Will Trump Play his Cards Right?
Love him or loathe him, ‘the Donald’ is the man of the moment. He defines himself as the ‘archetypal businessman’: a rags to riches American dream made real. His bluff, swagger, and unrestrained self-belief have taken him to the top of the political greasy pole.
Donald J. Trump is one election away from the most powerful job in the world.
The circus that surrounds Trump is a carnival of controversy. It feeds on fear, ignorance, and wishful thinking. It has the support of a rambunctious blue collar audience hungry for change. Trump’s rhetoric is divisive and dangerous but his appeal is easy to see. He’s the man who promises to make America great again. He’ll get the difficult deals done. He’ll reinvent the political wheel. He’s 100 per cent certain of it.
Hair. Hubris. Histrionics…
The hubris is glorious, immodest, unashamed, and usually a Politifact ‘pants-on-fire’ storm. What can’t be denied is the power of the brand. Trump’s ego is as large as the giant letters that adorn his many properties. He considers himself to be the smartest businessman on the block. The truth is a little bit more complicated and convoluted, as this tale of Donald’s dabble in the casino world will prove.
Are you betting on Trump? It might be worth sticking a few chips to one side…
As Trump’s presidential run gathers pace, history is being rewritten and much of the New York City property developer’s past is being swept under the carpet.
Visit the official Trump website today and there is no mention of his former gaming company Trump Hotels and Casino Resorts (now known as Trump Entertainment Resorts). His real estate portfolio has a section that links to past properties. There’s no record of his adventures in New Jersey. No Taj Mahal. No Castle. No Plaza.
Betting on the casino business was a gamble. Did it pay off?
The truth is: the Republican party has a mixed approach to gambling. On one hand, we have Las Vegas casino mogul and Republican party donor Sheldon Adelson, who is ferociously opposed to online gaming because he wants to protect his land-based casino business interests.
On the other hand, there are the ultra-conservative Christian congressmen, like UIGEA sponsor Jon Kyl and Jim Leach, who want to ban online gambling and casinos forever on purely moral and religious grounds. Trump is rumoured to be in favour of regulated onlinecasinos and gambling.
The copy on Trump will churn and churn until election day, with pundits picking over this presidential wannabe’s past like vultures.
This week, we are putting the spotlight on Trump’s gamble with casinos. He may not be a player at the casino property tables any more but his early portfolio was a deck stacked with some serious pleasure palaces. Here’s our guide to Donald’s casino winners and losers.
Silk Rags to Riches
Trump was born in Queens, New York City, in 1946. In 1974, he became president of his father’s property business. Fifteen years later, he inherited his ‘rags’: a fortune of between $40 million and $200 million.
Trump’s early business dealings were mainly in the real estate sector, specifically condos, apartment buildings, and government sponsored housing projects. He said: “It’s tangible, it’s solid, and it’s beautiful. It’s artistic from my standpoint and I just love real estate.”
In the 1980s, the Trump brand continued to gain momentum, with more than 270 businesses bearing the Trump name. From vodka and airlines, to mail order steaks and beauty pageants, brand Trump was ladled on thick. The ideas may not worked but everyone knew who was pulling the strings.
In the early days, Trump had a fantastic reputation for bringing in projects under budget and ahead of schedule. His no nonsense approach to business would often leave contractors in tears and suppliers short-changed.
Despite this, in 1990, the Trump Organisation was $5 billion in debt. Trump had to be saved by a bailout and debt deferment by more than 70 banks. If they had called it in, it could have been Cruz – Clinton.
One of the core reasons that Donald got into deep water was his problematic ownership of three Atlantic City casinos: the Trump Taj Mahal, The Trump Plaza, and the Trump Castle (latterly the Trump Marina).
Place your Bets, Gentlemen Please…
Trump’s first Atlantic City boardwalk hotel is also his most controversial. In his biography The Art of the Deal, Trump boasts of fast-tracking the licensing process by reducing the standard one year background investigation to just six months.
He did this by threatening not to build the casino, unless New Jersey’s attorney general John Degnan gave the project a green light. Degnan was aware of the damage that would be caused to Atlantic City’s lucrative gaming industry if the project stalled. He fast tracked Trump and granted him a gambling licence.
Now licensed, construction started in 1982. Harrah’s joined the project, to operate the property. The 614 room hotel opened on May 14, 1984. Five months after opening, the Harrah’s Boardwalk Hotel changed its name to Trump Plaza.
