The day Donald Trump called and asked for a one-on-one meeting in the winter of 1988, Tom Barrack was a relative newcomer to the high-stakes poker game of New York real estate. He had worked for nearly two years for Robert Bass, the Texas billionaire investor, and had played an important role in winning the Plaza Hotel for his boss the year before. Mr. Trump was the country’s most quotable and ostentatious financial celebrity, a guy with a jet, a 282-foot yacht and a fondness for peach-toned marble.
But among the people he negotiated with, Mr. Trump had a reputation for both steeliness and finesse. So Mr. Barrack was wary. A mere four months after Mr. Bass had taken control of the Plaza, he gave Mr. Barrack the go-ahead to put it up for auction. Mr. Trump was calling to say, in effect, skip the auction. We’ll strike a deal, the two of us, right here in my office.
“Just come over,” Mr. Trump said, in Mr. Barrack’s recollection. “Give me half an hour.”
Mr. Barrack was soon sitting in Mr. Trump’s office in Trump Tower on Fifth Avenue. The two had met a few times, because Mr. Trump had been angling to acquire the Plaza for years. Now that it was going back on the market, Mr. Trump didn’t want to miss out.
“How can I live without it?” Mr. Trump asked, gesturing to the Plaza, which could be seen from his window, just two blocks north. “It’s right in my backyard.”
“You should own it,” Mr. Barrack replied. “But you’re going to have to pay for it.”
Mr. Trump quickly agreed to a price of slightly more than $400 million, an unprecedented sum for a hotel at the time. Just a few years later, the Plaza wound up in bankruptcy protection, part of a vast and humiliating restructuring of some $900 million of personal debt that Mr. Trump owed to a consortium of banks. Never one for regrets, Mr. Trump today regards the purchase as a triumph.
“To me the Plaza was like a great painting,” he said in an interview in late December. “It wasn’t purely about the bottom line. I have many assets like that and the end result is that they are always much more valuable than what you paid for them.”
Thomas Barrack Jr., the aspiring deal maker who orchestrated the sale of the Plaza to Mr. Trump.
Peter Foley / Bloomberg
How Mr. Trump came to own, operate and then lose the Plaza reveals a lot about his business style. For decades, Mr. Trump has boasted of his boardroom skills in self-exalting speeches and books. As the front-runner in the Republican presidential race, he frequently argues that his corner-office prowess uniquely suits him to negotiate with world leaders.
What does this prowess look like up close? In the Plaza tale, Mr. Trump demonstrated both strengths (an ability to charm or strong-arm, as the occasion required) and weaknesses (a kind of hungry impatience that left him searching for new trophies as soon as one had been acquired). His methods as a political candidate mirror his methods as an executive, say those who have dealt with the latter and seen the former. In fact, the more you know about Mr. Trump’s past, the more his run for high office looks like an effort to close the biggest deal of his life.
“He has the ability to imagine what the other party wants him to be and then be that person,” said Michael D’Antonio, author of “Never Enough: Donald Trump and the Pursuit of Success.” “He presents the Trump that will work in the moment.”
When Mr. Trump made that call to Mr. Barrack he was 41 and New York City’s showiest developer. Then, as now, his braggadocio could sound like a parody of braggadocio. There was, for instance, the moment in 1984 when he told The Washington Post he could handle the United States’ side of nuclear arms talks with the Soviets.
“It would take an hour and a half to learn everything there is to learn about missiles,” he boasted. “I think I know most of it anyway.”
By 1987, he had casinos in Atlantic City, a mansion in Palm Beach, Trump Tower, all the trappings of an up-and-coming tycoon, along with a best seller, “The Art of the Deal.” What Mr. Trump lacked was the kind of old-money Manhattan landmark that would add prestige to his portfolio.
The Plaza, which he’d been yearning to buy since his mid-20s, was that landmark. The hotel had opened in 1907, a 19-story French Renaissance “chateau” with roughly 800 rooms. It billed itself as “the world’s most luxurious hotel,” and over the years its habitués included F. Scott Fitzgerald, Marlene Dietrich and Frank Lloyd Wright, who lived there while construction of the Guggenheim Museum was underway. When the Beatles performed on “The Ed Sullivan Show” in 1964, they stayed at the Plaza.
