DONALD J TRUMP : N.Y.'s ‘Landlord’ May Be Shopping on the West Coast
On one side of the table was the head of a tenants committee and the group’s aggressive grass-roots lawyer. On the other side, Donald J. Trump, landlord, was airing out one of the most useful tools in his negotiating arsenal: his exceptionally ingratiating line of flattery.
“We met for a three- or four-hour lunch, and he spent the first two hours complimenting me,” recalled David Rosenholc, a lawyer who was more accustomed to dealing with thuggish slumlords than with the blond, honey-tongued, expensively tailored developer of multimillion-dollar high-rise aeries.
Rosenholc had fought Trump to a standstill over his attempt to evict the tenants of a distinguished old apartment house at 100 Central Park South in order to convert it into yet another brand-name luxury condo building. Trump’s managers had let the building services deteriorate, stripped the lobby of even its Christmas tree and brought innocent tenants up on rent non-payment charges.
As a result, the tenants stood to win a highly damaging and embarrassing harassment case against Trump.
As negotiations dragged on, Rosenholc took the floor and shut down the river of flattery with a blunt expletive. Soon after that, Trump capitulated with a settlement that gave the tenants even more rights than they might have won under a city order.
Not that Trump did not get in the last word. In his best-selling book, “Trump: The Art of the Deal,” he dismissed the tenants as people “for whom hardship is not being able to get a table on 30 minutes notice at Le Cirque,” New York’s toniest restaurant.
In any case, he wrote, he eventually made more than $100 million from 100 Central Park South and the building next door.
Thus did Donald Trump turn one of his few public relations disasters (New York magazine had featured the dispute under the headline, “A Different Donald Trump Story”) into yet another self-congratulatory anecdote for his best-selling autobiography.
Of course, no one would claim that Trump has ever been weak on self-promotion. Since 1980, he has been New York’s most visible and extravagant real estate man, plastering his name over Manhattan island like the label on a pair of designer jeans.
Now the question on people’s minds is whether Trump is preparing for a jump to the West Coast. What inspires the speculation is the announcement by MCA on Feb. 12 that Trump has disclosed a holding of $15 million of the huge entertainment conglomerate’s stock (less than 1%) and was considering buying as much as 24.9%.
Followers of the corporate raiding fraternity might not be so impressed, because in the course of making hundreds of millions of dollars on the stock of a handful of important hotel-, gaming- and real estate-rich companies during a two-year prowl of the stock market, he has only once mounted a genuine takeover. Some Trump followers speculate that he really has his eyes on MCA’s generous holdings of real estate in Southern California and Florida.
But it does appear that Trump’s name can work its magic on the stock exchange as well as on the New York housing market: MCA shares have risen more than 15%, to $46.25, since the Feb. 12 disclosure.
Trump has had close to a decade of experience in turning expectations and promotion into hard profits.
On Fifth Avenue, Trump Tower, with its glittering brass appointments and glitzy pink marble retail lobby, has long since replaced the staid marble mansions and apartment houses a few blocks further uptown as the popular symbol of luxury living. Across town, Trump Plaza has helped convert the Upper East Side from a neighborhood of townhouses and middle-class apartment blocks into an overbuilt community of high-rise pied-a - terre .
Moving afield, Trump stands likely to soon become the largest casino owner in Atlantic City, N.J., where his Trump Plaza and Trump’s Castle casinos are among the gambling town’s most heavily marketed and most successful. And now the developer, an owner of the New Jersey Generals of the defunct United States Football League (and moving force behind its ill-starred plan to compete with the National Football League on an autumn football schedule), is expressing interest in a bid for ownership of the NFL’s troubled New England Patriots.
He even maneuvered himself into a brief spot in the national political limelight by journeying up to New Hampshire late last year to give a speech on, of all things, foreign policy.
Trump’s theme, articulated simultaneously in full-page ads in the New York Times and Boston Globe, was that America should force its rich partners, including Kuwait, Saudi Arabia and Japan, to pay for the military protection they received from U.S. armed forces.
Speech, Then Speculation
Back in New York, he luxuriated in the speculation that he might consider a run for public office.
“I went up to New Hampshire,” he remarked during an interview, “and--you know what happened--we had the biggest reception of anybody. The fact is, I really agreed to do it for a friend, and simultaneously I took an ad which had nothing to do with the trip . . . and people started saying: the ad, New Hampshire. . . . Is Donald Trump going to be running for President?”
Reminded that, given the dynamics of American politics, any such activity in or around New Hampshire within a year or two of a presidential election has the appearance of politicking, Trump assumes an ingenuous and a transparent look of surprise and says: “You know what? I just found that out!”
