Trump

by Donald J. Trump

  “It’s simple, Mr. Trump,” he said. “The reason is that the windows in the Barbizon are much too small for a luxury residential building.”

  The solution was obvious: leave the building intact, but cut out bigger openings and enlarge the windows.

  Coincidentally, my own tastes were changing. I was beginning to appreciate the detailing and elegance of certain great older buildings. Among them were the two buildings I owned on Central Park South. I also began to realize how much a part of the Central Park South skyline these buildings were.

  Our preliminary estimate for ripping down the Barbizon and putting up a new structure in its place was $250 million. When we costed out the job of gutting and rebuilding the interior and enlarging all the windows, we came up with an estimate of $100 million for the entire job. The cost of trying to replicate my favorite feature of the Barbizon—the magnificent stone crown at its top—was $10 million alone. Even at that, it would never have matched the original. Renovating wasn’t only cost effective, it was also a better design decision.

  One last factor helped turn the whole deal around. For several years, I’d been trying to purchase the St. Moritz Hotel, directly across the street from 100 Central Park South. The sellers were Harry Helmsley and Lawrence Wien, two of the greatest real estate men ever. The problem had always been cost. They wanted a huge price for the hotel, which I believed was more than its earnings justified. Several times they made deals with other buyers, presumably for what they were seeking, only to have the agreements unravel before closing. Time and again I’ve seen that happen with people who offer a top price for a property. Their eyes prove bigger than their pocketbooks, and they end up backing out.

  After watching this process repeat itself several times, I called Harry Helmsley and said, “I’d very much like to buy the St. Moritz, and in my case you know the deal will go through, but I don’t want to pay the price you have in mind. And he said, “Well, what you’re offering is too low. We negotiated back and forth, and finally we settled on a price that I think was fair, based on the hotel’s earnings.

  But I had an ace in the hole: the 1,400-room Barbizon-Plaza one door up the street. I hadn’t told anyone, but my plan was to close down the Barbizon as soon as I purchased the St. Moritz. The logic was simple. When I closed the Barbizon, I could move Charles Frowenfeld, a great hotel manager, and all of his best people over to the St. Moritz. In addition, many of the Barbizon’s customers would inevitably follow, since the St. Moritz was the only otiter moderate-price hotel on Central Park South. While I’d obviously lose some customers when I closed down the Barbizon, I’d pick up a lot of them at the St. Moritz. At the very least, I figured, occupancy and revenues at the St. Moritz would increase by 25 percent virtually overnight.

  The banks apparently agreed. When I went seeking financing for the purchase, I was able to get an immediate commitment for $6 million more than my purchase price. In short, I was able to buy the St. Moritz without putting up any money at all—and I ended up with $6 million to put in my pocket. When we got to closing, Harry Helmsley was leafing through the papers and he noticed the size of my mortgage. He didn’t look thrilled. But the sale was also a great deal for Harry and Larry. After all, they’d paid practically nothing to purchase the hotel years earlier.

  I took over the St. Moritz in September 1985 and closed the Barbizon soon after. During the first year, business at the St. Moritz increased by 31 percent, or slightly more than I’d predicted. But by virtue of more efficient management, the margin of profit nearly quadrupled.

  The one remaining issue I faced was the harassment suit at 100 Central Park South. Because I no longer intended to vacate and raze the building, a harassment finding no longer threatened my plans. Still, several of my lawyers urged me to settle the case purely to resolve an unpleasant situation. Specifically, they suggested I work out a deal under which the tenants would drop their harassment suit in return for my selling them the building outright for $10 million.

  On its face, the deal wasn’t a bad one for me. Based on my original purchase price, I stood to earn a very substantial profit by selling 100 Central Park South for $10 million. But in the end I said no. Temperamentally, I just couldn’t accept the idea that the tenants were using harassment charges as a lever against me so that they could buy a building for less than market value. This is where the tenants and their lawyers caused themselves the loss of a tremendous windfall. Today in New York almost everyone wants to buy their apartments.

