Trump, Donald John

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Trump, Donald John

(1946-)
The Trump Organization

Overview

Billionaire real estate developer Donald Trump showed the world that millions could be made in developing expensive commercial and residential properties. His intuitive sense of business and sharp eye for spotting a deal made Trump one of the most respected—and most hated—business persons of the 1980s. Without question, Trump became one of the most famous poster boys of an era known for its big-time financial wheeling and dealing and conspicuous consumption.

Personal Life

Born Donald John Trump in 1946, he was the fourth of five children of Frederick C. and Mary MacLeod Trump. He was raised in Queens, New York, where his father was a builder and real estate developer who later specialized in constructing and operating middle-income apartments in Queens, Staten Island, and Brooklyn. Donald was a bright, energetic, and assertive child who grew up in a 23-room house with his siblings. But by age 13, it was evident to his parents that he lacked discipline, so they sent him to the New York Military Academy. Trump did well there both socially and academically, and became a star athlete and student leader by the time he graduated in 1964.

While at the Academy, Donald spent his spare time looking around at construction sites and renovating old houses. It seemed Trump would follow in his father's footsteps, but on a much grander scale. He attended Fordham University but later transferred to the University of Pennsylvania, where he obtained an undergraduate degree in finance from its Wharton School of Business in 1968. Following graduation, he worked in his father's business, the Trump Organization. Soon, Trump began putting his newly acquired business training to use, and was able to finance an expansion of the company's holdings by convincing his father to be more liberal in the use of loans based on the equity in the Trump apartment complexes. Eventually, Trump bypassed his older brother and became president of his father's company, which concentrated on building houses and apartments. Though this was an important position, it was not really fulfilling for Trump. He had bigger dreams of putting his signature on the Manhattan skyline.

Yearning for bigger, more profitable projects, Trump used $200,000 to move his residence to a small studio apartment in Manhattan in 1971. There, he was closer to the affluent and influential set who, he felt, could make dreams come true. "If I ever wanted to be known as more than Fred Trump's son, I was eventually going to have to go out and make my own mark," Trump once said.

In 1973, Trump persuaded his father to invest in the Manhattan real estate market. By then, the company's worth had grown from $40 million when Donald had joined the firm to a whopping $200 million.

Four years later, Trump married New York fashion model Ivana Zelnickova Winklmayr, who had been an alternate on the 1968 Czech Ski Team. After their first child was born, Trump named his wife vice president in charge of design in the Trump Organization. Ivana, an attractive and stylish woman, had a flair for design, and played a major role in supervising the renovation of the Commodore Hotel. She nicknamed her husband "The Donald," and added a touch of style that he appreciated and welcomed, like color-coordinating his tie to her outfit. But later, as Trump's empire began to crumble, so too did his marriage. There were constant reports in the tabloids that Trump and his wife were having marital problems, and that the source of those problems was model Marla Maples. Trump and Ivana, who had three children, divorced, and Trump married Maples in 1994. Time magazine recorded the moment, reporting that "more than a thousand guests attended the 15-minute ceremony in the Grand Ballroom of Trump's Plaza Hotel, causing limo-lock in the surrounding streets. In their wake trailed 17 television-camera crews, 90 paparazzi and a small army of bodyguards." The new Mrs. Trump wore an off-the-shoulder white satin dress, topped off with a $2 million tiara. For all the pomp and circumstance, however, the marriage was brief, and ended in divorce. Trump and his second wife have a daughter, Tiffany.

Career Details

Trump's climb to the apex of the business world is remarkable. His strategy was to buy dilapidated properties when prices were cheap, fix them up, and then make a huge profit when the economy picked up. He would either sell the real estate for a higher price than he paid or, more often than not, lease out space at steep prices. He made his first major deal in 1975, when he acquired the bankrupt Penn Central Railroad's Commodore Hotel and rail yards near the Hudson River. Trump then sold the rail yards to the city for a hefty commission, and won an unprecedented $120 million, 46-year tax abatement to tear down the Commodore and build the new Grand Hyatt Hotel in partnership with the Hyatt Corporation. To that amount he added $70 million in loans to construct the hotel. The deal incensed a number of community and political people in New York, who claimed that he used political connections to broker a deal with the city. But Trump had supporters, too. Urban analysts credit Trump with helping to ignite a building renaissance in a deteriorating part of town. "Nobody believed I could pull it off," he boasted.

Ignoring naysayers and supporters alike, Trump continued to negotiate complex deals that made him the best-known and most controversial developer in New York. Against the wishes of New York City, Trump was able to convince the courts that he was entitled to a large amount of tax abatements, which the city was forced to pay. Trump used the abatements to help finance his flag-ship building, the posh Trump Tower on Fifth Avenue at 56th Street, completed in 1980. The 58-story building featured a six-story atrium lined with pink marble, and included an 80-foot waterfall. The luxurious building attracted well-known retail stores and celebrity renters. Residential condominiums sold for a pricey $10 million and higher. Of course, all this overt show of opulence and wealth attracted national attention for Trump, as the Trump Tower became a major tourist attraction. As quoted in the New York Times, Trump dubbed the project "the finest apartments in the top building in the best location in the hottest city in the world."

