Trump: How to Get Rich

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:

• The top 400,000-square-foot tower had small floors with spectacular views, and he was convinced it would quickly be rented to boutique tenants who would pay higher rent for the prestige of being a full-floor user on a high floor.

• The middle 300,000 square feet could be rented for less per square foot, but those rents would still more than cover the purchase price and the cost of renovation.

• The bottom 400,000 square feet might be tougher to rent, but even if those floors were completely empty, the building would still be profitable, assuming our projections about renting the top 700,000 square feet were correct.

Emboldened by George’s plan, I discarded the idea of residential conversion and relied on our construction expertise to turn 40 Wall Street into a successful office building. We redesigned and modernized the lobby and building systems, and when the rental market improved, we were ready. Now, the building is worth hundreds of times what I paid for it.

I guess my instincts were right.