  Meanwhile the harassment case stalled in the courts. A state supreme court judge ruled in August 1985 that there was no clear evidence that harassment had occurred. In December 1986, the appellate division of the state supreme court unanimously upheld the lower court’s ruling.

  The lawyers kept talking settlement. Finally, late in 1986, nearly all the tenants agreed to drop any further claims against me. Since I no longer planned to demolish the building anyway, I agreed to drop all eviction proceedings and to give them new leases on their apartments. I also agreed to excuse from three months’ rent every tenant who was party to the agreement, and in return, all tenants who’d been withholding rent—in some cases for as long as a year—agreed to pay up. The total figure exceeded $150,000.

  While the state dropped its case, the city insisted that it intended to continue pursuing the harassment case against me. Even John Moore, the leader of the tenants’ group, was surprised. For the city to push the case, he said to a reporter, “is like beating the horse after the horse has come back to the barn.” The real victims were the taxpayers. The city was choosing to spend money and manpower on a nonissue that had been resolved—at a time when many important issues had not. It is my opinion that this case continues purely because I beat the hell out of Ed Koch on the Trump Tower tax abatement and embarrassed him with Wollman Rink.

  In the meantime, I renamed the Barbizon-Plaza Trump Parc, and began my renovation. One of the first things I did was to hire a company called Holes, Inc. Talk about surreal specialization. These people did nothing but cut holes for a living. Fortunately, they did it very well. In a matter of weeks, they’d turned the Barbizon’s tiny windows into huge picture-window openings. Those openings alone were immensely valuable, because a great view is worth a small fortune.

  In a market about to be flooded with new buildings, we had something unique to offer: the best of the old and the new. The detail and ornamentation of the building’s exterior remained, including the crown. So did features such as the twelve-foot ceilings in the apartments, which no developer would even consider in a new building, because the cost is simply too great. At the same time, the new construction gave the building several advantages over most older ones: new plumbing, smooth walls, modern wiring, fast elevators—and, of course, huge Thermopane windows.

  The building is scheduled to be completed in the fall of 1987, but we put the apartments on the market in November 1986. Within eight months, we’d sold 80 percent—nearly 270 apartments. One individual bought seven apartments, for a total of $20 million. When the building sells out—in all likelihood before a single person has moved in—we’ll have grossed in excess of $240 million. And that’s before I do anything with 100 Central Park South and the stores along the street.

  All’s well that ends well. The tenants at 100 Central Park South kept their apartments, Central Park South retained two of its landmark buildings, and the city will soon be earning far greater taxes from the property than ever before. As for me, I’ll ultimately earn a profit of more than $100 million on a deal that many people thought would turn out to be a total loser. And it was largely because the tenants managed to delay me.

  11

  LONG SHOT

  The Spring and Fall of the USFL

  ALL MY LIFE I’ve believed in paying for the best. But when it came to the United States Football League, I decided to go a different route entirely.

  By the time I bought the New Jersey Generals in the fall of 1983, the league was already failing badl
y. It had lost nearly $30 million. The Generals alone, under the ownership of an Oklahoma oilman named J. Walter Duncan, had lost more than $2 million, not to mention nearly every game they’d played. In real estate terms, I was buying the South Bronx instead of Fifth Avenue and 57th Street.

  But I didn’t look at the Generals as a typical deal. I viewed it instead as a long shot, a lark that I could afford to take. I’ve always been a football fan. I love sports, and having my own team seemed the realization of a great fantasy. I also liked the idea of taking on the NFL, a smug, self-satisfied monopoly that I believed was highly vulnerable to an aggressive competitor.

  As long shots go, I liked the odds on the USFL. My initial investment was relatively small, and the potential rewards were quite great. For less than $6 million, contingent on the league’s continuing—compared with the $70 million an NFL franchise might cost—I was able to purchase a professional football team in one of the greatest areas in the world. If I could help turn the team and the league around, I stood to earn back many times my initial investment. At the very least, I would have a lot of fun trying.

