Trump: The Art of the Deal

After graduating from Wharton in 1968, Donald Trump set his sights on Manhattan real estate, but the market was “very hot” (93) at the time. With a net worth of $200,000, mostly tied up in Brooklyn and Queens properties, he waited for the right opportunity while working with his father. In 1971, he moved to a small studio apartment on the Upper East Side, immersing himself in Manhattan life and learning about its real estate landscape. To expand his social and professional network, Trump sought membership at Le Club, an elite New York social club. Initially rejected, he used persistence and strategic networking to gain entry. The club helped him meet wealthy and influential people, including Roy Cohn, a notorious lawyer known for his aggressive legal tactics. Trump hired Cohn when the federal government sued his family’s company for allegedly having discriminated against Black people in housing. Ignoring conventional legal advice to settle, Trump fought the case aggressively and ultimately resolved it without admitting guilt.

By 1973, the New York real estate market declined due to rising interest rates, inflation, and the city’s worsening financial crisis. While many investors pulled back and “stopped believing in the city” (101), Trump saw an opportunity. He set his sights on the abandoned Penn Central railyards, a 100-acre riverfront property on Manhattan’s West Side. Despite his lack of Manhattan development experience, he pitched himself as an ambitious and capable developer to Victor Palmieri, the Penn Central representative in charge of liquidating assets. Trump secured an exclusive option to develop both the 60th Street and 34th Street railyards without putting any money down. He branded his business as the “Trump Organization” to appear “much bigger” (105) than it was and leveraged his connections with politicians, including Mayor Abe Beame, though Beame remained noncommittal about supporting the project.

After Trump announced his plans in 1974, competing developers offered higher bids, including Starrett Housing’s $150 million offer, but Trump convinced Palmieri that his plan was the most viable. However, in 1975, the city’s financial crisis turned “from bad to much worse” (109), halting public housing financing. With his original plan for middle-income housing no longer feasible, Trump pivoted to a new idea: a convention center on the 34th Street site. Trump aggressively lobbied city officials, hiring zoning attorney Samuel Lindenbaum and political insider Louise Sunshine to promote his plan. He organized a press conference branding his site the “Miracle on 34th Street” (111), arguing it was cheaper and better located than the city’s preferred sites at 44th Street and Battery Park.

Trump’s strategic marketing and political maneuvering helped shift public perception. He exposed the flaws of rival sites, including the high cost of building over water at 44th Street and Battery Park’s isolation. He even leveraged a graduate study from Wagner College favoring his site, branding it the Wagner Report to create legitimacy. Although he hadn’t secured final approvals, Trump’s relentless self-promotion, strategic alliances, and ability to adapt set the stage for his future success in Manhattan real estate.

Donald Trump faced strong opposition in his effort to promote the 34th Street site for the New York convention center, particularly from Mayor Abe Beame and Deputy Mayor John Zuccotti. Beame backed Battery Park, while Zuccotti refused to admit the failure of the West 44th Street plan. Trump fought back publicly, using media attention to highlight the advantages of his site and to accuse Beame of being “self-serving and petty and a half-dozen other things” (113). Ultimately, a 1977 study confirmed that Trump’s location was the best, leading Beame to offer verbal support before leaving office.

When Ed Koch became mayor in 1978, he conducted his own study, which again favored Trump’s site. The city purchased the property, but Koch refused to let Trump build the center, citing conflict of interest. Trump offered to complete it under budget and absorb overruns, but the city took control, resulting in massive delays and cost overruns. By completion in 1986, the project was four years late and cost nearly $1 billion, around $700 million over budget. Frustrated by the “terrible planning and ridiculous cost overruns” (117), Trump eventually abandoned his option on the 60th Street yards in 1979 to pursue more viable deals, starting with the Commodore Hotel acquisition from Penn Central.

During his efforts to acquire property on Manhattan’s West Side, Donald Trump developed a deeper relationship with Victor Palmieri, who oversaw the Penn Central Railroad’s bankruptcy assets. Palmieri mentioned that Penn Central’s hotels were for sale, and Trump identified the Commodore Hotel as a prime opportunity due to its location next to Grand Central Terminal despite its poor condition and financial troubles. Trump saw potential in the Commodore, even though the hotel was losing money and defaulting on taxes. Recognizing both the risks and rewards, he approached Palmieri with an offer: He would take an option to purchase the hotel for $10 million, but only if he could secure a tax abatement, financing, and a hotel partner first. To buy time, he delayed finalizing the contract while working on assembling the deal.

