Donald Trump & Roy Cohn trick New York into paying for his first hotel

The Trump Timeline

Sources linked at end of page.


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Around May 1975, Donald Trump attempts an elaborate plan to buy the struggling, historical Commodore Hotel and turn it into the Grand Hyatt. The plan includes convincing the city that he’s doing them a favor and needs a tax exemption in return.

This isn’t as difficult as you might expect. Fred Trump has been friends with Mayor Abraham Beame for over 30 years.

By the time the clubhouse hack [Mayor Abraham] Beame arrived in City Hall in 1974 after the reform mayoralty of John Lindsay, Fred Trump had known him for 30 years. The new mayor immediately gave both Trumps a license to steal by declaring that “whatever Donald and Fred want, they have my complete backing.”

New York Magazine

The Trumps — with help from Roy Cohn — bring the city an elaborate financial plan to save the hotel. Donald Trump will be allowed to purchase the property for $9.5 million. Then, he will sell it for one dollar to the Urban Development Corporation, a New York government agency he brought into the deal after hiring Louise Sunshine, the governor’s chief fund raiser. The agency will then lease the property back to him and waive the hotel’s property taxes for 40 years.

Behind the scenes, Trump, Cohn, and officials at Penn Central, which owns the property, strategize a public relations campaign to put pressure on the city. NYC services were being slashed, and the city was on the brink of bankruptcy. Trump’s messaging was clear: save the Commodore to save New York. (Manipulating fear to achieve his goals is a tactic Trump relies on for the rest of his life.)

To make the deal happen, Trump had his surrogates and Penn Central’s spread the idea that if the Commodore shut down it would, in the words of a WCBS editorial, “lie vacant, taxes unpaid, a monument to urban failure.”

City officials concurred: “A closed Commodore would have a very serious blighting influence on the east midtown area,” said Alfred Eisenpreis, New York’s Economic Development Administrator. Trump needed to play up the urban blight angle both to keep the purchase price low and to ensure that no one else would swoop in and offer more than $9.5 million.

James Nevius,

As worries escalate around the possible closure of the Commodore, Trump and friends tell the press that Donald has already signed a purchase contract for the hotel, on the terms that the city agrees to his requested tax abatement. But he hasn’t. He can’t secure the $250,000 Penn Central requires for an option to buy.

Not knowing they’re being conned, the Urban Development Corporation votes initial approval of a two-part deal with Trump in March 1976. UDC official Richard Ravitch warns that this could be scheme for Trump to make a “windfall profit.”

The next step for Trump is to get approval from New York City’s Board of Estimate. The board will need to see some paperwork, the contractual agreement between Trump and Penn Central. Trump sends them the unsigned contract and tells Penn Central to shut down The Commodore two days before the meeting. He wants the board to make a decision out of fear — fear that if they don’t agree to this deal with Trump, the hotel won’t be saved and other businesses in the neighborhood will feel the consequences.

It works. The board either doesn’t see the missing signatures on Trump’s papers or doesn’t care. The deal is approved on May 20, 1976, and the lease is drafted in September.

Trump’s strategy worked thanks to help from the mayor’s office.

Beame deputy mayor Stanley Friedman… in his waning weeks in office fast-tracked the agency approvals Trump needed to rebuild the decrepit old Commodore Hotel as the Grand Hyatt, his first big deal. Roy Cohn served as the closer. The day after the Beame administration was succeeded by Ed Koch’s in 1978, Friedman was paid off for his Trump handiwork with a new job as a partner in Cohn’s law firm.

New York Magazine

The final arrangement includes a 42-year tax exemption on the property, assessed at $1.4 million annually. Instead of the taxes, Trump pays rent to the UDC: $250,000 for the first year, $350,000 for the next five years, and similar increases every five years until the exemption ends. The city calculates that they’re saving Trump $72 million over that 42-year period. The New York Times estimates the real amount at $168 million.

Trump is also required to pay a percentage of his annual profits to the city (15 per cent of the profits if they reach $2.5 million) until he’s paying the full property taxes.

City officials had two years to find other buyers who might renovate the Commodore without financial aid or who would require less help. They didn’t even try because they thought Trump already had a legal stake in the property and because of pressure from Beame’s office.

Ravitch [at the UDC], who told me he still thought the deal was a “mistake,” said he was pressured by (Mayor Abraham) Beame, John Zuccotti, State Senator Manfred Ohrenstein, Assembly Speaker Stanley Steingut, and Trump to approve the deal. “They all called and wanted me to move the thing faster,” said Ravitch. Ravitch kept telling the callers that the city could get better terms and told Trump not to call again. “I didn’t like this political stuff,” Ravitch said. “I didn’t want another call from another politician.”

Wayne Barrett

Note: This story has a lot of layers. I’ve done my best to organize them here, but if something is missing or out of order, please let me know via the Trump File contact form or on Twitter.

External Sources

Village Voice (Archived)

Curbed (Archived)

New York Magazine (Archived)

Mother Jones, Archived

New York Review of Books, Archived

Too Much And Never Enough by Mary L. Trump, Ph.D.

Photo: Getty Images

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