Donald Trump drives a golf cart. (Photographer: Matthew Lloyd/Bloomberg)

Inside Trump’s Money-Losing Scottish Golf Paradise

(Bloomberg Opinion) -- Fresh off the NATO summit and before he meets with Russian President Vladimir Putin on Monday, President Donald Trump is expected to play at least a couple of rounds of golf this weekend at Trump Turnberry.

Turnberry is a venerable British Open course that Trump purchased in 2014 for what was reportedly about 36 million pounds (or $63 million at the time) in cash. He then renovated and relaunched it over the following two years. It’s a breathtaking property that borders choppy, gray seas, and features fairways swollen with undulating turf, knotty roughs and sprawling greens.

Despite its virtues — and despite financial disclosure forms the president has filed in the U.S. suggesting otherwise — Turnberry appears to have largely lost piles of money. That makes it a lesson in the strengths and weaknesses of the president’s instinctive and haphazard approach to business and politics, reminders of longstanding problems that have dogged him throughout his career, including financial conflicts of interest that have taken on new traction with his ascent to the White House.

According to corporate filings in the U.K., Turnberry lost $36.1 million in 2016 (the most recent figure available) on revenue of just $12 million. The operation’s debt load nearly doubled between 2015 and 2016, according to the filings. Turnberry has also been the subject of congressional hearings that included testimony speculating about how Trump arranged financing to buy that course and fund his others in Scotland and Ireland. Eric Trump, the president’s son, has been quoted as saying that some of his family’s funding for its golf business came from Russia (Trump fils disputed the account).

The Washington Post recently took a close look at the $400 million in cash that the Trump Organization spent on acquisitions between 2006 and 2015, a period that included the Turnberry purchase. Trump has historically been loath to put his own funds into any deal, preferring instead to borrow money, so deciding to change course and lay down piles of cash was curious. Eric Trump told the Post that none of the cash came from outside investors or from selling other Trump properties. Instead, he said, the family’s existing businesses — a handful of commercial buildings in New York and some licensing deals for Trump-branded hotels and apparel — gave them all the “incredible cash flow” they needed.

Perhaps. But that explanation runs up against the fact that the Trumps also unsuccessfully tried to borrow money from a major Scottish bank in 2008 and 2009 to buy and redevelop a landmark hotel in St. Andrews, Scotland, according to reporting last month from The Scotsman.

Trump could clear up some of this confusion about Turnberry and his sources of income by releasing his tax returns, but he has refused to do so. It’s also a topic of discussion that’s unlikely to go away. Investigators working for Robert Mueller, the special counsel who’s looking at possible links between Trump’s campaign and Russian meddling in the 2016 election, are reportedly examining whether Trump associates laundered financial payoffs from Russian officials by channeling them through offshore accounts.

Regardless of how Trump funded the Turnberry purchase, there’s another possible explanation for why he jumped into that transaction so quickly and eagerly: love.

Trump is a golf fanatic with a low handicap, a bespoke enthusiasm that occasionally compels him to zip his golf cart across greens and tees, and a passion for ownership that’s had him expanding his golf holdings even as the industry around him shrinks.

While golf course development is small beer in the world of authentically big businesses, it’s a family affair for the Trumps. The president’s two eldest sons still oversee the president’s golf portfolio and have flown to locales like Dubai with taxpayer-paid Secret Service protection as they tend to the family fortune.

Golf courses typically tend to be boutique businesses that aren’t wildly profitable, particularly for owners who take on the costs associated with developing a club from scratch. Turnberry, an established course, generates modest revenue that would only classify it as the smallest of small businesses in the U.S.

The first two courses Trump launched were successful, particularly the club he opened in Bedminster, N.J., in 2004. Bedminster gave Trump the golf bug and now he owns or operates 16 courses, most of them in the U.S. The majority became part of his portfolio after the mid-2000s and his timing was bad. Golf participation, overall, began booming in the 1980s and 1990s before peaking and then plateauing around 2003. It’s now a business in decline.

No matter, because throughout Trump’s career, whenever he has fallen for a property, he has fallen hard. After overpaying for the Plaza Hotel in 1988, for example, he took out a full-page magazine ad likening the most expensive hotel purchase in history at the time to something more than a deal.

“I haven’t purchased a building, I have purchased a masterpiece — the Mona Lisa.” Trump said in the ad. “For the first time in my life, I have knowingly made a deal that was not economic — for I can never justify the price I paid, no matter how successful the Plaza becomes.”

Trump put the landmark hotel into bankruptcy four years later.

Trump has discovered his inner artist in Scotland, too. “Look, there’s no place like Turnberry,” he said in 2014. “It’s the greatest canvas in the world.”

Unlike the Plaza deal, Trump appears to have paid a reasonable price for Turnberry. He also approached enhancements to the links with care, adding new holes and improving others as he worked toward making a great course even better.

Turnberry, which opened in 1906, has hosted four British Open championships. The centerpiece is the Ailsa Course, which clocks in at 7,448 yards. A 192-room Edwardian hotel that opened when Turnberry did sits on a hill above Ailsa.

Although grand, gorgeous and one of the world’s top golf courses, Turnberry hasn’t been a reliably profitable business for decades. Starwood Hotels & Resorts, frustrated with the business, sold Turnberry to Leisurecorp, an investment vehicle controlled by Dubai’s royal family, for about $100 million in 2008. Six years later, Leisurecorp sold Turnberry to Trump for about $63 million.

