Trump: How to Get Rich

It was now 1995 and the market still wasn’t so good. Kinson had every reason to want to get out, and they wanted to do it quickly and quietly. So the negotiations began, with me offering them $1 million in addition to assuming and negotiating their liens. I also made the deal subject to a restructured ground lease with the Hinneberg family.

They accepted my terms without question.

Why? Because they wanted out—and fast. They knew it and I knew it, and because I knew it, the negotiation was easy.

There was another crucial aspect to this deal, which proves the importance of knowing what the other side wants: All of the prior leaseholders had dealt with the agent of the Hinneberg family. The agent insisted on increasing the rent and raised other financial obstacles that he said the owner insisted upon. I had to see for myself what the Hinnebergs wanted—was it money, or something else? If you want the truth, go to the source and skip the translation by the intermediary.

I flew to Germany with Bernie Diamond, my general counsel, for a face-to-face meeting with the owner, who seemed impressed by the fact that I would travel across the Atlantic to see him. I learned that what he really wanted was peace of mind in connection with his ownership of the land, but all he was getting was aggravation and litigation. I told him I would agree to turn the present disaster into a first-class office building if he would forgo all rent during the renovation period and revise the lease to permit rental to quality subtenants and bank financing for part of the building improvements. He agreed—and it was the first of many instances that confirmed my belief that Walter, Christian, and Walter Hinneberg Jr. are among the finest people with whom I’ve ever done business.

Very soon after acquiring 40 Wall Street, the markets turned for the better, and the downtown area experienced a renaissance in terms of both commercial and residential properties and developments.

I make a great deal of money from 40 Wall Street. Aside from owning the most beautiful building in lower Manhattan, I have the added attraction of owning a particularly lucrative one, all because I watched the property carefully for decades, waiting for my moment, and knew what the other side was thinking.

Be Reasonable and Flexible

A good negotiator must be flexible to be successful.

When I bought 40 Wall Street, it was virtually vacant. I told the existing leasing broker, a friend of mine, that I was going to renovate the building and get tenants. I offered him the chance to be my exclusive rental agent. The broker had been the agent for the previous owners of the building, who had been having big problems getting tenants. He was so sure I would fail that he said he would take the job only if I would pay him a retainer of $60,000 per month, starting immediately. He said he would deduct his future commission from that guaranteed fee.

His offer was impossible for me to accept. I owned a vacant building with existing losses, and the broker, who had been unable to produce in the past, was asking me to pay cash up front. I told the broker that his offer showed a total lack of faith in my ability to be successful—a broker getting paid without producing a tenant was unheard of.

The broker remained inflexible in his position. We parted company.

I hired another high-quality broker, who willingly accepted the opportunity on the usual terms—no lease, no commission. I renovated the building. The broker made millions in commissions in the next two years. The original broker’s inflexibility cost him a small fortune, plus he lost any future business from me.

Trust Your Instincts

When I took over 40 Wall Street, my associate Abe Wallach, who orchestrated the purchase, was certain that the only viable solution was to convert the building to a residential cooperative apartment house. His reasoning made sense, given the depressed market for office tenants and the incentives the city was giving for residential development downtown. All of the real estate brokers shared his view that leasing to office tenants wasn’t feasible. They said the floor sizes were either too small or too large for renting. They complained that the lobby, elevators, and building systems required extensive renovations with questionable results.

I was leery of their recommendation because the cost of residential conversion was high, plus the five floors occupied by a law firm would have to be bought out for megabucks and that would screw up any construction timetable. My instincts told me the building could become the prime office location it once had been, and that there had to be a way to make it work.

I asked George Ross to see whether he could devise a workable scenario, and he came up with an interesting new approach. He suggested we envision the 1.3-million-square-foot building as three separate structures on top of each other: