Trump's First Manhattan Deal: The Grand Hyatt Hotel

The Commodore Hotel Gambit

New York City in the mid-1970s was teetering on the edge of bankruptcy, and nowhere was the decay more visible than the Commodore Hotel, a once-grand property adjacent to Grand Central Terminal on East 42nd Street. The hotel was losing money, the neighborhood was deteriorating, and the Penn Central railroad, which owned the building, was itself in bankruptcy. Where others saw a dying property in a dying city, a 27-year-old Donald Trump saw his opening.

In 1976, Trump optioned the Commodore Hotel with a plan to gut it and transform it into a gleaming modern hotel in partnership with the Hyatt hotel chain. The deal was audacious for a developer who had never built anything in Manhattan, but Trump brought one crucial asset to the table beyond his father’s financial backing: a talent for political persuasion.

The Tax Break

The centerpiece of the deal was an extraordinary 40-year property tax abatement from New York City, the first such concession ever granted to a commercial property in the city’s history. Trump argued that without the tax break, the Commodore would simply close, costing the city jobs and tax revenue entirely. City officials, desperate for any sign of investment during the fiscal crisis, agreed.

The abatement was estimated to be worth hundreds of millions of dollars over its lifetime. Critics argued it set a troubling precedent, effectively giving a wealthy developer a massive public subsidy for a prime Manhattan location that would almost certainly have been developed eventually as the city recovered. Fred Trump’s extensive connections to the city’s political establishment were instrumental in securing the approval.

A Glittering Transformation

The Commodore was stripped down and wrapped in a reflective glass curtain wall, transforming it from a dingy relic into a flashy symbol of the new New York. The Grand Hyatt New York opened on September 25, 1980, and quickly became profitable. The hotel’s success established Trump’s reputation as a Manhattan developer and gave him the credibility and capital to pursue even larger projects.

The Grand Hyatt deal established a template Trump would use repeatedly throughout his career: identify a distressed property, negotiate aggressively with government for tax incentives and subsidies, partner with an established brand, and generate maximum publicity. It also introduced what would become a recurring critique of Trump’s business career, that his profits often depended heavily on public subsidies and favorable government treatment rather than pure entrepreneurial risk.