"I paid all cash. I then spent a tremendous amount of money on renovating the hotel and the golf courses," Trump told Reuters in a 2016 interview. "It’s incredible."

Residents in Ayrshire, the county where Turnberry is located, worried that the president might Trumpify the property by layering a casino aesthetic across it. He didn’t, but did give Turnberry some Trumpy embellishments.

He hung an oil painting of himself in the lobby. The restaurant offers Trump-branded wines at steeper prices than better European vintages on the menu, and he has installed two gigantic, out-of-context Romanesque fountains adorned with lions on the grounds. An 8-foot-by-10-foot chandelier hangs in the hotel’s main stairwell, and Trump’s contractor explained in a promotional video that the reason the Trump team liked it was because it was made by a guy “in New Jersey” who “designed and built the world record-largest chandelier.”

Trump has said he has poured 200 million British pounds ($265 million) into his Turnberry makeover. But his own general manager for the resort has contradicted him, saying in news interviews that the figure is closer to 140 million pounds ($185 million). Even that figure is artificially high because it represents investments Trump has pledged, not what he has actually spent. And, by the way, that figure is padded to begin with because it also includes Trump’s purchasing price for the property.

An examination of local building permits by The National, a Scottish publication, showed that Trump’s spending on Turnberry appeared to be fraction of what he claimed.

When Trump and his children attended the ribbon-cutting ceremony marking Turnberry’s renovation in the summer of 2016 (the last time Trump was there prior to this upcoming visit), the presidential candidate was greeted by local protesters and social media catcalls. Some of that hostility surfaced back then because Trump had congratulated the Scots on the U.K.’s decision to leave the European Union, even though Scotland overwhelmingly voted against Brexit. (“We voted remain, you polyester cockwomble,” advised one Scottish observer on Twitter.)

Several months later, joined by British Prime Minister Theresa May in his first press conference with a foreign leader after becoming president, Trump referred to his ownership of Turnberry while answering questions about his pledge to forge a new U.K. trade deal — unfortunate framing given the concerns then (and now) about potential conflicts of interests involving public policymaking and the president’s businesses.

For example, Turnberry received tax breaks from the Scottish government after Trump became president, although those were rescinded after local critics pointed out that the breaks were meant to boost smaller hospitality businesses.

The Scottish government has also drawn attention for considering steering business to Turnberry as part of its courtship of the U.S. military. The Scots reportedly want the U.S. to continue using Prestwick, a nearby, government-owned airport, for refueling stops and other purposes. The airport’s managers have also emphasized their operation’s ties to Turnberry to boost its bid to become a NASA spaceport, according to reporting in the Guardian. (Nicola Sturgeon, Scotland’s first minister, described the “so-called revelations” in the Guardian as a “load of bunkum.”)

Conflict of interest issues involving the Trump Organization’s golf ventures will remain a problem for the Trump administration. Even if golf isn’t a huge business, it’s a meaningful one for the president and his family. Foreign governments and businesses courting Trump’s favor are likely to be well aware of that.

Trump has an incentive to get a helping hand on some of his courses if his money-losing Scotland operations are a guide. The president also has tried to find ways of putting a better face on Turnberry, including filing misleading financial disclosure forms with the Office of Government Ethics.

His disclosure form last year, for example, pegged the president’s income from Turnberry at $14.5 million. Trump’s most recent disclosure, filed in May, showed Turnberry generating $20.4 million in income for the president in 2017. The financial disclosure forms Trump has filed in Scotland don’t suggest that Trump would be able to pull in that kind of money from either course given their modest revenue streams and annual losses.

Bloomberg News reporters have previously noted that earlier financial disclosure forms filed by the president suffered from similar problems. When they asked Trump in early 2016 about discrepancies appearing in those records, he told them that the U.S. forms — which are unaudited and simply rely on the president’s own assessment of his holdings — weren’t meant to convey actual earnings but, instead, “projected future income.”

In the meantime, Trump will have to mend some fences if he plans on drawing the kind of championship play that would help improve Turnberry's finances. The Royal and Ancient Golf Club of St. Andrews, one of professional golf’s august ruling authorities, has said it won’t allow Turnberry to host upcoming British Open championships due to Trump’s disparaging comments about Muslims, Chinese, Mexicans and women.

During a last-minute press conference on Thursday as Trump was about to depart the NATO summit in Brussels, reporters asked the president to talk about the Brexit debate in the U.K. That gave him an opportunity to promote his business. “I’ve been reading a lot about Brexit and it seems to be going a little differently recently,” he said. “It’s not for me to say, I own a lot of property there and I’m going to Turnberry in Scotland, which is a magical place.”

Protesters are reportedly planning to greet Trump when he surfaces in that magical place this weekend. The Scottish government has tried to make nice about all of it. Sort of.

“Scotland has deep and longstanding ties of family, friendship and business with the United States, which will continue to endure,” it said in a statement about possible protests. “At the same time, we will not compromise our fundamental values of equality, diversity and human rights, and we expect these values to be made clear during the presidential visit to the U.K.”

The protests aren’t likely to bother Trump. His visit to Turnberry amounts to free publicity for one of his prized businesses and the cost of getting him and his golf clubs to the Scottish coastline will fall on U.S. taxpayers. And — take that, U.K. — the cost of fielding the 5,000 or so police officers needed to protect him while he’s staying at Turnberry will be picked up by British taxpayers.

First of two columns about Trump’s golf courses in Scotland. Read the second column here.

©2018 Bloomberg L.P.