By now, a pattern had emerged. Trump had a penchant for glitzy, controversial deals, and maintained this interest throughout the 1970s and 1980s. In 1978 he bought the site of the Bonwit Teller department store and built a 68-story tower on Fifth Avenue, complete with a $2 million marble indoor waterfall. In the early 1980s he purchased a team in the upstart United States Football League, the New Jersey Generals, which sparked the league's antitrust lawsuit against the National Football League. But even Donald Trump could not make every deal happen. He once offered to construct a project on the site that later was occupied by the Jacob Javits Convention Center if New York City would name the building after Trump's father; the city declined. City officials balked at Trump's plan to build a $5 billion complex on a strip of land running along the Hudson River from 59th to 72nd streets.

Trump continued moving from one deal to another. He opened casinos, and entered other real estate ventures. In time, he ventured beyond the real estate market in hopes of making a mark in the high-stakes game of corporate raiding.

Early in his career, Trump earned significant notoriety for artificially driving up real estate prices. He drew similar criticism as he sought to acquire companies that were not looking for suitors. Beginning in 1986, he engaged in stock market deals that made him look like a corporate raider. He bought large stakes in a series of publicly traded companies, including MCI and Pillsbury, fueling takeover speculation that raised stock prices and allowed him to sell at a handsome profit. Though many criticized Trump's deals, he was playing the game much as other speculators did. Extravagant speculation was rampant at that time, and created a high-stakes climate. Anyone with less than several million was not invited to play. The process was simple: he would identify a company whose stock was undervalued, buy enough shares to take a noticeable position in the company, and make overtures of buying the company. This would immediately attract the attention of other stock traders, who would label the stock a buy, driving the stock price higher. Trump, of course, was never really interested in buying, nor was the company interested in selling; but his actions prompted a significant increase in the value of his shares, and enabled him to sell at a huge profit.

Some acquisitions, however, really did take place. In 1989, Trump acquired Eastern Airlines' shuttle operation for $365 million, and renamed it the Trump Shuttle. In 1990, he was interested in acquiring American Airlines, bidding $7.5 billion for it. But the parent company was not interested in selling.

Nonetheless, it seemed Trump was on a roll that would never end. A genius at self-promotion, Trump named several huge projects after himself—making his name a household word by the end of the 1980s. He built or bought a succession of hotels and apartment houses in Manhattan—including the Plaza Hotel, Trump Plaza, and Trump Parc—and became a major hotel and casino operator in Atlantic City, having astutely purchased property in the New Jersey seaside resort before the passage of a 1976 referendum legalizing gambling. This was where the Trump Princess Yacht was docked, and where the Trump Shuttle airplane landed. Trump's Castle and the Trump Plaza and Taj Mahal casinos quickly became big moneymakers and helped raise Trump's profile nationally by sponsoring boxing championships.

"The first time I did it, with Trump Tower, maybe it was ego," he once said. "But now it's economics. If somebody tells you you'll do a hundred million dollars more business if you call a building Trump Parc than if you call it Tower on the Park or some other name, you'd have to be some kind of masochist not to do it."

Chronology: Donald John Trump

1946: Born.

1971: Moved to Manhattan from Queens.

1975: Purchased Penn Central Railroad for $62 million.

1986: Renovated Wollman Skating Rink in Central Park.

1986: Purchased large stakes in major corporations.

1986: Acquired Eastern Airlines' shuttle operation.

1986: Made unsuccessful bid to purchase American Airlines for $7.5 billion.

1988: Wrote best-selling Trump: The Art of the Deal.

1990: Missed $73 million in payments; creditors put him on a $450,000-a-month living expense limit.

1997: Estimated net worth of $2.5 billion.

By 1990 many wondered how much Trump was really worth behind his complex financing schemes. His net worth had been estimated by some at as much as $3 billion. Trump never confirmed or denied it. But Forbes magazine decided to take a closer look, concluding that his property was worth just under $3.7 billion, but he had debts totaling $3.2 billion, for a net worth of only a half-billion dollars. The magazine went on to predict that Trump could expect difficult times ahead.

This bleak prognosis proved accurate. The real estate market soured in 1990 and property values began plummeting. Trump's casinos suffered from oversaturation. Moreover, the credit market tightened, making it difficult for Trump to borrow additional money to cover his debts. Consequently, he missed $73 million in payments due in June 1990, and was extended an emergency $65 million loan, which the banks granted in order to save him from default and to protect their own investment. But that loan came at a hefty price: in return, Trump lost his freedom and was forced to relinquish much of his income, and clear important business decisions with his creditors.

Trump was bitter about friends who turned on him during the bleak days. "I view these people as being born with garbage in their genes," he once said. But somehow, Trump bounced back and was reported to be worth more than $2 billion in 1997. He also found some Chinese investors to help him build huge housing projects on Manhattan's West Side rail yards, a site which he had been fruitlessly trying to develop for years.

The book on Trump continues, as many wonder what he may do in the future. Trump's flamboyance, immense wealth, and aggressive business practices—vividly displayed in his attempt to force tenants out of one of his properties by tinning up windows and offering to shelter the homeless in empty apartments—are resented by some New Yorkers. But there is little doubt that Trump was a pacesetter for the 1980s.

Social and Economic Impact

Donald Trump is noted in the business world primarily for his impact on the real estate and casino industries, but he is perhaps best known to the public as a wealthy and eccentric celebrity. His businesses were major developers of real estate during the 1980s and contributed to the rapid growth—and later, decline—of the real estate market in that period. More recently, he focused increasingly on amassing a large entertainment and gambling concern that now ranks as one of the largest in the United States. Overshadowing these achievements in the minds of many, however, have been the ongoing tabloid sagas of his marital life, his conspicuous wealth, and his troubled personal finances.