The 42-year-old son of an old-line builder of subsidized housing in the middle-class residential boroughs of Brooklyn and Queens, Trump brought his father’s real estate empire into Manhattan soon after graduating from Wharton School of Business in 1968.
‘Big Step’ for Atlantic City
His first high-profile deal was the acquisition of the decrepit Commodore Hotel, hard by Grand Central Station and at the center of a neighborhood that, in the fiscal crisis year of 1975, had become shamefully run-down. Trump sheathed the granite hotel in a new skin of green glass, reached a management arrangement with Hyatt Hotels and reopened the building in 1980 as the Grand Hyatt. The hotel and the Grand Central district were reborn together at the start of the fiscal revival of New York in the 1980s.
Soon after that, Trump built Trump Tower and Trump Plaza, the buildings that made his name virtually a fashion trademark. At Trump Tower, nestled in a corner spot on Fifth Avenue next door to Tiffany’s, condominium apartments sell for as much as 25% more than equivalent units in other high-grade mid-town buildings, and 74% are purchased by corporations and non-resident investors.
If Trump has made his name in Manhattan, the place where he has truly made a mark is Atlantic City. He moved into the fledgling gambling city in 1978, while the Commodore reconstruction was under way, and took the unusual but prudent step of applying for and receiving a casino license before beginning work on a casino-hotel. The idea, he explained in a 1985 interview, was to prevent New Jersey authorities from insisting on costly construction changes on pain of withholding a license.
Trump won his license partly by exercising the self-confidence that has since become familiar to followers of the rich and famous everywhere.
His project, he told the Casino Control Commission, would be “a big step for Atlantic City” because the resort town “needs some pizazz.”
Trump began construction of his first casino without a financial partner; after he spent slightly less than $50 million, Holiday Inns in 1982 bought a 50% equity interest in the project for its Harrah’s subsidiary. The deal repaid all of Trump’s expenditures, covered all further costs and left him with a 50% interest.
Soon after that, he got a second big break in Atlantic City. Hilton Hotels, which had responded disdainfully to the state gaming commission’s questions about its relationship with reputed mob lawyer Sidney Korshak, was unexpectedly denied a license for its almost-completed Atlantic City casino-hotel.
Trump blames Barron Hilton, the chain’s chairman and the son of founder Conrad Hilton, for allowing the company to grow lax. “You hear the name Hilton and you think of the legendary Conrad Hilton, but Barron is not from the same cloth,” he said in an interview. “He was a member of the lucky sperm club.”
In any event, Hilton’s loss was Trump’s gain; he took the costly casino off the company’s hands virtually at cost and reopened it so fast that the Hilton name was still imprinted on the slot machines. Today, known as Trump’s Castle, its revenue growth has consistently remained among the top five of Atlantic City’s 12 casinos.
Soon after the Hilton acquisition, Trump bought out Holiday Inns’ share of their partnership. Holiday Inns, appalled at the prospect of its own Atlantic City partner opening a second, competing casino, at first tried to enjoin Trump from putting his own name on the Hilton property. In exchange, Trump began to snipe at Harrah’s management of the jointly owned casino--a surprising turnaround from his lavish praise of the management during the period when Harrah’s Trump Plaza was the two partners’ only property in town.
“Trump is the most dominant figure in the gambling scene in Atlantic City and maybe nationally,” said Al Glasgow, the owner of the newsletter Atlantic City Action and a sometime consultant to the developer.
The reason, he argues, is that Trump is more flexible than the public corporations owning the rest of the Boardwalk’s casinos. “The only one he has to answer to is the guy he sees in the mirror every morning.” Yet, sometimes his incessant outflow of self-promotion, extravagance and hyperbole runs a little thin.
For one thing, having his own autobiography on the New York Times best-seller list provides him with the luxury of writing his own history.
Take the book’s version of the dispute at 100 Central Park South. At the time, Trump had battled the tenants in part by vilifying them as wealthy parasites benefiting from state-regulated below-market rents while worthy middle-class apartment hunters went begging. His most controversial move was to offer, as a public service, to donate a few of the building’s vacant apartments to the city as housing for the homeless.
“I genuinely felt it was a shame not to make use of a few vacant apartments when the streets were filled with homeless people,” he later wrote in the book. When the city demurred, he boarded up the vacant windows so the building looked like a misplaced Harlem tenement.
Rosenholc has a different gloss on the proposal: “There isn’t anybody in America who believed that was a good-faith proposal. It was simply harassment.”
One agency whose patience with Trump has come close to running out is the New Jersey Casino Control Commission, which recently threw a wrench into his plans to complete and operate Atlantic City’s largest casino, which would make him the city’s biggest gambling kingpin and bring him to the maximum of three casinos that can be owned by any one entity.