  The main problems with the USFL seemed fairly clear-cut and not all that difficult to remedy. The first was that the league was playing its games in the spring. Sports have their seasons, and fans like their football in the fall. The television networks, which essentially underwrite professional sports, won’t pay large sums for the rights to televise spring football. At the time I bought the Generals, ABC was paying $1 million a year for exclusive network rights to the USFL spring schedule. Meanwhile, the three networks together were paying a staggering $359 million a year for rights to the NFL fall games. The first thing the USFL had to do was move to the fall.

  The second challenge was to build a first-class product. To me, that meant spending whatever money it took to sign top players, promote our teams, and create the sort of excitement that would make us a legitimate competitor for the NFL’s fans and TV dollars.

  Two leagues had been launched previously in competition with the NFL, and the outcome in each case was highly instructive. The American Football League was formed in 1962 by eight very wealthy entrepreneurial men. They signed top players and absorbed substantial losses in the service of building the league’s credibility during the early years. By 1966, the AFL had signed away dozens of the NFL’s best players and was widely seen as the more exciting of the two leagues. With the AFL raids escalating, NFL commissioner Pete Rozelle surrendered. He suggested a merger of the two leagues, and today those original AFL teams are among the NFL’s most successful franchises. But even without a merger, the AFL would have prospered.

  The other venture that tried to compete with the NFL was the World Football League. It was launched in 1973, but by men of much less wealth and more limited vision. In contrast to their AFL counterparts, the WFL owners signed very few name players, placed their franchises in smaller cities, and failed to attract any kind of television contract. Within two years, the WFL was bankrupt. Its founders didn’t lose a fortune—but only because they didn’t invest a fortune.

  I foresaw two possible outcomes if we moved the USFL to the fall and began to build quality teams, and both of them were potentially good. The first was that at least one of the three networks would offer us a substantial fall television contract, which would help us continue to build an even stronger league fully competitive with the NFL. The second was that the three networks, all fearful of alienating the monopoly NFL, would refuse to give us a fall television contract, no matter how strong a product we had to offer. In that case, I believed, we’d have strong grounds for an antitrust case against the NFL.

  If we went the latter route, obviously we could lose, and then our league would be dead. But I believed the more likely outcome was some sort of victory. If the suit went to a jury and we were awarded reasonable damages—particularly given the fact that any damage award is trebled in an antitrust case—we’d have the financial base we needed. Another possibility was that the NFL, anticipating a costly and humiliating court defeat, would offer some sort of settlement, much as they’d done twenty years earlier with the AFL.

  I made no secret of my views. Two years later, the NFL would try to claim in court that my plan to move our league’s season to the fall was somehow secret and sinister. In fact, within days of taking over the Generals, I told any reporter who called me exactly how I felt. Then, on October 18, 1983, a month after purchasing the Generals, I attended my first owners meeting in Houston, Texas. I wasn’t shy there, either.

  When my turn came to address my fellow owners, I stood up and explained that I hadn’t bought into the USFL to be a minor-league owner playing in the off-season of spring. I pointed out that the greatest number of fans, and by far the biggest pool of network television dollars, were concentrated in the fall. I reminded my fellow owners that because the NFL had just gone through a long, bitter players’ strike the past fall, many fans were feeling restless and alienated. And finally, I argued that we had a chance to put the NFL even further on the defensive by moving aggressively to sign top NFL players whose contracts were coming up, as well as the best graduating college players.

  If there was a single key miscalculation I made with the USFL, it was evaluating the strength of my fellow owners. In any partnership, you’re only as strong as your weakest link. Several of my fellow USFL owners were strong as hell financially and psychologically. Among them were Michigan Panthers owner Al Taubman and Philadelphia Stars owner Myles Tanenbaum, both of whom, coincidentally, had made their personal fortunes building shopping centers, as well as Memphis Showboats owner Billy Dunavaut and Jacksonville Bulls owner Fred Bullard.

