Trump, page 44
Arria talked to Stephenson by phone a few hours after the letter was messengered to him, and Stephenson called the Macri response “insane,” canceling the meeting he had scheduled with them for the next day. “I do not want to do anything with you. I want out. I want my money,” Stephenson bellowed. Though the bank’s relationship to the project would drag on for a year, it effectively ended during this 3:40 P.M. phone conversation.
There was no question but that Donald learned quickly about this dramatic turn of events and that it convinced him he suddenly had Macri on the ropes. The debonair Arria, who wrote letters to Donald as if the two were lifelong and trusting friends, penned another missive to him, sending him copies of his and Stephenson’s correspondence and suggesting that he and Trump “clarify any misunderstandings” Stephenson might still have. Whatever Arria didn’t inadvertently tell Donald about Macri’s dire circumstances Trump seemed to know anyway. He decided to seize the opportunity. The same day as Stephenson’s outburst, Schrager’s firm sent Macri an amended agreement, granting the March 31 review period deadline requested by Arria but adding a series of new demands. Trump wanted Macri to pay all his expenses for the review period if the deal terminated. The proposal was actually dated three days earlier, but Trump waited to send it over until Stephenson had forced Macri’s hand.
What followed was a hectic series of Macri attempts to undo the Stephenson decision. A contingent went to Chase to meet with Stephenson’s immediate superior, Robert Douglass, who said he would try to “put things together.” Macri hired a powerful law firm with significant Chase ties—the prestigious Patterson Belknap, Webb & Tyler—to deal with the crisis. In a February meeting with the Macri leadership, Joel Carr, a partner from the firm, concluded that the December agreement was unenforceable under state law because it was so vague about the sales price, recommending that Macri “immediately walk away” from it. Carr encouraged Arria, who had a lunch scheduled with Donald for the following day, February 7, to broach the subject of terminating the agreement. Arria did, and Trump quickly agreed to tear up the December letter, throwing in a lecture for good measure about how generous an act it was. In truth he, too, wanted out, betting that Chase’s now open combat with Macri would force the Argentine to give him an even better deal in the near future. Arria agreed to pick up $100,000 in Trump expenses associated with the agreement; $75,000 of it for Dreyer & Traub.
The day after all the releases were signed and the checks sent, Donald replied with a classic brief note to Arria: “Over the last number of years everyone has taken advantage of Lincoln West, but I will not be one of them. That is why I released you from your obligations under the Letter Agreement after having let you know how serious those obligations were and also why I am returning the check you sent me for expenses. You and Franco (Macri) are friends and I do not want your money. I will absorb all my costs, but I do hope after all of our efforts we will be able to get the development on track as soon as possible. It really needs help.” With it, Trump returned the $25,000 check sent to cover his own organizational costs.*
The day after the clearly confident Trump pulled out of the deal, Stephenson dropped another bomb in a terse letter to Arria that formally advised the Macri group that the bank had “no interest in extending the commitment or renewing the notes.” Stephenson asked that Macri pay the $72 million obligation as soon as possible. Ironically, earlier the same day, Arria had sent Stephenson copies of the Trump releases and asked that the bank now proceed with the construction loan.
At a meeting several days later Stephenson gave the Macri group thirty days to formulate “a concrete plan” to take Chase out of the deal, characterizing the loan as “due and payable” but “not on demand.” While he congratulated Arria on obtaining the release from Trump, he asked: “Why didn’t you consummate the deal?” Assuring them that he could have worked things out with Trump, Stephenson closed the meeting with a threat to call the loan and Macri’s personal guarantee through Chase’s branch in Argentina, if a plan to repay the loan wasn’t submitted in a month.
Faced with this possibility, Macri once again began talks with Donald. But during this third cycle both sides finally seemed ready to consider what Donald had always wanted—an outright buyout. Macri hadn’t made a firm decision to sell, but Arria and Donald nonetheless began exploring a purchase price. Arria and attorney Ralph Galasso tried one more approach to Stephenson midway through the bank’s thirty-day period, amassing seven binders of progress reports on every aspect of Lincoln West, trying to convince him to stick with it. A curt Stephenson dismissed the tableload of documents with a wave of his hand, insisting “All Chase wants is its money and a concise proposal on how it will get it.”
