TRUMP STRATEGIES for REAL ESTATE to Help You Or to See Things Your Way
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TRUMP S TRATEGIES FOR R EAL E STATE TRUMP S TRATEGIES FOR R EAL E STATE Billionaire Lessons for the Small Investor GEORGE H. ROSS with Andrew James McLean JOHN WILEY & SONS, INC. Copyright © 2005 by George H. Ross. All rights reserved. Published by John Wiley & Sons, Inc., Hoboken, New Jersey. Published simultaneously in Canada. No part of this publication may be reproduced, stored in a retrieval system, or transmitted in any form or by any means, electronic, mechanical, photocopying, recording, scanning, or otherwise, except as permitted under Section 107 or 108 of the 1976 United States Copyright Act, without either the prior written permission of the Publisher, or authorization through payment of the appropriate per-copy fee to the Copyright Clearance Center, Inc., 222 Rosewood Drive, Danvers, MA 01923, (978) 750-8400, fax (978) 646-8600, or on the web at www.copyright.com. Requests to the Publisher for permission should be addressed to the Permissions Department, John Wiley & Sons, Inc., 111 River Street, Hoboken, NJ 07030, (201) 748-6011, fax (201) 748-6008. Limit of Liability/Disclaimer of Warranty: While the publisher and author have used their best efforts in preparing this book, they make no representations or warranties with respect to the accuracy or completeness of the contents of this book and specifically disclaim any implied warranties of merchantability or fitness for a particular purpose. No warranty may be created or extended by sales representatives or written sales materials. The advice and strategies contained herein may not be suitable for your situation. The publisher is not engaged in rendering professional services, and you should consult a professional where appropriate. Neither the publisher nor author shall be liable for any loss of profit or any other commercial damages, including but not limited to special, incidental, consequential, or other damages. For general information on our other products and services please contact our Customer Care Department within the United States at (800) 762-2974, outside the United States at (317) 572-3993 or fax (317) 572-4002. Wiley also publishes its books in a variety of electronic formats. Some content that appears in print may not be available in electronic books. For more information about Wiley products, visit our web site at www.wiley.com. Library of Congress Cataloging-in-Publication Data: Ross, George H., 1928– Tr ump strategies for real estate : billionaire lessons for the small investor / George H. Ross with Andrew James McLean. p. cm. Includes bibliographical references and index. ISBN 0-471-71835-1 (cloth) 1. Real estate investment. 2. Real estate development. 3. Real estate investment—United States—Case studies. 4. Real estate development—United States—Case studies. 5. Trump, Donald, 1946– I. Title: Billionaire lessons for the small investor. II. McLean, Andrew James. III. Title. HD1382.5.R67 2005 332.63′24—dc22 2005000053 Printed in the United States of America. 10 987654321 This book is dedicated to my wonderful wife, Billie the solid foundation on which the happiness and success in my life was built. C ONTENTS F OREWORD BY D ONALD T RUMP ix P REFACE xi C HAPTER 1 S ELL Y OURSELF L IKE T RUMP: F IVE P ERSONAL Q UALITIES Y OU N EED TO S UCCEED IN R EAL E STATE 1 C HAPTER 2 T HINK B IG: HOW T RUMP C HOOSES P ROPERTIES TO I NVEST I N 21 C HAPTER 3 P RINCIPLES OF N EGOTIATION: H OW T RUMP U SES T HEM 45 C HAPTER 4 H IGH-POWERED R EAL E STATE N EGOTIATION T ECHNIQUES AND TACTICS 69 vii CONTENTS C HAPTER 5 T HE T RUMP T OUCH: CREATE “SIZZLE,” GLAMOUR, AND P RESTIGE TO G ET H IGHER-THAN-MARKET P RICES FOR Y OUR P ROPERTIES 99 C HAPTER 6 R AISING M ONEY: TACTICS FOR ATTRACTING L ENDERS AND I NVESTORS 125 C HAPTER 7 G ET H ELP FROM THE B EST R EAL E STATE S PECIALISTS Y OU C AN F IND 153 C HAPTER 8 W HY T RUMP B UILDING P ROJECTS A RE A LWAYS ON T IME AND U NDER B UDGET 165 C HAPTER 9 T RUMP M ARKETING S TRATEGIES: S ELLING THE “SIZZLE” SELLS THE P RODUCT 179 C HAPTER 10 H OW TO M ANAGE P ROPERTY L IKE T RUMP: T REAT I TASAC USTOMER S ERVICE B USINESS 193 C HAPTER 11 H OLDING S TRATEGIES AND E XIT S TRATEGIES 207 I NDEX 223 viii F OREWORD by Donald Trump (In the author’s copy of The Art of the Deal) To George— There is no one like you. Only you and I know how important a role you played in my