Trump, page 18
Beyond the massive density of the plan, Trump addressed the major development issue at the site with characteristic flair. He recommended lowering the elevated West Side Highway to grade and extending Riverside Park to 59th Street, situating the new parkland near the realigned highway.
The highway loomed over the site like an albatross. It would cost a fortune to get it out of the way of any housing development’s view of the water or, if left in place, to build a project on a platform raised above the highway’s ten-story height. Trump proposed carrying the cost of his proposed lowered highway on the tab of the subsidized project, just one more unrealistic element of a plan that no one on the West Side was taking seriously.
Within a few months, however, a scurrying Trump had shifted to a similarly sized housing project built on a platform with the highway left in place and a shopping center beneath the platform. In the new scheme, the parkland, rather than a lowered highway, would run along the water. He began to make stern 10,000-units-and-that’s-my-final-offer speeches, but the West Siders were about as impressed as Sally had been that first morning. No one in the community flinched.
The Goodgold forces insisted on lower density and a variety of uses, until Trump suggested in a December 1976 letter that he would drastically revise the proposal to include commercial and recreational uses and less housing. By then, Jimmy Carter had been elected President, and Trump, who had publicly mused about how important a Democratic President might be for his West Side plans, was optimistic that new federal subsidies might bail out his stymied project.
In May of 1977, two years after the breakfast meeting in Sally’s living room, Trump was down to 8,000 units, a marina, a specialty shopping center on the waterfront, and a commercial sports center. But he still had forty-four-story towers, 4,000 units too many, no specific plan that went beyond broad concepts, and only platitudes about the amount and location of open space. Most important, he still had no financing plan for the project, and the fresh new Georgia faces at the White House weren’t proposing one into which he could tap.
Donald was still appearing at occasional bagel briefings at Sally’s, and sometimes the meetings shuttled to Doris Freedman’s even grander apartment at 25 Central Park West. Doris was the daughter of a successful Art Deco architect and the city’s first cultural affairs commissioner. A petite, forty-five-year-old brunette wired into West Side and national Democratic politics, she had convinced a foundation to give the Penn Yards Committee enough money to hire its own consultants to evaluate Trump’s proposals. Her family owned the luxurious building facing the park in which she had her apartment. It was just the setting for a humility lesson, and Freedman gave one, tweaking Trump for everything from parking his polluting limo outside during their talks to serious legal questions about whether Penn Central actually had the right to deliver title to him free and clear.
When Freedman pressed him once about the rail use covenants that did in fact cloud the title of the West Side property, he insisted angrily: “I own it all.” And when his careful attorney, Sandy Lindenbaum, interrupted the byplay with Freedman to qualify Trump’s assertion—delicately suggesting “Why not say that to the best of our knowledge we are in control of the site?”—Donald exploded. “I’m telling you it’s all mine,” he declared, chastising Lindenbaum with the direction: “I’ll do the talking here.” The reprimand drove Lindenbaum to the door, where he calmly told Freedman and Goodgold: “I expect to be around for a long time on matters like this, and I expect to deal with you on many of them. I am never going to lie to you. Goodnight.” Goodgold in fact never dealt with Lindenbaum again on Trump’s project, and the experience taught her an important lesson about the contrasting styles of Donald and his lawyer—Lindenbaum had a sense of the long-term and was not about to burn his bridges, while his client was a child of the moment, with neither a respect for the past nor an instinct for the future. All he knew was what he needed right then.
By the time of the fracas with Lindenbaum, however, the many pressures of the project had finally worn even Trump down. His grandiose dream city was turning into a nightmare that could not win hard financing. Penn Central’s expense advances were all but exhausted, and the community was as relentlessly resistant as on the first day.
