The Real Trump Deal. Martin E. Latz
Donald Trump wanted more. A lot more. And he set his sights on Manhattan.
As Ned Eichler, one of his early negotiation counterparts recalled, Trump, in a walk around New York City’s Central Park during a break in their negotiations, viewed the park as “merely the lawn in front of his future properties.” 69
During that walk, Trump pointed to the buildings on Fifth Ave and Central Park South and said, “I’ll be bigger than all of them. I’ll be bigger than Helmsley [a major New York developer] in five years.” 70
Did he get there? Yes and no. It depends on when you look at him. Three Trump eras took place in terms of his goal-setting:
1) “Over-the-top” best describes Trump in the ’70s and early ’80s.
2) But then he got caught up in a deal-making frenzy in the mid-1980s and took a goal-setting U-turn.
3) Trump regained his signature aggressiveness again in 1990, though, when faced with financial ruin.
How aggressive should he have set his goals the entire time? Let’s evaluate his goal-setting in each “Trump era.” Then we’ll evaluate his goals versus the experts’ proven research.
Trump’s Goal-setting in New York City in the ’70s and Early ’80s
Three examples illustrate Trump’s extremely aggressive goal-setting in the ’70s and early ’80s.
A Fred Trump Convention Center
One of Donald Trump’s first Manhattan deals involved purchasing an option to a 34th Street property from the bankrupt Penn Central railways. After he bought the option, he hoped to build “a city-funded convention center and twenty thousand apartments, in one fell swoop creating an empire that would rival his father’s.”71
But New York City in 1978 decided to build its own convention center on that site. And it needed Trump’s option. Here’s how Peter Solomon, the city’s negotiator, described Trump’s effort to get the city to name it the Fred C. Trump Convention Center.
Trump told us he was entitled to a $4.4 million commission on the sale according to his contract with Penn Central. But he told us he’d forgo his fee if we would name the convention center after his father…. After about a month of knocking the idea around, someone finally read the terms of the original Penn Central contract with Trump. He wasn’t entitled to anywhere near the money he was claiming. Based on the sales price we had negotiated, his fee was only about $500,000.
But what really got me was his bravado. I think it was fantastic. It was unbelievable. He almost got us to name the convention center after his father in return for something he never really had to give away. [Emphasis added.]72
Trump exhibited impressive “bravado” in even shooting for this goal. The question of his truthfulness, of course, also arose here.
The Commodore Hotel Redevelopment
Trump’s aggressive goal-setting also manifested itself in his first big negotiated deal—the redevelopment of the Commodore Hotel across from New York City’s Grand Central Station. In that deal, Trump requested a 99-year tax abatement from the city as an economic incentive to redevelop a run-down hotel in a depressed area.
The tax benefit he requested, if approved, would amount to around $400 million over forty years.73 It would also be unprecedented—the first ever given to a commercial property in New York.
Richard Ravitch, a state official involved, described the following negotiation session with Trump. After offering Trump an option that would allow Trump to line up sufficient financing to redevelop the hotel (the alleged rationale for the tax abatement), he said Trump wouldn’t even consider it.
Ravitch said he told Trump “it would not be fair to deprive the city of the real estate taxes if the hotel was successful, but that at least would enable you to get the mortgage.”
“That’s not good enough; I don’t want to pay any taxes,” Trump replied, according to Ravitch.74
That’s aggressive goal-setting.
Michael Bailkin, a key city official in those negotiations, said Trump “had the energy and vision and perhaps was hungry enough and maybe a little bit crazy enough to try to do things that were in the best interest of the city, whereas more traditional developers would never have taken on a task like this.”75
Trump got his unprecedented tax break. How? According to TrumpNation, a well-researched biography by long-time investigative journalist Timothy L. O’Brien (previously an editor and writer for The Wall Street Journal and The New York Times), Trump “benefited from family connections, his own determination, an economically struggling city anxious to get new construction underway, and banks ready to ramp up real estate lending again.”76
Trump envisioned his goal and charged ahead to accomplish it.
Trump Tower
Trump also set an extremely aggressive goal in his first negotiation move to build his signature 58-story tower on Fifth Avenue. This negotiation involved his purchase of an option to buy the lease on the property.
He achieved this “with a location that was so rich everyone else assumed it could not be bought.”77
Learning that the department store that owned a 29-year lease on the site had recently gone bankrupt, Trump:
– Recognized the opportunity;
– Immediately flew down to Nashville to buy the option from the bankruptcy trustee; and
– Bought it for $25 million with no money down.78
An extraordinarily aggressive goal. So aggressive, in fact, several other builders offered the trustee a better price for it after they learned of Trump’s deal.79 But Trump’s deal was done.
And it turned out extremely well. Trump Tower was described as “an inspired, balanced business deal” in TrumpNation.80 Trump at his best in negotiations.
Trump’s Goal-setting Took a U-turn in the Late 1980s
Donald Trump’s blockbuster autobiography The Art of the Deal came out in 1987. And it coincided with the stock market crash and an unparalleled Trump buying binge of widely varying high-profile assets.
It also coincided with a new Trump attitude toward goal-setting and negotiations—buy at almost any cost. As TrumpNation described it,
For Donald, the post-Trump Tower years were a heady rush into celebrity and entrepreneurial candyland as he snared one business bauble after another, sometimes in industries in which he knew next to nothing. While the vision he had shown in building Trump Tower remained, the discipline he had summoned to get the skyscraper built evaporated. Emboldened by easy money and a laudatory press, Donald went on a massive and ill-considered shopping spree.81
Two major purchases reflect his different goal-setting and negotiation approach: The Plaza Hotel Purchase and The Eastern Air Shuttle Purchase.
The Plaza Hotel Purchase
New York City’s Plaza Hotel was “one of Manhattan’s truly storied properties, steeped in wealth, glamour, power, and celebrity, and Donald snapped up the hotel in 1988 for $407.5 million with $425 million in borrowed funds that he could ill afford.”82
How do we know Trump didn’t aggressively set a goal and negotiate a great deal?
First, the sellers flipped the hotel to Trump just four months after buying it—garnering at least a $50 million profit. And this occurred just months