Trump

by Donald J. Trump

  The most notorious example of all may be Ed Koch, the mayor of New York. Koch has a very nice three-room rent-controlled apartment with a terrace in a beautiful part of Greenwich Village. He pays $350 a month—perhaps one fifth what it’s worth. The worst thing, though, is that Koch doesn’t even live in his rent-controlled apartment. He lives in Gracie Mansion, the official residence of the mayor.

  Unlike most developers, I don’t advocate eliminating rent control. I just think there ought to be a means test for anyone living in a rent-controlled apartment. People below a certain income would be permitted to keep their apartments at their current rent. People with incomes above a certain sum would be given a choice between paying a proportionally higher rent for their apartments or moving somewhere else.

  The situation at 100 Central Park South is a perfect illustration. Soon after I purchased the building, I did some research into the financial status of the tenants. What I discovered was fascinating but not surprising. There are three distinct groups. The first, who live in the largest apartments, overlooking the park, on the higher floors, are generally successful, wealthy, and in some cases quite prominent.

  Fashion designer Arnold Scaasi, for example, has a six-room duplex facing the park, for which he is paying $985 a month—about what it costs to rent a one-room studio at market rates. Angelo DeSapio, another wealthy tenant and an architect of some eminence, has the entire seventh floor facing the park—nine rooms for a rent of $1,600 a month. Still another tenant owns a beautiful brownstone on 63rd Street worth at least $5 million but also has four combined apartments at 100 Central Park South, with fabulous views of the park from the thirteenth floor and a rent under $2,500 a month. All of these apartments could rent for many times what the current wealthy occupants are paying.

  The second group of tenants are what I’d call the yuppies: younger professional people—stockbrokers and journalists and attorneys. While not necessarily millionaires, these people are certainly affluent. A good number of them occupy one- and two-bedroom apartments facing the park.

  The third group of tenants live in smaller apartments with tiny kitchens and windows facing the court. Not surprisingly, these people are generally of modest means. A number of them are elderly, living on social security. Their rents are below market, but not nearly to the degree of their wealthier neighbors in the front apartments. A comparable studio in the neighborhood might rent for twice what most of these tenants are now paying.

  The leader of the tenants, John Moore, was a man who didn’t quite fit into any group. In his early forties, this gentleman came from a family of money and social standing. His grandfather was a major stockholder in Tiffany & Company before it was bought by Walter Hoving, but he himself had not been very successful. I’ve always been convinced that leading the tenants gave him a way to feel useful and important. Of course, he also had something very valuable to protect: a beautiful two-bedroom park-view apartment for which he paid a very modest rent.

  Vacating the Barbizon-Plaza was easy. All I had to do was stop renting hotel rooms. Before I gave up that income, however, I wanted to vacate 100 Central Park South too. Unfortunately, I made a very critical mistake right at the start: I should have gotten involved myself. That’s what I’d always done in the past, and that’s what always worked for me. But frankly, convincing tenants to move wasn’t the kind of work I relished. Instead, I decided to hire a company that specialized in relocating tenants. Citadel Management was recommended to me by several top executives at well-known companies who’d used the firm and vouched for its reputation. I wasn’t looking for tough guys. This was a high-visibility location, and a lot of people were gunning for Donald Trump already. The last thing I needed was to create controversy.

  My original plan was very straightforward. We’d let the tenants at 100 Central Park South know that we intended to eventually demolish the building, along with the Barbizon next door. Then we’d offer them help in finding suitable new apartments, as well as cash incentives to move.

  Very quickly, however, the tenants got organized. They formed a tenants’ association and decided to hire a law firm to represent them. Cost was no object. The wealthiest tenants had the most money to lose, and they were more than willing to underwrite any attorney fees. Several agreed to contribute as much as $8,000 a year to the cause. That was cheap, after all, compared with the $10,000 a month they might have to pay for a comparable apartment elsewhere.

  The firm that the tenants chose had been somewhat successful representing tenants facing eviction. They made a better living than most landlord attorneys. Their approach was to resist eviction on every front and tie things up in court for as long as possible, perhaps hoping to make as big a settlement as possible with the landlord.

  I felt confident that I had every legal right to vacate 100 Central Park South for the purpose of building a new and larger building in its place. To evict the tenants who lived in non-rent-controlled apartments, all I had to show was my plans to demolish the building and put up a new one in its place. To evict the tenants under rent control, I had to meet stricter standards but none that seemed insurmountable.

  First, I had to demonstrate that my new building would provide at least 20 percent more housing units than the old one. That was easy enough, since it was obviously in my interest financially to put up a bigger building. Second, I had to prove that the old building was earning a profit, after expenses, of less than 8.5 percent of its assessed value. By virtue of rent control, the assessment was a paltry $1.5 million, meaning the city got almost no taxes from the building. And although I wasn’t permitted to include my debt service as part of my expenses, the building still didn’t come close to earning an 8.5 percent margin. If my debt service was included, I was actually losing a substantial amount of money. Either way, if the city ruled purely on the merits, I was convinced they’d have to approve our demolition application and order any remaining tenants out.

