From Delancey Place:
Today's selection -- from The Plaza by Julie Satow.
"In the fog of 1980s excess, Trump had built up his sprawling, debt-laden empire. As the dawn of the 1990s broke, however, the haze cleared, and the economic realities came into view. There was a recession, the real estate market had collapsed, and Wall Street was reeling from the savings and loan crisis. Trump had overpaid and overborrowed in the expectation that his assets would continue appreciating and he could easily cover his debts. But that didn't happen.
"Trump owed his lenders several billion dollars, nearly $1 billion of which he had personally guaranteed. This meant that his personal assets, and not just his business assets, could be seized by creditors. One day, Trump was strolling down Fifth Avenue with Marla when he passed by a homeless person. 'You see that man?' he asked her. 'Right now he's worth $900 million more than me ... Right now I'm worth minus $900 million.'
"Trump's situation became increasingly dire. In 1991, his Taj Mahal casino in Atlantic City, billed as the 'Eighth Wonder of the World,' was nearly $3 billion in debt and filed for bankruptcy protection. It would be the first of what would eventually amount to six corporate bankruptcies. As he watched his empire and his marriage collapse, Trump retreated to his own apartment in Trump Tower, taking refuge in food, ordering in hamburgers and French fries from the deli downstairs. When a friend commented that he was acting like the reclusive Howard Hughes, he replied, 'Thanks, I admire him.' In the end, Trump would lose his 282-foot yacht; his private jet; his Trump Shuttle airline; his stake in the Grand Hyatt New York; and his Mona Lisa, the Plaza.
"In the first few years that Trump owned the Plaza, the hotel benefited from rising room prices and occupancy rates, as well as a booming banquet business, thanks in part to the Trumps' highprofile celebrity friends. But despite its performance, the underlying financials were shaky. Trump had acquired the Plaza at a market peak, using borrowed funds. He had then saddled the hotel with even more loans, leveraging it to buy an airline and fund construction of his Taj Mahal casino. No matter how much the Plaza made, how many weddings, debutante balls, or bar mitzvahs it hosted, it would never be sufficient to service the debt.
"In 1990, the hotel's total accrued debt service was about $41 million, while the hotel's cash was just $21 million -- a major shortfall. In 1991, it was even worse, with a $42 million debt service and cash of $17.6 million.' At the same time, Ivana was a profligate spender and blew way past her budget on her many hotel improvements. In fact, as a result of her costly renovations, in one year the Plaza spent a staggering $74 million more than it earned. In the summer of 1990, Trump's lenders agreed to let him defer his interest payments and extend the maturity dates on his loans. But by late 1991, it became obvious that no matter what allowances the bank gave him, Trump could never cover his Plaza debts.
"Trump, concerned he would lose the hotel, threw out a possible lifeline. When he had first bought the Plaza, he intended to carve out the building's upper floors into more than a dozen exclusive penthouse apartments, even going so far as to get city approvals for his plan. But not long after Trump closed on the hotel, he grew distracted with his personal life, his Atlantic City casinos, and other Trump-branded ventures. The penthouse plans were put aside.
"Now, he tried reviving them.
"The Plaza's upper floors didn't look like penthouse material.
"They had once been the former maids' quarters and were now a warren of small offices and storage rooms. 'The seventeenth floor was kind of half empty,' Lee Harris Pomeroy, an architect whose offices were there, told me. Pomeroy's conference room, for example, had bathroom tiles along one wall, a throwback from when it had been the maids' shower. These floors were also often used as gathering spots for the prostitutes who hung around the hotel. 'We had a couple of public bathrooms on my floor, and there were the prostitutes in the community. They would hang out downstairs in the lobby, but they needed to change their clothes or do whatever they do, so they would come up to the top floor,' Pomeroy recalled. To try to dissuade the prostitutes from congregating up there, the hotel removed chairs and other lounge furniture from the hallways so there would be no place for them to sit.
"Trump was hoping that the penthouse concept, his last-ditch effort to save the hotel from bankruptcy, could generate massive profits. (He was right. Trump's penthouse plan would eventually be realized -- years later, without him -- generating $1 billion for the Plaza's then-owners.) Trump hired Pomeroy to execute the designs for his penthouses, and the architect began creating plans. The idea was to convert the seventeenth and eighteenth floors into fourteen ultraexpensive apartments. The ungainly rooftop, which was covered with water ranks and paint sheds made of corrugated metal and chicken wire, would also be cleaned up and become a part of the design. But there were several problems standing in Trump's way, and one of the most challenging presented itself in the shape of a diminutive old lady.
"Fannie Lowenstein was one of just a handful of the thirty-nine widows of the Plaza who were still alive. Lowenstein had arrived in 1958, as a young divorcee, and she soon met a fellow hotel resident who became her second husband. Not only did Mr. Lowenstein have a seat on the New York Stock Exchange, but even better, he had a rent-controlled Plaza apartment, one of the lucky few whose rent was frozen in the wake of price controls instituted during World War II. When her husband died, Lowenstein continued to live in splendor in their three-room suite. It would have typically rented for more than $1,250 a night, but Lowenstein paid just $800 a month....
....MUCH MORE
