DONALD Trump's ambitious plan to transform an environmentally sensitive stretch of the Scottish coastline into a £1 billion golf resort would be a major risk for the tycoon's business empire, a leading financial expert told the Menie inquiry yesterday.
Iain Webster, a financial expert hired by the Trump Organisation to carry out a detailed review of the controversial project, revealed the firm would have to spend 600 million on the development over six years before receiving a single penny back in income.
He claimed that the massive resort scheme only stood to make a profit for the entrepreneur if the project included a development of 500 luxury homes.
Mr Webster also told the second day of the inquiry in Aberdeen that Mr Trump planned to invest a potential 12 million of his personal fortune in the project and that his organisation had already spent 1 million preparing for the inquiry.
The revelations came on the second day of the public local inquiry into the Menie estate development in Aberdeenshire.
Mr Webster, the head of corporate finance with Johnston Carmichael, one of Scotland's largest accounting firms, told the inquiry that he had analysed two separate scenarios. The first involved a development comprising the two golf courses, the construction of 36 golf villas, almost 1,000 timeshare holiday apartments and a five-star hotel with 450 bedrooms. The second included the construction of 500 privately owned homes, with price tags ranging from 250,000 to 1 million.
The inquiry was told that the potential cost of developing the main championship course at the Menie estate could be as much as 12 million.
Mr Webster revealed: "I am aware that what (Mr Trump] is planning to do is to fund the golf course development with his own money. That is the equity that is going into the business.
"Once that golf course is up and running, he will use the equity value to then borrow money to fund further stages of the development. He would gear up or borrow against the security of existing properties."
Borrowing would represent 90 per cent of the total funding of the project. Mr Webster said: "I regard it as a relatively high-risk project. This is one of the largest capital projects I have ever seen and, in any large-scale capital project, you have real risk in terms of your construction costs and potential over-run. There is a seven-year construction period; costs are likely to go up."
He explained that the cash "outflows" of the project would go on until 2014. "There are, in effect, six years of cash outflows, which aggregate to 500 million before the project generates its first year of cash inflow. That is risky. It is a big-risk project."
The cash outflow of 500 million excluded interest and tax likely to total 100 million. "The Trump Organisation will be paying out approximately 600 million at that point before they start to generate cash inflow from the operation," said Mr Webster.
He added: "I have concluded, based on the proposed outline planning applications, the project may only be attractive to investors if the element of residential development is undertaken as part of the overall development."
The inquiry continues.