  When Citadel took over management of the building early in 1981, I gave them two instructions: the first was to try to find new apartments for as many tenants as possible; the second was to continue to provide all essential services to the tenants.

  It happens to be very easy to vacate a building if, like so many landlords, you don’t mind being a bad guy. When these landlords buy buildings they intend to vacate, they use corporate names that are difficult to trace. Then they hire thugs to come in with sledgehammers and smash up the boiler, rip out the stairways, and create floods by cutting holes in pipes. They import truckloads of junkies, prostitutes, and thieves and move them into vacant apartments to terrorize holdout tenants.

  That’s what I call harassment. I wouldn’t have done that sort of thing for moral reasons, nor would I have done it for practical reasons. I buy buildings in my own name, and I have a reputation to uphold.

  The tenants at 100 Central Park South got an abundance of heat and plenty of hot water. I made sure to deal with the building’s outstanding violations, however modest, even though you’ll find dozens of violations in elegant buildings all over the Upper East Side. The last thing I wanted was to give these tenants legitimate grounds for opposing me.

  What I didn’t do was run 100 Central Park South as if it were a white-glove Park Avenue building. The rent roll, which barely covered my basic expenses, simply couldn’t support luxuries. Nor did tenants paying tiny below-market rents have any right to expect them. For example, when we took over, there was a telephone in the lobby—not a pay telephone but a free telephone. It was supposed to be for emergencies. It turned out that some tenants were using the phone to call their friends in Gstaad and St. Moritz.

  The doormen were taken out of their fancy uniforms. That saved a small fortune in dry-cleaning bills. To ensure security, the doormen stopped leaving the door to meet tenants halfway down the street to carry their packages. High-wattage lights in the hallways were replaced with lower-wattage bulbs, because, as any cost-conscious landlord will tell you, that alone saves many thousand do
llars a year in electric bills.

  What we didn’t anticipate was that the tenants would try to use the fact that we were running the building more efficiently as evidence that we were harassing them and making their lives intolerable. In a way it was fitting. We were talking about at least some people, after all, for whom hardship is not being able to get a table on thirty minutes’ notice at Le Cirque. If there’s one thing I’ve learned about the rich, it’s that they have a very low threshold for even the mildest discomfort.

  The tenants even figured out a way to turn our relocation offer into evidence of harassment. We were, they claimed, using “persistent and intense pressure” to get people to move. In reality, each tenant was approached with an offer of help in relocation. If our offer was turned down—which was usually the case, since the tenants had agreed to oppose us on everything—that was the end of it. Some tenants even told us that they had been warned by the tenants’ committee not to consider our offer. The irony is that we might well have been able to offer better alternatives to the tenants who lived in the less-desirable apartments.

  The one thing I can’t deny is that claiming harassment was a clever tactic. Harassment is a virtual buzzword in New York. It prompts instant images of vicious landlords and victimized tenants. If the tenants’ attorney could somehow convince a sympathetic jury—probably tenants themselves—that a harassment case had merit, we’d automatically be denied our demolition application. The tenants of 100 Central Park South wouldn’t have to move. In the meantime, they could generate plenty of negative press about me merely by alleging that I was harassing them. The fact that I denied the charges would only make it a juicier story.

  Unfortunately, we made several moves that played right into the tenants’ hands. For example, we decided to bring eviction proceedings against any tenant at 100 Central Park South who was in significant arrears on his rent, or who wasn’t using the apartment as a primary residence, as required by law. Landlords all over the city bring these proceedings every day. They are perfectly legitimate, and we won in several instances.

  Stupidly, we also brought several cases that were flawed. In one, for example, we claimed that a tenant hadn’t paid his rent. It turned out he had his canceled check as evidence, and the payment simply hadn’t been recorded in Citadel’s books. When they realized the error, they told the tenant they’d drop the action if he produced the check. By then, however, the tenants’ lawyer saw a perfect opportunity to further demonstrate their case. The tenant refused to produce the check, and obviously we lost this case in court. In another situation, we failed to give a tenant sufficient legal notice of an impending eviction proceeding. Our case was legitimate, but the court ruled that we should have known the law had been changed recently to require longer notice.

  Another mistake was tinning-up the windows of vacant apartments. It happens to be exactly what the city does with its own vacant apartments all over the city to protect them from vandalism. But then the city doesn’t own buildings on Central Park South. It would have been smarter—and it would have saved us a lot of trouble—if we’d come up with a nicer way to deal with the windows from the start.

  Nothing generated as much controversy as my offer to provide housing for the homeless at 100 Central Park South. By the summer of 1982—about a year after I took over the building—the problem of the homeless in New York was beginning to get a lot of attention. One morning, after passing several homeless people sleeping on benches in Central Park, I got an idea.

  I had more than a dozen vacant apartments at 100 Central Park South. Because I still planned to demolish the building, I had no intention of filling the apartments with permanent tenants. Why not, I thought, offer them to the city for use by the homeless, on a temporary basis? I’m not going to pretend that it bothered me to imagine the very wealthy tenants of 100 Central Park South having to live alongside people less fortunate than themselves for a while. At the same time, I genuinely felt it was a shame not to make use of a few vacant apartments when the streets were filled with homeless people.