Arria argued that a restructuring was impossible in fifteen days, telling Stephenson of the renewed negotiations with Trump and of a few other vague prospects. Stephenson said he would grant another ninety days if a new letter of intent with an acceptable buyer was submitted. He then went out of his way to denigrate the only other buyer mentioned by Galasso. In the guise of an attempt to be helpful, Stephenson also recommended that Macri “sell out completely” to avoid a lawsuit from his 35 percent partner, Abe Hirschfeld. Finally, Stephenson made it clear that Chase would not accept a new formula that left Macri in place as a general partner, reducing any future Macri association with the project to, at best, a limited interest. Trump and his favorite banker, as it turned out, had almost identical positions.
The high point of this showdown with Stephenson, however, was Arria’s request that “Steve,” as he was called by his New York developer friends, keep their discussions strictly confidential, an axiom in any banking relationship. Arria said that Trump had already cut his buyout offer from $130 million to $100 million “when he learned that Chase had given Lincoln West thirty days to find a takeout.” Arria made no explicit charge about where Trump might have learned this vital information, but Galasso’s careful post-meeting memo noted: “Stephenson was silent, but it was obviously a point very well taken by him.” Afterward, Stephenson’s approach “was more constructive and even conciliatory.”
With the thirty-day deadline still in place, Macri had his lawyers evaluate the possibility of a lawsuit against Chase, while he simultaneously tried to figure out a way to circumvent Stephenson. Arria renewed his meetings and correspondence with Robert Douglass, Stephenson’s superior, sending him the same seven binders of information Stephenson had rejected and telling him in one session about Stephenson’s suspected breach of confidentiality. Arria pointed out that Macri had never missed interest payments—an amount that now totaled $8.2 million—even during these testy times, while the bank had refused to make the final payments due under the agreed-upon bridge loan.
But Arria did not send a four-page letter they had spent days drafting to Douglass. In it, Arria said they were “dismayed to discover that less than 24 hours after we were given 30 days by Mr. Stephenson, our prospective purchaser was in full knowledge of this situation and reduced his offer by $24 million.” Arria said he told Stephenson that “these leaks were extremely damaging to our project,” yet “ongoing events between Chase and Lincoln West continue to be known by prospective purchasers or their representatives to our detriment.” Arria’s letter was not sent because Macri decided that it would turn the financing issue into an assault on Stephenson’s integrity, leaving the bank with no option other than intransigent opposition to his project.
When the Douglass conversations did little more than buy time, Macri made one last appeal to the man who symbolized Chase in Latin America, David Rockefeller, who’d resigned as chairman in 1981 but still headed the bank’s international advisory committee. Macri recruited an Argentine friend, Jose Alfredo Martinez de Hoz, the former minister of the economy under the military government who was an old friend of Rockefeller’s, and flew him up to New York. De Hoz’s approach to Rockefeller was a high-level secret, even within the Macri group. He laid out the Stephenson history, and Rockefeller said he would look into it and get back to him within twenty-four hours. The next day Rockefeller called Macri’s New York office to say there was nothing he could do.
The predictable effect of Chase’s abrupt and irreversible rejection was that Macri had to sell, with little time and no buyers on hand but Donald. A third agreement with Trump was drafted. The terms changed from day to day, but the essence of it was that Donald would acquire the land, with the Lincoln West partnership of Hirschfeld and Macri holding on to a combined 10 to 15 percent interest in the project. The price fluctuated between $100 million and $125 million, with Chase becoming Donald’s lender and financing the purchase. So long as this deal was on the table, Stephenson let his own fierce, mid-March deadline pass without comment.