One of the reasons for the name change was to differentiate Trump’s hotel from the low-rolling Harrah’s venues. Trump built 85 luxury suites, to serve the 60,000 sq ft casino. Unfortunately, they rarely saw any action as the whales continued to flock to the blackjack tables of Las Vegas.
Paltry Profits
In the first half of 1985, the Trump Plaza made pre-tax profits of a paltry $144,000. The result was a meltdown between Trump and his partners. The outcome was a $70 million buy out. It cut Harrah’s loose and gave Trump the momentum he needed to claim the title of casino king of Atlantic City.
Trump continued to commit to the Atlantic City casino cause and spent a further $62 million acquiring the Plaza’s neighbouring plot, which included a brand new Hilton hotel. The Hilton Hotel group had been denied a gambling license, due to alleged links to organised crime. Trump jumped in and the Trump Castle was born.
Trump Castle had five good years. It was the setting for the game shows Yahtzee and Trump Card. It was also the scene of the notorious $10 million baccarat battle with Japanese whale Alio Kashiwagi.
Kashiwagi was a whale with yakuza connections who Trump had been courting. Kashiwagi eventually obliged but – to Trump’s horror – stayed at the Castle for just two days and left the casino with $6 million in chips. Trump got the Japanese businessmen back a second time and – this time – Kashiwagi crashed, paying back the $6 million and another $4 million on top. Kashiwagi didn’t get to regret his actions. He was murdered with a samurai sword in 1992.
The Cooler
Even with players like Kashiwagi, by 1990 business had started to head south for Trump. Casino revenues at the Plaza and Castle were turning sour. Ironically, the meltdown was due mainly to the newly opened Trump Taj Mahal. Donald appeared to be shooting Donald in the foot.
The Taj Mahal had been in Trump’s sights ever since the original owner and developer James Crosby died in April 1986. The hotel was still unfinished and Crosby’s heirs lacked the knowledge to finish such a major construction job.
With two Atlantic City casinos to his name, Trump was the obvious takeover choice and purchased a controlling stake for $79 million in July 1987. He was appointed chairman of Resorts International and now controlled his third boardwalk hotel.
To finish the hotel’s construction would cost nearly a billion dollars. Resorts International couldn’t find the necessary $550 million so Trump jumped in and offered to buy the entire business. Following a series of legal wrangles and boardroom battles, Trump finally purchased the Taj Mahal for $273 million, added an additional $675 million to finish the job. It opened on April 2, 1990.
The Taj Mahal claimed to be the largest casino on the planet and billed itself as the ‘eighth wonder of the world’. At the time, it was the most expensive casino ever built. The chandeliers alone cost a cool $16 million.
With 2012 rooms, 4.2 million sq ft of enclosed space, and Michael Jackson starring in the opening night show, the hotel put Atlantic City on the map. It also was the beginning of the end for Trump’s big casino gamble.
Trump was over-leveraged. He’d issued nearly a billion dollars in junk bonds to keep the casinos afloat. The Trump Taj Mahal filed for bankruptcy one year later in 1991. The Plaza also restructured its debt and submitted for bankruptcy in 1992. It was the same story at Trump Castle, as investors were paid off with shares in the failing business.
It was far from over, however. Trump doesn’t like to lose. In 1995, he established Trump Hotels and Casino Resorts as a publicly traded company and reacquired all three casinos. The Trump Castle was rebranded as the Trump Marina.
All through the business dealings, Trump had managed to keep making a profit. His Taj Mahal deal included a package that awarded him a bonus despite the casino losing millions every year. Profit and loss were calculated without taking into consideration the massive loans incurred by the business. Without the debt, they showed a profit. Trump got his bonus.
Trump also paid himself a huge wage and made sure that the bars all stocked his Trump Ice bottled water. The brand was everywhere as the walls came crashing down.
Floating the business gave the business a wash of finance but the excessive borrowing was still too much. The company filed for Chapter eleven bankruptcy protection four times in 1991, 2004, 2009, and 2014.
Today both the Marina and the Plaza are no longer. The Taj Mahal is owned by investor Carl Icahn who dreams of making the iconic hotel great again. The hotel has been neglected for a long time. $15 million has been allocated for immediate repairs and there is a possible $100 million on the sidelines.
Atlantic City has always played second fiddle to Las Vegas. For a brief moment in the late 1980s, Donald Trump made the boardwalk big again. Trump earned a personal fortune but left a trail of devastation in his wake.
Too much debt caused his casino experiment to fail but canny, clever, negotiating kept Trump on top. Atlantic City is still struggling but Donald is almost at the top of the ultimate game. Love him or hate him, you have to respect his stamina and tenacity. President Trump? Would you bet on it?
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