At issue was the so-called Taj Mahal, a vast hotel and casino complex begun by Resorts International but stalled since the death in April, 1986, of its chairman and controlling shareholder, James Crosby.
From Crosby’s survivors, Trump last year acquired a controlling interest in Resorts, but then engaged in months of bluster and threats to win the company board’s approval for a complete takeover. Meanwhile, he tried to browbeat the casino commission into approving a multimillion-dollar management contract paying him to complete and operate the Taj Mahal--on one occasion suggesting that he might take Resorts into bankruptcy if it were not approved.
Finally, on Feb. 18, two of the five commissioners--enough to deny the Taj Mahal a casino license--rebelled.
Questioning whether Trump and his aides had treated the commission with “honesty and integrity” during the eight-month licensing process, Commissioner Valerie H. Armstrong suggested that Trump’s blustering and hand-wringing over the condition of Resorts had “been carefully staged, manipulated and orchestrated to drive down the value of (Resorts) stock” in order to allow him to more easily take over the company.
She also complained that Trump had backpedaled on Resorts’ previous commitments to Atlantic City to build low- and middle-income housing on an urban-renewal tract as a condition of its casino license--a commitment demanded of all casino developers and honored mostly in the breach.
The commission required that Trump appear for two days of hearings last week in which he was closely questioned about his plans for management of Resorts International.
After that, and after he agreed to the housing commitment, the commission approved a one-year extension of the Resorts casino license.
Resorts notwithstanding, Trump’s reputation as a corporate raider is decidedly mixed. True, he has almost invariably racked up large profits from short-term holdings in such companies as Holiday Inns ($35 million), Allegis ($80 million) and Bally ($31.7 million). But the Bally profits carry the unmistakable emerald glow of greenmail.
For his part, Trump stands by his claims that most of his forays into large block holdings in companies have been for investment only.
“Imagine . . . I buy some stock in Holiday Inn,” he said. “I buy 5%, I’m sitting at my desk, bought it for investment reasons, and all of a sudden you see the company enacting all sorts of (defensive moves) that do nothing and in this case drive the stock through the roof. So I said, ‘Sell the stock.’ It’s amazing.”
Trump made his $35-million profit on Holiday Inns by selling his block on the open market, thus getting the same price per share available to any investor. But the Bally deal was quite different.
Trump paid an average $17 for each of his roughly 3.1 million shares.
He resold 2.6 million shares to Bally last February for $24 each, not including an added $6.2-million sweetener to cover his litigation costs, at a time when the public market for Bally was just under $20 a share.
He retained the right to sell his remaining 457,000 shares to Bally this year at $33 each. Deals like that, in which a company pays an investor a premium to repurchase his shares, are generally damned by Wall Street as an expense to the company and an injury to other shareholders.
At the same time, many of Trump’s stock campaigns have the taint of personal affairs. He accumulated his stock in Holiday Inns after his acrid disagreement with its Harrah’s unit over the Trump Plaza partnership. More to the point, he also began accumulating stock in Golden Nugget, another one-time Atlantic City casino owner, after a number of run-ins with that company’s impeccably groomed chairman, Steven Wynn.
In his book Trump gave Wynn the back of his hand: “He’s a smooth talker, he’s perfectly manicured and he’s invariably dressed to kill,” he wrote. “The problem with Wynn is that he tries too hard to look perfect, and a lot of people are put off by him.”
One is certainly Trump. Late in his negotiations with Hilton over the Atlantic City property, Trump learned that Wynn was biddingagainst him and threatening his deal. When he was rattling his saber in Bally stock, that company set the stage for his buyout by purchasing Golden Nugget’s Atlantic City casino. By giving Bally two casinos in the city, the move meant that Trump--also the owner of two--would violate the state’s ownership limit of three if he won control of Bally’s.
Dispute With Koch
So Trump’s announcement last July that he owned 4.9% of Nugget stock may have been designed just to aggravate Wynn, who in any event controlled directly and indirectly a commanding 40% of the company.
It is not unusual for Trump to engage in even more public disputes. Take his running battle with New York Mayor Edward I. Koch. The disagreement erupted last year over Trump’s most grandiose proposal--a 100-acre development on a riverfront site that is Manhattan’s largest undeveloped piece of property. Trump, who had long since christened the project “Television City,” needed special city tax abatements to attract a prime tenant--the NBC television network, whose huge office and studio lease at Rockefeller Center is soon to expire.
Koch refused to grant the subsidy and worked to keep NBC in Rockefeller Center. That led to the improbable spectacle of the city’s leading developer calling the mayor a “moron,” and the mayor responding with the epithet “piggy, piggy, piggy.”