  Unfortunately, I quickly discovered that a number of USFL owners lacked the financial resources and the competitive vision to build the sort of top-quality league necessary to defeat the NFL. They shuddered at the prospect of any direct confrontation with the NFL, they were quite content to play in obscurity in the spring, and they spent much more time thinking about ways to keep their costs down than about how to build the league up.

  My most immediate priority was the team I’d just purchased. The New Jersey Generals were a disaster. They’d just come off a season in which they’d won only four games and lost fourteen. The team had one great athlete and superstar, Herschel Walker, the Heisman Trophy running back from Georgia, but even Herschel had yet to play near his potential. Meanwhile, although the Generals had just completed a full season of playing professional football across the river from the media capital of the world, they had attracted virtually no press attention and very few fans.

  The best way to turn that around was to turn the Generals around. Fans like winners. They come to watch stars—great, exciting players who do great, exciting things. Herschel was obviously one, but in football, the team rises or falls on the quarterback. Nothing helped promote the AFL—and the New York Jets—as much as the signing of a University of Alabama quarterback named Joe Namath, for a then-unprecedented $400,000 a year. Namath eventually led the Jets and the AFL to their first Superbowl victory. But even before that, he earned his salary simply because he became the AFL’s most colorful, charismatic drawing card.

  The first player I went after was Brian Sipe, the quarterback for the Cleveland Browns. Sipe had been the NFL’s most valuable player a couple of seasons earlier, and he was a bona fide superstar. He was also in the option year of his contract, meaning that he’d be available in a matter of months. Getting Sipe was a chance to help the Generals and the USFL and simultaneously to hurt the NFL. The negotiations proved to be long and difficult, but on December 27, 1983, I held a press conference to announce we’d signed Sipe to a long-term $800,000-a-year contract with the Generals.

  By the time we got Sipe, we’d already lured away several other top NFL players. The first was Gary Barbaro, an All-Pro free safety from the Kansas City Chiefs, whom we signed on November 5. Signing Barbaro had a side benefit: it showed other NFL players that we were serious about paying top dollar
to build a top team. On November 28 we signed Kerry Justin, who’d been a starting cornerback for the Seattle Seahawks. In December we signed a pair of linebackers from the Super Bowl-champion San Francisco Forty-niners, Willie Harper and Bobby Leopold. To protect Sipe, we signed a veteran offensive guard from Cincinnati named Dave Lapham.

  Another negotiation that got some attention during that period was the one I conducted with Don Shula, coach of the Miami Dolphins. Shula was one of the most successful coaches in NFL history, but he was also vastly underpaid. I immediately offered Shula far more than he’d been earning. I was willing to meet most of his demands, but when he threw in a request for an apartment in Trump Tower, I drew the line. I can afford to buy football teams in part because I don’t give away apartments. Still, the negotiation ended up helping Shula: it forced the Dolphins to renegotiate his contract at a far higher salary, which he certainly deserved.

  We got the most attention of all for signing Lawrence Taylor, the All-Pro linebacker for the New York Giants and perhaps the best all-around player in the NFL. On December 31, 1983, we announced that Taylor had signed a four-year contract with the Generals, for a total of $3.25 million. The catch was that it wouldn’t take effect until 1988, when his contract with the Giants expired. In a way, that was even better than getting him immediately. By signing a player of Taylor’s stature to a “futures” contract, we were serving notice on the NFL that none of their players—not even those under multiyear contracts—were beyond our reach.

  As it turned out, when Taylor’s deal was announced the Giants went nuts. Two weeks later, on January 17, 1984, they offered him a six-year $6.55 million extension of his contract. In effect, I forced the Giants to increase Taylor’s salary by $3 million just to prevent him from departing three years down the road. Then, in return for my letting Taylor out of his Generals contract, the Giants agreed to pay me a penalty fee of $750,000.