Sheathed in green glass and renamed the Grand Hyatt, the Commodore reopened two years later, the centerpiece of a resurgent neighborhood. "In a way, Donald Trump's best ally has been the business cycle," Stern observed. "He came into his own as an operator just at a time when the market was at bottom, and he built into a period of prosperity." Others believe that the revitalization of the neighborhood was awaiting the risky renovation of the hotel. "A lot of people were sitting there with billions to invest, waiting to see what would happen with the Commodore," says Richard Kahan, a prominent New York developer and former president of the state Urban Development Corp.
In 1978, with the Hyatt under way, Trump began moving in on Atlantic City, lured by the tremendous profits of the first few casinos. He applied for and received a casino license before starting his building, an unusual step ensuring that construction would be unencumbered by the costly last-minute interference by New Jersey casino authorities. The Trump Plaza casino-hotel would be completed for between $200 million and $220 million, virtually on the mark of its budgeted cost. By comparison, the nearby Tropicana came in at $340 million, about $250 million over budget.
Trump began construction without a financial partner; ultimately he would put slightly less than $50 million in capital into the project, much of which he got back in 1982 when Holiday Inns Inc. bought a 50% equity interest in the project for its Harrah's subsidiary. In other words, Harrah's covered virtually all Trump's costs, leaving him with a 50% interest.
"So Harrah's put up all the cash," observed Daniel Lee, a gambling industry analyst for Drexel Burnham Lambert Inc. "He got it because he had the guts to start the casino without a partner."
Of course, the Trump capital was not necessarily Trump cash. According to state records, between May, 1980, and June, 1981, Trump drew $8.9 million from his Chase Manhattan personal credit line for the casino project. Some of that was repaid with the proceeds from a $7.5-million loan that Trump got from his father.
Leased the Land
And not all the decisions that Trump made on the Atlantic City project were right. The decision to lease much of the land beneath the building, rather than buy it, had an impeccable financial rationale: Buying the land would require a huge cash investment that would have to be financed at high interest rates.
"If I was to spend $25 million to purchase the (land) as opposed to paying $1.8 million or $1.9 million a year in rent, which is the equivalent of going to a bank at 7% or 8% interest, the cost of the job would have just become prohibitive," he told the Casino Control Commission. "I would spend the money on brick and mortar, on architects, on furnishings, on the right-looking facilities, rather than spending $25 million to unnecessarily purchase the land."
That created problems when it emerged that one of the lessors was Daniel J. Sullivan, a Teamsters Union functionary who had met occasionally with Jimmy Hoffa and who had a string of convictions on weapons charges and other misdemeanors. It was unlikely Sullivan would pass the commission's scrutiny.
Trump overcame that obstacle by buying the Sullivan partnership's parcel for $8 million, according to records of casino regulators. Later, Trump arranged for Sullivan to be hired as a labor negotiator at the Grand Hyatt project, which had been having bargaining problems with the hotel and restaurant workers union.
Trump also introduced Sullivan to his own banker at Chase, although he declined to guarantee a Chase loan to Sullivan.