Nonetheless, in late 1977, he girded himself for one final rush at the zoning prize before the Beame era ended. Even if he couldn’t build at that time, the value of the land would be greatly enhanced if he could get the variance. Within days of Beame’s defeat in the Democratic primary that September, Donald submitted another proposal to the community board. The number of units did not change, but the generous open space was finally defined in a series of drawings, two stories were taken off the tallest tower, and for the first time a financing program with tax abatement and limited subsidies was suggested, but only vaguely. The bottom line was that Trump was now pressuring the city, and the community, to approve a special zoning district for the area immediately, insisting that they could work out the details of the actual project later. Trump now hoped he could push Beame officials to authorize the new zoning without his producing any commitment on financing, and the city’s planning commissioner eventually capitulated, directing staff to prepare a zoning district resolution based on Trump’s planned density.
One problem remained, however. Trump had overlooked a pivotal requirement for the site: an expensive and time-consuming environmental impact study. A new state law that had just gone into effect in September made an EIS essential, and Trump’s failure to complete one killed his last-minute push for new zoning. But even this defeat didn’t stop him.
He resumed his efforts in 1978 with the new Koch administration, though with little success. He began meeting with the new City Planning Commission chairman, Robert Wagner, Jr., telling the son of the former mayor that they should “build the city of the future together.” But Wagner and the new mayor, Ed Koch, had never had an uncomfortable moment on the West Side themselves, were both seasoned Manhattan pols, and were not about to take on the city’s most vociferous neighborhood on behalf of an overly ambitious and unfinanced project. Trump’s option expired in October 1978, but Palmieri officials conceded him continuing site control and began negotiating a new deal with him. Palmieri had helped Penn Central reorganize itself out of bankruptcy, and was still on retainer to sell assets of the new corporate entity. This time, no court approvals would be necessary, and there was almost a casualness about nailing down the new agreement.
By May of 1979, Trump and Palmieri officials had agreed on the broad terms of a second, eighteen-month, option, with a right to extend for another twelve months. This time Donald was to put up a $300,000 deposit and commit to spending $700,000 of his own money to push the project through the rezoning process. As paltry as this million-dollar commitment was, it did reverse the terms of the original Eichler deal, which obligated only Penn Central to cover development costs and required no Trump deposit. But since Palmieri was letting Donald operate as if he had an option, there was no pressure on him to sign the new deal, so he dawdled.
Another reason not to sign was that by the summer of 1979, his West Side yard dealings had attracted a new kind of troubling attention. Federal prosecutors in Brooklyn had opened a criminal investigation into how Donald had obtained the option in the first place. U.S. Attorney Ed Korman was examining allegations that Trump’s retention of Berger was a payoff for Berger’s sudden switch on the rail-yard sale. Donald sent Roy Cohn to meet with Korman, who made it clear that Trump and Berger were the subjects of the inquiry and promised it would be a short and quiet one. Cohn dismissed the payoff allegation scornfully and offered an interview with Trump, unencumbered by a lawyer.
So a federal investigator went out to Avenue Ζ to interview Donald. It was Trump who picked the location—a barren cubicle in the back of Fred Trump’s end-of-the-earth office. The same investigator had delivered a subpoena to Donald’s elegant new office in The Crown Building on Fifth Avenue, where he’d been greeted by giant Trump Organization lettering when he walked off the elevator. The Avenue Ζ hideaway was a sharp contrast—one that the agent fell had been deliberately selected by Trump to try to strike the pose of an ordinary guy. To complete the homey scene, Ivana and two-year-old Donald Jr. played around the office throughout the hour-and-a-half interview.
The investigator ran through his traditional speech: “You’re a target of a grand jury. We have information that may be criminal in nature and may not be. That’s what I’m here to determine.” Donald took off his jacket and rolled up his sleeves. He was at ease and talkative. He claimed that he’d agreed to pay too much for the properties. He talked about the difficulty of the zoning change approval process. He denied any quid pro quo with Berger.*
The investigation was a case of inference that never got past the inference. Though prosecutors rushed witnesses through a hasty grand jury, the probe had not begun until mid-1979, with the five-year statute of limitations just about exhausted. It died without an indictment and without ever hitting newsprint. Cohn would later compliment Korman about how carefully he’d kept the probe under wraps, adding that “now Donald’s going around talking about it.” When Korman, who subsequently became a federal judge, bumped into Trump at a dinner a few years later, Trump thanked him “for the professional way the investigation was handled,” praising him for “no leaks.” In fact, the probe remained a secret for a decade until Donald revealed it in his second book, Surviving at the Top.
Just as mysteriously as he had arrived on the West Side five years earlier, Trump finally, quietly slipped away in December 1979. He never told the architect who’d worked with him for years, Jordan Gruzen, why he was quitting. He never came up with a farewell plan, as he had promised. He never explained his departure. Everyone from Gruzen to Goodgold believed he had just grown tired of it all and moved on to other projects, especially Trump Tower, the monumental structure he planned for Fifth Avenue.
On the deadline day set by Palmieri for signing the new option, December 29, 1979, Donald came to Palmieri’s Third Avenue offices and held out a bank check for $300,000, the deposit he was obliged to make. “I left this morning to come here thinking we’d close,” he said. “I’ve been bouncing back and forth on it. But I’ve got Trump Tower going, got Atlantic City going. I’m getting out.”
Ironically, the only issues that remained in dispute between Trump and Palmieri were questions that hung over the title—the very problems Sandy Lindenbaum and Donald had differed over in Doris Freedman’s apartment years earlier. Palmieri was unable to secure a “clean release,” from Conrail, which refused to state exactly what railroad utilities and equipment might exist under the surface of the yard. Donald seized on the problem as fundamental, as well as on another technical question affecting the air rights.
The Palmieri staffers were stunned. They were convinced that the legal loopholes were alibis. At first they suspected Trump might be trying to lower the ultimate purchase price to avoid paying the deposit. Palmieri had already obtained approval from the reorganized company’s board of directors, which had budgeted the revenue in the business plan, including an agreed-upon $28 million purchase price at the end of the option, with a 2 percent price increase per month beyond the set deadline.
In Trump’s stead, instantly and curiously, was Abe Hirschfeld, the city’s parking garage king who’d never built a major project. Palmieri officials contacted him a few days after Trump departed and, without entertaining any other offers, promised him the same deal Trump was about to sign. They did not want to redraw the agreement with another possible developer and then resubmit it to their new, and highly skeptical, clients at the suddenly solvent Penn Central.
Hirschfeld was an old friend of Fred Trump’s, a golfing partner from the Breakers in Palm Beach. He was also the joke of New York politics, an unsuccessful candidate for just about every major public office who’d often been backed by Fred. Bunny Lindenbaum had represented him for years, and he, Fred, Donald, and Bunny had sometimes shared the same table at dinners of the Brooklyn Democratic organization. A short, heavy, sixty-year-old Israeli with reddish hair and an awkward Polish accent, Hirschfeld was a millionaire who looked and sounded like the neighborhood Jewish tailor.
Hirschfeld was a bizarre selection for this option—the opposite of the ultimate insider depicted by Eichler when Trump got it. A few weeks after Hirschfeld was contacted, he and his wife, without a lawyer, arrived at Penn Central, paid the deposit, and signed the documents. Hirschfeld claims he neither read, nor negotiated, a word of the agreement. Instead, he just took on the obligations Trump had agreed to—he would forfeit the $1 million he advanced by deposit or expenses if he was unable to obtain the zoning change necessary for a buildable project.
Hirschfeld kept all of Donald’s consultants, including Gruzen, though he had never used the architect before. Hirschfeld and an unknown Argentine builder and auto dealer named Francisco Macri soon began talks about a partnership on the yards.
Penn Central immediately notified the State Department of Transportation that it intended to abandon and dispose of the site, a formal warning it had never issued through all the Trump years. This notice, an attempt to at last clear the title of at least one crucial claim, opened the door for the city or state to exercise its right of first refusal and buy the yard itself for rail uses. The Koch administration acted quickly to put a legally permissible hold on the property until June 1980 while it considered taking the yard by condemnation.