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Mr. Bass came into possession of the Plaza when he, along with a Japanese corporation, bought its owner, the Westin chain. Mr. Bass was enamored with the hotel’s history and cachet, but he had little experience in the hospitality industry.
As Mr. Bass pondered the matter, Mr. Barrack, who was based in Manhattan, started to appreciate that the Plaza could fetch an irresistible price. By February 1988, he was readying an auction.
It was around this time that Mr. Trump picked up the phone and requested that half-hour meeting with Mr. Barrack at Trump Tower.
To understand what happened next, you need to know that in every real estate deal, the two big variables are price and contingencies. The latter come after an initial purchase price is agreed to and are essentially conditions demanded by the buyer after a thorough inspection of the property. A condition could be a problem with the plumbing, the roof or a thousand other particulars, and every condition can reduce the price of the property. With a building as old as the Plaza, a proper inspection could take months and include union contracts and an assortment of licenses for food and drink.
On the phone, when Mr. Trump asked him to abandon the auction, Mr. Barrack initially thought it was a ploy related to contingencies.
“I told him: ‘You’re too good. You’ll want to buy it and it will get tied up in all these contingencies.’ He said, ‘No, it’ll be a real deal.’ I said, ‘No contingencies.’”
Once in Mr. Trump’s office, the haggling began. Mr. Barrack said he expected 10 to 15 participants in the coming auction and an ultimate price as high as $500 million. What if I gave you $390 million today? Mr. Trump asked. Mr. Bass has an offer of $410 million in hand, Mr. Barrack countered. Mr. Trump raised his bid, and they settled on a final price of $407.5 million.
“Then he did something amazing,” Mr. Barrack recalled. “He said: ‘You’ve owned the property for four months. I want you to tell me everything that’s wrong with it and how to fix it. I said, ‘We just said, no contingencies.’ He said: ‘This is not in a contract. Nothing in writing. Just tell me what is wrong with the property and how to fix it.’”
In essence, Mr. Trump was telling Mr. Barrack that he trusted him to disclose everything that a team of lawyers and inspectors would typically need at least 90 days to unearth. It was like asking an enemy for a map of a minefield. And by saying, in effect, “I’m at your mercy and will believe what you tell me,” Mr. Trump was appealing to Mr. Barrack’s integrity. Which was very disarming.
Mr. Barrack thought over Mr. Trump’s question for a moment. He had already worked out most of the major problems.
“The biggest issue,” he told Mr. Trump, “is Fannie Lowenstein.”
He was referring to a woman, who might have been in her 80s, who lived by herself in a tiny, rent-controlled apartment in the Plaza. With Ms. Lowenstein there, reconfiguring the building as a condominium or a co-op, which was Mr. Trump’s plan and the only way to justify the $407 million price tag, would be far more difficult. But she had adamantly refused to give up her rent-control rights and move to a larger apartment in the Plaza.
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“I’ll do the deal in a week, for $407.5 million,” Mr. Trump said, “and you take care of Fannie Lowenstein. All I want at the closing is to hear that Fannie Lowenstein is happy.”
Mr. Barrack left the meeting in a daze, both thrilled and anxious.
“It was a genius deal for Trump,” Mr. Barrack said, “because while an auction would have fetched a bigger initial price, it would have been tangled up in contingencies. And he’d just convinced me to fix everything for him.”
Mr. Trump had correctly sized up Mr. Barrack: someone who was trying to prove himself and wanted a major coup.
“He kind of looked at me and said, ‘I’ll make you a star,’” said Mr. Barrack, who now runs Colony Capital, a real estate investment firm based in Los Angeles with 300 employees. “It’s the same talent on display when he gives political speeches. He reads an entire crowd with the same precision that he reads an individual.”