success—Thanks for everything! Best wishes, Donald Trump ix P REFACE ’VE SPENT 50 YEARS as a lawyer, business advisor, and deal nego- Itiator for real estate tycoons at the top of the world’s toughest real estate market—New York City. I’ve represented or negotiated with great real estate minds like Harry Helmsley, Sam LeFrak, Bill Zeck- endorf, and Donald Trump. It’s been my good fortune to spend many of the best years of my career as Donald’s right-hand man. These days most people know me best from the TV show, The Apprentice, where Carolyn Kepcher and I help Donald make tough decisions about whom to fire and whom to keep. The show has been fun, but most of my work for Donald over the past 25 years has been in the world of real estate. I have been an advisor, negotiator, and lawyer on many of his biggest and most successful real estate invest- ments, including the acquisition and renovation of the GM building, Tr ump Tower on 5th Avenue, the Grand Hyatt Hotel, and my per- sonal favorite, 40 Wall Street. Throughout my career, I have had the opportunity to acquire a great deal of knowledge and experience in real estate investing, which I hope to pass on to you in this book. For example, during a 10-year period from 1956 to 1966 when Sol Goldman and Alex DiLorenzo Jr. became two of the biggest property owners in New York, I personally bought 702 individual properties on their behalf. I have been intimately involved in many of New York City’s most spectacular projects, such as the Chrysler Building and the St. Regis xi PREFACE Hotel, which I helped one of my clients buy. I’ve also had the oppor- tunity to watch Donald Trump in action as he made some of the greatest real estate investments in history. This book explains the strategies Donald Trump used to make his real estate fortune, and how small investors can apply them to in- vestments of any size, right down to a one-family rental property. I describe how Trump implements some of his signature strategies such as creating luxury, perceived value, exclusivity, and attention to detail, which all come together to maximize the value of his invest- ments. (This is why his properties earn far more money, square foot for square foot, than his competitors’.) A number of the chapters focus on a particular real estate invest- ment that I was directly involved in negotiating or advising Trump on. Using this example, I draw out the lessons and explain how the same strategies that Trump used to make huge profits on his deals can work for you—the small investor. Although Trump does things on a grand scale and his target market is usually an elite, luxury cus- tomer, Trump’s basic real estate strategies will be of interest to: •Anyone who is interested in owning or developing real estate •Anyone unsure of how to negotiate a real estate transaction • Anyone who isinrealestateonasmallscalebutwouldliketo do more • Anyone interested in learning how Donald Trump does his magic This is the first book on Trump’s strategies for the real estate investor. Although it has a lot of nuts-and-bolts guidance and in- vesting principles, the book alone will not make you a great in- vestor. As I tell the students who take my negotiation course at New York University, “There’s no way in 15 hours that I can make you xii P REFACE an excellent negotiator. It is impossible! All I want to do is open your mind to the possibilities and the power of negotiating, and some basic techniques. Then, when you run into a specific situation you can go back to your notes, and say, how did George handle this? Or, what did he suggest?” You already have some ideas about real estate, but I’ve learned many things in my 25 years working with Tr u mp a nd 50 years in the real estate business, that I’d like to pass along to you. If I am successful, this book will help you negotiate far better deals, arrange better financing, make better investments, and earn significantly more money in real estate. I recall the day I first met Donald Trump in 1974. He entered my office at the law firm of Dreyer and Traub beaming with enthusiasm about a project he wanted to do with the old Commodore Hotel on 42d Street in New York City. He was just 27 years old at the time, and I was a senior partner known for completing complex deals, but I agreed to see him out of courtesy because I represented his father, Fred Trump. Fred had spoken enthusiastically about Donald’s promise as a future star in the real estate world.