Although a 1980 city report concluded that it should acquire the site for new freight facilities, it never acted on the recommendation. The deadline quietly passed without any city or state attempt to move to take the site. If the alternative had been a Trump superproject, rather than the prospective sale of the property to dubious Abe Hirschfeld, an aroused West Side might have forced consideration of the rail plan. Instead, the brief period of public preferential rights passed without commotion.
“The difference would’ve been night and day,” recalled Goodgold. “No one took Abe seriously. If Donald had the option during that period, we wouldn’t have been running around spinning wheels. Something would’ve happened.”
Even before the site cleared the rail use obstacle, Hirschfeld had sold his option to the Argentine for $6.5 million, become a 35 percent limited partner for next to nothing, and been retained as a $6,250-a-month consultant by the new partnership. He was even reimbursed for the deposit and expenses he’d paid.
Several years would pass before Hirschfeld and his partner, Macri, could finally obtain a zoning change. Throughout that period, Donald carefully watched what was happening with the prized site he had inexplicably forfeited. He would later write in his first autobiography that the “toughest business decision” he ever made was “giving up my option on the West Side yards.” As soon as the new owners won their elusive zoning change, however, Donald would leap back into the fray, negotiating with the Argentine to retake control of a site that had become an obsession. His day at 60th Street, he had determined, would come again.
*Ravitch had, in the midst of this conflict, been asked by the new governor, Hugh Carey, to take over the state’s near bankrupt Urban Development Corporation. His preoccupation with UDC, and the hemorrhaging projects HRH was already building on the West Side, may have reduced Ravitch’s challenge to the Trump deal to a halfhearted effort.
*What no one, including Donald, was aware of was the stark similarity between the maneuverings in this bankruptcy buyout and one that had taken place almost precisely forty years earlier in Brooklyn in 1934, when Fred Trump look control of the Lehrenkrauss mortgage servicing company. Like Donald at the Penn Central hearing, Fred won a bid battle without submitting the best bid, aided by the very attorneys whose job it was to maximize revenue to the bankrupt shell.
*This allegation was rejected by the judge, who did find, however, that blank forms retaining Berger’s firm were being circulated among city landlords. The judge said, nonetheless, that there was no way of determining if Berger’s firm was responsible for this “regrettable” mass distribution of retainer agreements.
*Berger was represented in the probe by Fred Trump and Bunny Lindenbaum’s old friend, ex-judge Nat Sobel.
5
Tax Break Hotel
“Well,” said the magnate, “I see our friend Mr. Cowperwood has managed to get his own way with the council. I am morally certain he uses money to get what he is after as freely as a fireman uses water. He’s as slippery as an eel. I should be glad if we would establish that there is a community of interest between him and these politicians around City Hall. I believe he has set out to dominate this city politically as well as financially, and he’ll need constant watching.”
—THEODORE DREISER, THE TITAN
If I hadn’t finally convinced the city to choose my West 34th Street site for its convention center and then gone on to develop the Grand Hyatt, I’d probably be back in Brooklyn today, collecting rents.
—DONALD TRUMP, THE ART OF THE DEAL
Michael Bailkin has the throaty, soothing timbre of a psychiatrist and, when thinking out loud about the structure of a real estate deal, the creative dexterity of a jazz pianist.
When Donald Trump met him in 1975, Bailkin was a midlevel bureaucrat in a busted city, with more ambition than purpose, hidden away in the tiny offices of the Beame administration’s Lower Manhattan Development Corporation. Trump had come to him seeking city assistance to redevelop a small downtown property, and Bailkin had rejected the idea over a lunch in the nearby Woolworth Building. But Trump must have liked something about the five-foot-six, bulldog-shaped Bailkin. A few weeks later, on a sunny early fall day, Trump returned, without an appointment, looking for advice about a giant midtown project far beyond the reach of Bailkin’s neighborhood office. The project would change both Bailkin’s and Trump’s lives.