For Mr. Barrack, winning over Ms. Lowenstein was a project. She knew more about tenant law than any lawyer, and for the next two months, the two spoke four or five times a week. He ultimately offered her an apartment in the Plaza that was almost 10 times as large as her studio apartment, with a view of Central Park. Rent-free. For life. Also, new furniture, new dishes, new everything. She grudgingly agreed. But she also wanted a piano. She got a Steinway.
To Mr. Barrack’s amazement, Mr. Trump handled nearly all of the negotiations for the Plaza himself. Much as Mr. Trump is doing in his current campaign, which is notably lacking in consultants and pollsters, he operated largely by gut instinct.
When Mr. Trump did consult outside counsel about the Plaza, his instructions were to make as little trouble as possible, no matter how daunting the numbers looked.
Prince Alwaleed bin Talal of Saudi Arabia, who bought the Plaza after Donald Trump’s bankruptcy, in a partnership with CDL Hotels International.
Saleh Rifai / Associated Press
“He toned me down,” recalled Jonathan A. Bernstein, then a lawyer at Dreyer & Traub. “He had come to the conclusion that this was a deal he wanted to do, and he was completely aware of the downsides, and my job was to get him the best legal document I could. You don’t tell him, ‘Are you crazy?’ You say: ‘It’s $400 million and $12 million in N.O.I.,’” or net operating income. “‘Are you O.K. with that?’”
Once he owned the hotel, Mr. Trump put his wife, Ivana, in charge of renovating it, paying her, as he put it at the time, “one dollar a year plus all the dresses she can buy.” She and a team oversaw a restoration that included new paint, new furniture and a revival of the major public spaces, like the Palm Court tearoom.
“Some of it came out great; some of it came out kind of chintzy,” said Barbara Res, then an employee of the Trump Organization. “We went about trying to restore it but in a way that didn’t cost too much money.”
Mr. Trump offered design opinions and growled when necessary. After a hotel union put up resistance to changes requested by his wife — that ashtrays be regularly stamped with the Plaza’s logo, for instance — Mr. Trump issued a threat.
“I called these guys up,” he told The New York Times soon after the purchase, “and said, ‘Do it, or I’ll turn the Plaza into a condo with three janitors and a super.’”
Opinion was split over the merits of the deal. Among the many who thought that Donald Trump had overpaid was Donald Trump. In a full-page ad he took out in New York magazine in November 1988, he called the transaction “the first time in my life I have knowingly made a deal which was not economic — for I can never justify the price I paid, no matter how successful the Plaza becomes.”
This proved prescient. By 1990, the Plaza needed an operating profit of $40 million a year to break even, according to financial records that Mr. Trump disclosed at the time. The hotel had fallen well short of that goal, and with renovating expenses, in one year it burned through $74 million more than it brought in.
But Mr. Trump didn’t spend a lot of time sweating over the Plaza’s finances. He was too busy with new challenges. A few months after the Plaza deal closed, he purchased the Eastern Air Shuttle for $365 million, and in 1990, he opened the Trump Taj Mahal casino in Atlantic City, which cost $1 billion to build. Some of the loans he took out to pay for deals were personally guaranteed.
“The fact is, you do feel invulnerable,” Mr. Trump told Timothy O’Brien, author of “Trump Nation,” discussing this period in his life. “And then you have a tendency to take your eye off the ball a little bit and hunt around for women. And hunt around for models.”
A lack of focus was not Mr. Trump’s only problem. The updraft in the real estate market of the ’80s turned into a headwind by the early ’90s, and more than $3 billion in loans — $900 million of which were personally guaranteed — went into default. Dozens of banks came calling and, after lengthy negotiations, a meeting was held in a large conference room in the law offices of Weil, Gotshal & Manges, the firm that represented the largest lender, Citibank. There, some 50 bankers and lawyers watched Mr. Trump sign over nearly all of his properties — the Plaza, other buildings, the shuttle, the yacht, the jet — in exchange for more favorable terms on his personal guarantees.
The banks could have easily toppled Mr. Trump into personal bankruptcy, “but we all agreed that he’d be better alive than dead,” said Alan Pomerantz, then head of the real estate department at Weil. “We needed him to help sell all of his assets, and the deal was that as he sold off more, we’d reduce his personal guarantee.”
