding error.
However, on Wednesday, Trump attorneys cross-examined the appraiser, and the result is the court “erupted into chaos,” as one reporter described it, when one of the defense team members accused Larson of lying on the stand the previous day. Trump’s team produced an email exchange between appraiser Larson and the Trump Org controller from 2016 in which the controller asked Larson to provide a report on some of the buildings in question, following a process he had outlined in a generic email to clients previously. Larson maintained he did not remember conversing with the Trump Org specifically. Yet, Trump’s attorneys made much out of the seeming inconsistency and insisted that the witness be notified of his rights (regarding perjury).
After contentious arguments, the witness later returned, and over objections he clarified that he had not worked with the Trump Org in 2013 valuations, the year highlighted during questioning.
More is sure to come on this, and it will get more (not less) interesting. I offer this wild story to you as proof that no matter how boring what we do for a living in this business can seem when you’re at a cocktail party … sometimes we are quietly right at the center of some of the most notable and newsworthy of things. We just tend to do our work quietly and in the background. Thank goodness!
Until next time,
Mary Schuster
Chief Knowledge Officer
October Research, LLC