Trump needed a “really fantastic design” (123) to sell the project. He hired architect Der Scutt, who designed a “sleek, contemporary” (124) glass façade to cover the Commodore’s aging brick exterior. The goal was to make the hotel look brand new to attract investors. Scutt’s design played a crucial role in marketing the project to city officials and banks. Trump also sought a hotel partner to manage operations and lend credibility. He focused on Hyatt, as they lacked a “flagship presence in New York City” (126) and were eager to enter the market. His initial negotiations with Hyatt president Skip Friend stalled, leading him to deal directly with Jay Pritzker, Hyatt’s owner and a shrewd businessman. They formed a 50-50 partnership: Trump would handle development and Hyatt would manage operations.

Securing financing proved difficult. Banks were reluctant to lend for projects in New York City, which was nearing bankruptcy. Trump’s strategy shifted from promoting financial potential to emphasizing civic duty, arguing that banks had an obligation to invest in revitalizing the city. Despite these appeals, no bank was willing to take the risk without a tax abatement, and “nothing seemed to work” (130). Trump leveraged a new city program, the Business Investment Incentive Policy, which encouraged commercial development through tax breaks. In October 1975, he pitched the city on his project, emphasizing that Hyatt was committed, but financing was impossible without tax relief. The city agreed to a 40-year tax abatement, under which Trump would pay a fixed fee plus a percentage of profits in lieu of property taxes.

To strengthen his case, Trump orchestrated a crisis narrative. In December 1975, Palmieri publicly announced that the Commodore was losing money and would shut down in June 1976. Around the same time, a competing hotel project in Times Square collapsed due to lack of financing, reinforcing Trump’s argument that New York real estate was too risky without tax incentives. Trump secured city approval for the tax deal, ensuring the project’s viability. The Commodore transformation marked his first major Manhattan deal, proving his ability to negotiate complex agreements, leverage government incentives, and revitalize failing properties. This set the foundation for his future success in high-profile real estate projects.

In early 1976, the Board of Estimate changed the structure of the tax abatement deal, shifting it to the Urban Development Corporation (UDC) instead of the city. This gave Trump an advantage, as the UDC had the power of condemnation, allowing for swift evictions and project control. However, opposition to the 40-year tax abatement grew, with hotel owners claiming it gave Trump an unfair advantage. Politicians and councilmen also criticized the deal, sensing an opportunity to gain voter support. Trump, unfazed, publicly defended the deal, arguing that no one else had made an offer for the failing Commodore Hotel.

Just before the Board of Estimate’s fourth vote, an alternative bid emerged from a low-quality hotel operator, which only strengthened Trump’s position. The Penn Central, eager to offload the Commodore, announced its imminent closure, reinforcing Trump’s argument that his plan was the best solution. On May 20, 1976, the Board of Estimate unanimously approved the tax abatement, securing Trump millions in savings over 40 years. Even with the tax deal in place, banks hesitated to finance the project, doubting that a revitalized Commodore (to become the Grand Hyatt) would succeed. Equitable Life Assurance Society and Bowery Savings Bank eventually provided $80 million in financing, recognizing that a failing Grand Central neighborhood would hurt their interests.

Trump defied critics by fully modernizing the Commodore instead of refurbishing it. Preservationists opposed his glass façade design, but Trump argued that traditional architecture had failed the neighborhood. The reflective glass ultimately won praise, as it showcased Grand Central Terminal and the Chrysler Building. Trump designed a luxurious lobby with marble floors, brass railings, and a glass-enclosed restaurant. He wanted the interior to be “an event” (138) in its own right. The Grand Hyatt opened in 1980, achieving instant success, with high occupancy rates and growing profits. Hyatt, as the operator, resisted Trump’s hands-on involvement, particularly when his wife, Ivana, pointed out cleanliness and uniform issues. Hyatt’s head of operations, Patrick Foley, resolved the issue by hiring a manager compatible with Ivana, overloading Trump with minor decisions and leading him to step back from daily operations. A key aspect of the deal was a restrictive covenant that prevented Hyatt from building competing hotels in NYC. Trump strategically inserted this clause at closing, taking advantage of Hyatt’s absent leadership. This valuable restriction ensured Hyatt could not compete without his permission, giving him long-term leverage. Trump’s relationship with Hyatt remained strong, partly due to his affection for A.N. Pritzker, Hyatt’s patriarch. Trump canceled a major business deal to attend Pritzker’s funeral in 1986.