New York Attorney General Letitia James has filed a lawsuit against former president Donald Trump, seeking $370 million in fines and a lifetime ban from real estate business in the state.
However, Shark Tank star Kevin O’Leary argues that inflating property valuations for financial gain is common practice in the real estate industry and does not cause financial harm.
O’Leary said, “I don’t think this thing will ever survive appeal regardless of what the fine is. This doesn’t even make sense.”
He continued, “If you’re a developer and you’ve got a building on the block, anywhere in America, and it’s worth, let’s say, $500 million, and you want to build a building right beside it, you go to the bank and say, ‘This building is worth $500 million. I’d like to borrow a construction finance loan against this asset, and I want you to tell me it’s worth $500 million, too.’”
“However, the bank might not agree with the valuation — it might value the property at $400 million. This would lead to negotiations. According to O’Leary, developers aim to present their assets ‘in the brightest light’ possible to maximize their valuation since loans are typically 40% to 50% of the asset’s value,” explained the Shark Tank star.
He believes that this lawsuit reflects a broader industry issue rather than an isolated incident.
“Forget about Trump, every single real estate developer everywhere on earth does this. They always talk about their asset being worth a lot and the bank says no. That’s just the way it is,” revealed O’Leary.
“Who lost money? Nobody. The bank got paid back the construction finance loan, and a new building was built,” explained O’Leary.
O’Leary warned, “If you’re going to sue this case and win, you’ve got to sue every real estate developer everywhere.”
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