Macri and Trump reached agreement again in early April, but did not sign anything. On the final day of negotiations, Donald was accompanied by a New York Times reporter, and before the end of the month he was portrayed in a fawning Sunday Times Magazine profile as having convinced the Argentines to sell out their project to him. In fact, Macri was still uncertain, and he had yet to obtain the approval of his limited partner waiting in the wings, Abe Hirschfeld.
Macri brought the proposal to Hirschfeld, who had a right under the original agreement to sign off on any sale or try to match the offer. Hirschfeld had happily consented to the first Trump deal in July 1983, adding only one amendment—the hope that “a street or an avenue” in Trump City might be named after his family. While that agreement left Hirschfeld’s slice of the project untouched, with Donald in charge, Hirschfeld had been bypassed in the ill-fated Sherry Netherland negotiations, and complained bitterly about it when he found out. This time, before any letter was signed, Macri, Hirschfeld, and his son Eli shared a conference call, with Macri pushing for “a decision on Donald Trump very fast,” giving Hirschfeld no other plausible alternative.
Instead, Hirschfeld decided to make his own offer to buy the project, leaving Macri with no option but to consider it—under the express terms of their partnership agreement. Trump and the bank had to back off while this implausible Hirschfeld notion played itself out. By the end of April, Hirschfeld dropped his attempted purchase, apparently signaling a willingness to accept a $100 million sale to Trump in which he and Macri would retain a 10 or 15 percent joint interest. When such a contract was drawn, however, Hirschfeld refused to sign the consent Macri sent him. So Macri decided to go ahead without Hirschfeld and test the “reasonableness” of Hirschfeld’s refusal to consent in an arbitration proceeding, as provided in the original contract between the two.
That resolve triggered a fourth set of negotiations, redesigning the April agreement with the assumption that Hirschfeld would probably challenge it. After several months of conversations between lawyers for both sides, Macri and Donald finally talked by phone in mid-June. The proposed deal, which would have given the Lincoln West partnership of Macri and Hirschfeld a priority position to lay claim to $25 million out of Trump’s first profits, looked so certain that Macri came to New York to conclude it. He sent a short note to Donald, together with a draft of the final contract, promising that “within the next 48 hours you and I will meet alone without any of our lawyers to arrive hopefully and if possible to a final contract or if this exercise proves to be impossible, then to terminate our long negotiations.” The meeting never took place.
For the fourth time in a year, on June 22, a deal between these two mismatched developers came apart. Macri handwrote Donald a note in broken English, concluding “at least we both now know that we will not be able to do anything more together on this matter.”
Neither side would bite the bullet—Macri could not come to grips with the loss of his dream project, and Trump still believed he could get rid of Macri altogether. Donald knew that the financial pressures on Macri would only grow stronger—after all, by July of 1984, Lincoln West was nearing his second complete year of interest payments, totaling $10 million, on a project that had gone nowhere. An internal accounting analysis concluded that since serious talks with Trump and the problems with Chase began in April 1983, the Macri group had spent $26.9 million on various predevelopment costs, and Macri claimed that $20 million of it was his own money.
Macri took one last, transparently futile, shot at the bank—writing two letters to Stephenson in early July, asking him to agree to restructure the existing financing over a two-to five-year period or to go forward with the $190 million commitment. This time Macri announced he would withhold interest payments until a new arrangement could be worked out. Though Macri was only a few days late on the first missed payment, Stephenson took the decisive step on July 18, filing a foreclosure action in court.
The foreclosure came at a particularly vulnerable moment for Macri, for he had exactly two months left on the grace period the city had given him when the rezoning was approved in 1982. At the time the zoning permits passed the Board of Estimate, Macri had promised the city to work out a mapping agreement—laying out a 200-page street circulation and infrastructure plan for the yards—by September 17, 1984. The map had finally been completed, and Macri and the city were prepared to commit themselves to an entire grid of streets, curbs and sewer lines. But the city suddenly added a new and unusual wrinkle, insisting that Macri’s bank “subordinate its interest in the property to the rights granted the city by the mapping agreement.” This new demand required Chase to commit itself, as a potential owner of the property (should it take the property in foreclosure) to meet the street and infrastructure obligations Lincoln West had accepted in the mapping agreement if the project was built. Chase had done exactly that in 1982 with respect to the subway improvements and other amenities, but if it now refused to sign this technical subordination consent, Macri would lose the mapping agreement and possibly even the special permit for 4,300 new apartments that had taken years for him to negotiate.