In effect, the banks allowed Mr. Trump to remain solvent so that they could get the benefit of his gift for salesmanship. In exchange, the banks provided him with $450,000 a month to operate his business and cover personal expenses. It was so tight a leash that when Marla Maples, his girlfriend at the time, turned up on television waving the costly Harry Winston diamond she’d been given as an engagement ring, the paymasters wanted a word with the groom-to-be.
“I didn’t buy it,” Mr. Trump said, according to Mr. Pomerantz. It was a three-month loaner, given in exchange for on-air mentions of Harry Winston.
A spokeswoman for Mr. Trump called that story “completely false.”
The banks shopped the Plaza around, without success, for a few years before finally selling it in a deal that valued it at $325 million to a partnership between Prince Alwaleed bin Talal of Saudi Arabia and CDL Hotels International of Singapore in 1995. None of the proceeds went to Mr. Trump, according to several people involved.
Still, he told me that the sale was yet another victory. The terms were, to use one of his favorite words, fantastic, and relieved him of a vast personal debt.
“One of the great deals was the Plaza, because way beyond the price, I was able to get favors from the banks and from others,” he said. Speaking of Prince Alwaleed, he added: “He paid too much for the hotel. He wanted that hotel so badly, and I put him through the wringer and made a great deal.”
Of course, it cost the Saudi-Singapore partnership $75 million less than Mr. Trump had spent for the same building seven years earlier. Mr. Trump also claimed in the interview that he owned 100 percent of the Plaza until the day it was sold, a version of events totally at odds with published reports at the time and the recollections of others involved in the deal.
This may be yet another parallel to Mr. Trump’s performance on the hustings, where he has bent the truth into so many outlandish shapes that PolitiFact anointed his entire campaign the 2015 Lie of the Year. Among the more memorable whoppers: a Twitter post that 81 percent of whites are killed by blacks (PolitiFact cites the true figure as 15 percent) and that on television he’d seen thousands of people in Jersey City cheering the collapse of the World Trade Center.
Mr. Trump’s prediction that the Plaza would be worth far more than it cost him did come true. Unfortunately for him, it happened in 2004, when the hotel was sold yet again, this time for $675 million to an Israeli developer who carved up the rooms in the way that Mr. Trump had originally imagined. Half of the building was turned into condominiums, which eventually sold for a total of $1.4 billion.
Today, Mr. Trump’s brief ownership of the Plaza is one of the least-known chapters of a protean career. It was not the last time one of his properties would need the shelter of bankruptcy protection, and it marked the beginning of his transition from an owner of major assets to a manager of major assets. An increasing share of his wealth would come in the future from licensing his name, not just to builders but sellers of suits, cologne, chandeliers, mattresses and more. In professional parlance, he went from “asset heavy” to “asset light.”
The Plaza deal also demonstrated both his intense drive and ambition as well as his tendency to spread himself dangerously thin as he looks for other conquests. Abraham Wallach, a former executive at the Trump Organization, said Mr. Trump was a man without any conventional vices, but he had a hopeless addiction to notoriety and was always prowling for another deal that would gain attention and enhance his status.
“I’ve been shocked he has demonstrated such focus during the presidential campaign,” Mr. Wallach said. “In business, he would focus for about two or three days before the closing, and after that he would lose interest.”
Recently, the hotel and a central character in this narrative have intersected with his presidential run. After Mr. Trump called in December for a “complete shutdown” on Muslims’ entry into the United States, Prince Alwaleed posted on Twitter: “You are a disgrace not only to the G.O.P. but to all America. Withdraw from the U.S. presidential race as you will never win.”
Mr. Trump returned fire: “Dopey Prince @Alwaleed_Talal wants to control our U.S. politicians with daddy’s money. Can’t do it when I get elected.”
That same day, Dec. 11, Mr. Trump gave a speech at a luncheon where he was heckled by protesters waving signs that read, “Stop the war on immigrant communities” and “Trump, making America hate again.” Several people were ejected from the building.
The building was the Plaza Hotel.