Donald Trump’s 3 biggest failures as a New York City real estate mogul
Donald Trump portrays himself as a master negotiator, but he has failed to seal several deals over the years. Had they happened, he would have cemented his status as one of New York’s leading real estate moguls. Still, even when forced to sell, he’s largely managed to earn a profit.
West Side Yards
Trump acquired the stretch of abandoned rail yards running along the Hudson River from West 59th Street to West 72nd Street in 1985 for $115 million. He planned to build a $4.5 billion project called Television City, later Trump City. It would have included 5,700 apartments and a 150-story skyscraper that would have been the world’s largest, had Trump not quickly abandoned that plan. He had also hoped the complex would become NBC’s new headquarters. To make the numbers work, he needed a $700 million property tax abatement, but Mayor Edward Koch wouldn’t give it to him. Trump waged a public relations war, saying Koch had “no talent and only moderate intelligence.” Koch called Trump “piggy, piggy, piggy,” then granted NBC tax incentives to stay in Rockefeller Center, as Trump chronicler Tim O’Brien wrote at Bloomberg View. In 1994, Trump defaulted on about $1 billion in loans for the project and had to sell a majority stake to Hong Kong investors, who built the condo complex now called Riverside South, paying Trump a fee to put his name on some buildings. In 2005, the Asian owners sold the whole thing for $1.8 billion to private equity giant Carlyle Group and Extell Development Corp., run by Gary Barnett. Trump, who retained about a 30% interest, sued, arguing he could have sold it for more. But ultimately he failed to block the sale. Trump’s profit: About $425 million.
General Motors Building
In 1998, Trump teamed with an Indiana-based insurance company called Conseco to buy the Fifth Avenue tower for $878 million, outbidding rivals including Vornado Realty Chairman Steven Roth and billionaire investor Sam Zell. But Conseco went bankrupt in 2002 and pushed for selling the prized property to help finance its recovery. Trump resisted. After a state judge upheld an arbitrator’s ruling that would have forced him to sell his 50% stake for a minuscule $15.6 million, Trump agreed to sell the building to developer Harry Macklowe for $1.4 billion. Trump trashed a book about the affair by Vicki Ward called The Liar’s Ball, saying it was “poorly written and very boring.” He told the New York Post: “I made a tremendous amount of money in that deal. The book doesn’t capture the essence, the glamour or excitement of what happened. It wasn’t bad about me, but it should have been great about me.” Trump’s profit: About $260 million.
The Plaza Hotel
Trump bought the famous hotel in 1988 for $407 million and put his wife at the time, Ivana, in charge of renovating it. It was the high-water mark of Trump’s career as a buyer and seller of real estate. Soon he moved on. In 1989, he bought the Eastern Air Lines Shuttle for $365 million, renaming it Trump Airlines. The next year he opened the Trump Taj Mahal casino in Atlantic City, which cost $1 billion to build.
But then the economy slowed and the heavily indebted Trump nearly sank into bankruptcy. Trump Airlines defaulted in 1990, and aircraft brokers said its aging fleet was worth less than $55 million. The failure was painful to Trump, who had guaranteed a $135 million personal line of credit from Citicorp to finance the acquisition, according to Pulitzer Prize-winning journalist David Cay Johnston. Trump Airlines’ routes were eventually taken over by U.S. Airways. The Trump Taj Mahal filed for bankruptcy in 1991, the first of four Atlantic City casino companies bearing the Trump name to go bankrupt. Trump gave up half his ownership stake in the Taj Majal in exchange for bankers reducing his empire’s debt burden by a third, to $2.5 billion, while his personal debt obligation was lowered to $115 million from $885 million.
Trump yielded half his Plaza stake. Bankers sold the hotel in 1995 for $325 million to a group including Saudi Arabia’s Prince Alwaleed bin Talal. Trump’s loss: About $80 million on the Plaza. Along with airline, casino and other losses, this dropped his then-net worth to negative $1.4 billion.