  Almost immediately, the columnists and editorial writers criticized my offer. City officials, sensing a potential controversy, told me “No, thanks.” It didn’t help make my offer seem sincere when one columnist wrote a story saying that I’d refused a subsequent plea by a group representing Polish refugees seeking to use the apartments. In fact, by then I’d had second thoughts about the whole concept. My attorneys had researched the situation and determined that if I permitted anyone to move into the apartments—even on a temporary basis—I’d have a very hard time ever getting them out legally. That was all I needed.

  Saying so publicly, however, might just have made a bad situation worse. Instead, I said nothing, which wasn’t much better. It was not one of my best experiences with the media, but it taught me something. You don’t act on an impulse—even a charitable one—unless you’ve considered the downside.

  Early in 1984, a group of tenants went to the state and officially filed charges of harassment. Virtually all of the complaints were trivial, but I told my people to take care of every one nonetheless. Even that wasn’t enough. In January 1985, the state agreed to consider the tenants’ charges of harassment. Obviously, we’d made our share of mistakes early on, but none had caused anyone real hardship. In my view, the tenants’ tactics were a clever form of reverse harassment. They knew there had been no real harassment. The case instead was a ploy to hold on to their bargain apartments—or at the very least to exact a rich settlement from me.

  The tenants’ committee orchestrated the campaign. Nearly fifty tenants were part of the harassment action, and all of them submitted identical boilerplate lists of complaints. They even ended their letters with the same phrase: “Donald Trump is a modern-day Scrooge.” When my attorneys did a little further checking, they found out something very interesting. Several of the wealthier tenants had been submitting the same sort of complaints to city agencies for the past ten, twenty, and even thirty years, invariably accompanied by a request for a reduction in rent. The tenants of 100 Central Park South were world experts in the art of living very high for very little.

  What the tenants didn’t count on is that I’m not one of those landlords who roll over to avoid bad publicity or save a few bucks—particularly when I think the charges are unfair. Fighting back might run up my legal bills and even make me rethink my strategy. But the one thing I wasn’t about to do was allow myself to be blackmailed into a ridiculous settlement.

  A couple of things did go my way. The most important was the value of New York real estate. It had risen steadily every year since 1974, but in early 1981, about the time I bought the two buildings on Central Park South, it finally took a pause. Over the next two years, during which I’d originally hoped to get my new building finished, the market actually declined. A lot of people thought the big boom was over.

  In 1984, however, the market picked up again strongly. The economics were staggering. In the fall of 1981, the average price per room for a cooperative reached as high as $93,000. By early 1983, it dropped as low as $67,000. But by January 1985—when my confrontation with the tenants was reaching a head—the average price per room had jumped up to $124,000. In short, while the tenants were doing all they could to delay me, New York real estate was nearly doubling in value.

  Even by building only on the Barbizon site—which I’d decided was the easiest solution—I’d earn more than if I’d developed the entire site two years earlier. In addition, we now had numerous vacant apartments at 100 Central Park South, and with time the number could only rise. The law permitted us to rent some vacant apartments at market rates. In effect, I was sitting on gold.

  The other thing that happened during this period is that architectural tastes and trends began to shift. At the time I purchased the buildings on Central Park South, the style in skyscrapers was still very much the sleek, highly modern glass tower. Trump Tower was perhaps the ultimate example. Because that design was so well receiv
ed and so successful, it seemed to me only logical to design a similarly sleek modern building on the Central Park South site.

  By 1984, however, I sensed a new wave in architecture was setting in—and it was the wave of the old. The people who buy top-line apartments in New York tend to be extremely fashion-conscious, in architecture as in everything else. I’m a practical man. If an older look is what people want, that’s what I’m going to provide. I’m not interested in buildings that don’t sell. Early in 1985, I commissioned an architect to design a new building for the Barbizon-Plaza site—but one that incorporated older, classical elements compatible with 100 Central Park South.

  In truth, my heart wasn’t totally in it. I’d never been a big fan of postmodernism, the architectural movement that first mixed classical elements with modern design. To me, it often represents the worst of both worlds. The materials and the craftsmanship are rarely first-class because most builders won’t pay what that requires, and the classical elements in postmodern designs almost always look imitative. At the same time, these elements interfere with the sleek look of the best modern design.

  When my architect showed up with his model for an older-looking building on the Barbizon site, the design was not the first thing that caught my eye. The new building, I noticed, was much smaller than the one it was intended to replace. What, I asked the architect, was this all about?

  “It’s the zoning,” he explained. “When the Barbizon was built, there were no restrictions on size. Now that the zoning is so much stricter, it’s no longer permissible to build such a large building on that site.”

  “Do you mean,” I said, “that if I totally gut and rebuild the inside, and leave only the façade and the steel frame intact, that is okay? But if I tear down the old building I have to replace it with a much smaller and less dramatic new one?”

  And he said, “Yes, Mr. Trump, that is correct.”

  “If that’s the case,” I said, “then why should we knock down an old building to build a new one that will be less than half the size, won’t look nearly as good as the old one, and will cost a lot more?”