Trump was certainly aware of the publicly announced deadlines for the mapping agreement when he walked away from the June deal. It could not have come as much of a surprise to him, or to Macri, that Chase would refuse to sign the subordination, even though it did not expose the bank to any real risk. Through August and into September, Macri’s new lawyer, a powerful Washington attorney named Lloyd Cutler, tried to cajole a subordination letter out of Chase. The city extended its deadline to October 4, and the bank and Cutler went head-to-head. The issues that ultimately killed these negotiations were a measure of just how hostile, and mutually suspicious, the relationship had become.
Chase began by slating that “even if the subordination were not to harm Chase,” the bank wouldn’t “take effective action now solely to benefit Macri.” Macri offered to pay the $4 million in interest now due, make all future payments, and get Chase out of its loan in six months in exchange for the subordination and a six-month suspension of the foreclosure proceeding. While Chase indicated its willingness to suspend the foreclosure action, it wanted Macri to execute a waiver barring him from countersuing Chase for a breach of duties should the foreclosure resume, and it wanted a guarantee Macri wouldn’t file his own complaint for damages. Even with his back to the wall, Macri would not yield to these Chase demands. The foreclosure case proceeded, and in an October and November set of legal papers, Macri did press a breach of duties charge against the bank. The bank sidestepped the issue on technical grounds.
Despite Chase’s last-minute refusal to sign the subordination letter, the city decided to approve the mapping agreement but make it contingent on the signing of the bank’s subordination within four months. Since Chase would never sign, the vacillating Macri finally had a real deadline by which to sell, imposed by a resolution passed by the full Board of Estimate. If he didn’t sell or find a new bank to subordinate by February 4, he would lose his map change and possibly his special permit, diminishing the value of his property.
Like a tireless, circling predator, Donald Trump was again at Macri’s door—his fifth assault against the exhausted Macri. Trump doubted that the Argentine could reach out for new buyers with the mapping deadline hanging over his head. Trump would therefore drive a hard bargain, insisting on a complete buyout. The two wary adversaries settled quickly on a purchase price of $115 million, signing a forty-seven-page contract of sale only fourteen days after the October 4 Board of Estimate vote on the mapping agreement. It was a straight sale, with Macri getting out altogether and Stephenson financing the Trump purchase. While Chase’s initial mortgage was only for $85 million, the bank signed on to cover the long-term development costs of the project and eventually loaned Donald almost $215 million, even paying the interest due on its own mortgages. The Chase embrace of the Trump project sealed, at least in the minds of Macri’s men, their long-standing suspicion that Macri had been the victim of a viselike conspiracy, simultaneously squeezed by a buyer and a banker who wanted him out.
In sharp contrast with the $25 million profit and the 50 percent retained interest of the first Trump deal, Macri’s profit on the final sale, once the balance due Chase and all other expenses were subtracted, was a puny $4.4 million.
Hirschfeld delayed the closing by withholding his consent again. He contested the sale terms vigorously in an arbitration proceeding that dragged on until the end of November, pointing out, with some effectiveness, that the purchase price was $200 million less than Macri’s most recent appraisal. Skillfully playing the clock to his own advantage, Hirschfeld was counting on the fact that Macri had to complete the sale to Trump before the judge ruled on Chase’s foreclosure at a hearing scheduled for November 30 or risk losing the property to the bank. Donald, too, was nudged forward both by the foreclosure deadline and by the arbitrator’s ruling that he’d have to immediately submit to a wide-ranging deposition by Hirschfeld’s lawyer. So Donald quickly reached a separate agreement with Hirschfeld, making him a 20 percent partner.
