Boardwalk Empire: The Birth, High Times, and Corruption of Atlantic City

Princess had her own helicopter on the upper deck.

The Princess was conspicuous proof its owner was world-class wealth. Christened Nabila in honor of its original owner’s daughter, the ship had been built for Saudi Arabian arms dealer Adnan Khashoggi, a middleman used by Oliver North in the Iran-Contra scandal. When asked about the rumored secret passageway that enabled Khashoggi to slip from his suite to his paramour’s, crew members would smile silently, feigning ignorance of such things. Girlfriends were expensive, and times got tough for the gunrunner. Over his head in debt, he used the Nabila as collateral for a loan from the Sultan of Brunei. Khashoggi defaulted, and the Sultan took the ship. The yacht was estimated to cost as much as $85 million to build and was heralded as one of the most luxurious vessels in the world. But the Sultan didn’t need another yacht. He had one of his own, which he hardly used. He wanted to unload the Nabila; Trump took it off his hands for $30 million.

Shortly after purchasing his new yacht, Trump was contacted by Khashoggi, who had been a guest at a number of Atlantic City casinos. The arms dealer wanted Trump to remove his daughter’s name from the yacht. Khashoggi didn’t understand the Donald’s ego, which may be the biggest since the Pharaohs of ancient Egypt. For a man who put his name on nearly everything he owned, there was never a doubt he would rename his new toy. Had Khashoggi waited awhile, it wouldn’t have cost him the $1 million Trump demanded to change the yacht’s name. By the time she sailed into Atlantic City, the yacht had become the Trump Princess.

The event was Trump’s coronation as the self-anointed prince of the local casino industry. Inside the ballroom of the Trump Castle, hundreds of locals joined the Donald and his people to mark the occasion. The guest list read like a “Who’s Who” of Atlantic City. Area business leaders, the mayor, members of city council, state legislators, and even a U.S. Congressman were on hand. The crowd was a tribute to Trump’s success at cultivating his image as the billionaire developer whose touch turned everything to gold. He was bringing Atlantic City more than a glitzy yacht, he was increasing the resort’s visibility to a national audience. At the time the Donald came to town, the name Trump was on its way to becoming a legend in the real estate world and an icon in popular American culture. But the Donald is only part of the Trump legend and in truth, the lesser part. His father, Fred Trump, was the stuff of genuine legends. He’s where Donald got his start—standing on Fred’s shoulders. To appreciate the Donald, it’s important to know his roots.

Frederick Christ Trump was born October 11, 1905, in New York City. At the time, the family home was a cold-water flat at 539 East 177th Street in Manhattan. The son of German-born parents, Fred’s father, Frederich, wandered from place to place in search of his fortune. He even went back to Germany to find a wife before returning to America and settling permanently in New York. Unsuccessful as a hotelier and restaurateur, he began a real estate business in the Queens section of New York City. Time proved it to be the beginning of an empire. Frederich died when Fred was 11 and his wife, Elizabeth, struggled to provide for Fred and his brother and sister.

Elizabeth Trump was a seamstress, and Fred went to work shortly after his father’s death. Early in his teens, Fred supplemented the family income working in the booming New York housing industry as a “horse’s helper.” In winter months it was often impossible for horse- and mule-drawn wagons to make it up hilly streets with construction materials to a job site. In an age when there were no child labor laws, contractors hired strong young boys to substitute for horses. Fred carted many heavy loads of building materials up icy slopes to busy carpenters. “I replaced a mule,” he said later. While still a teenager, Fred became a carpenter himself. Studying at Pratt Institute in Brooklyn, he immersed himself in the building trades, learning how to read blueprints and prepare mechanical drawings. He would later say, “I learned how to frame walls more efficiently than other people, how to read a blueprint more accurately and faster. They weren’t huge skills, but they gave me an edge.” He had the edge on his competition his entire career.

Fred was self-employed by age 18. Too young to enter into a contract or even sign checks, Fred’s first company was “Elizabeth Trump and Son.” His initial project was a single-family home in the Woodhaven neighborhood in Queens. From the profits on the sale of that home, he built two more in Queens Village, followed by 19 in Hollis. No need to wander from where his father had begun, the Borough of Queens was where he established himself, building everything from mansions in Jamaica Estates to homes for teachers, firefighters, and merchants in Woodhaven and Queens Village.

As he branched out into Brooklyn and Staten Island, Fred built thousands of units for sale and rental. In July 1938 the Brooklyn Eagle praised Fred Trump as “the Henry Ford of the home-building industry.” By exploiting government financing and tax incentives available after World War II with a skill unequaled by anyone in New York City’s history, Fred amassed a fortune. Throughout the ’50s and ’60s he was dogged by controversy and government inquiries from one development to the next. While there were allegations of bribes and kickbacks, Fred remained unscathed and became the city’s largest landlord. By the time his son, Donald, had completed prep school at the New York Military Academy in Cornwall-on-Hudson and graduated from the Wharton Business School at the University of Pennsylvania in Philadelphia, Fred’s empire comprised nearly 25,000 units, with rental income of more than $50 million annually. And it was his alone—he had no partners.

The enormous equity Fred had built up in his rental properties was irresistible to his son. Donald convinced his father to use that untapped cash to venture where Fred had never gone, across the East River to the island of Manhattan.

The Manhattan real estate market is no place for amateurs. Smart players with equity and good timing can make fortunes in Manhattan but it’s also a graveyard for many would-be real estate barons. Donald Trump had not only his father’s money but also his instincts. From the time he was a child, he had watched and worked with his father whenever he wasn’t in school. He learned much. While still in his 20s, Trump had developed maturity for the real estate game far beyond his years.

Trump’s first opportunity to test his talent in Manhattan came on property owned by the ailing Penn Central Railroad. In 1974, Trump Enterprises secured options to buy several large waterfront parcels along the Hudson River. The timing was critical. Not only was Penn Central in trouble, but New York City was having serious financial and image problems of its own, and there were no other buyers. The purchase price for Penn Central’s land was $62 million, but Trump paid nothing for the option. Better still, the railroad agreed to pay all of Trump’s soft costs for the approvals needed to build a housing project that would contain thousands of units. Tax abatements from the city and long-term, low-interest financing (Fred had close ties to Mayor Abe Beame) assured success of his plans. Another deal where Trump put up little of his own money was the Grand Hyatt. Again, Penn Central was the seller, and this time Trump had a partner in the Hyatt Hotel chain. He agreed to buy the aging Commodore Hotel for $10 million and convinced the city to give him an unprecedented 40-year tax abatement, valued at a minimum of $160 million. When terms of the deal became known to other developers, the city was widely criticized. But Trump was probably the only buyer for the Commodore and, at the time, the only developer willing to gamble on building a new hotel in New York City.

Trump had seized the opportunity created by a city desperate for development. He continued his roll going on to acquire the Bonwit Teller building and the air rights above the adjacent Tiffany’s on Fifth Avenue. There, he built the centerpiece of his Manhattan empire, Trump Tower, a glittering palace housing hundreds of seven-figure condominiums—only in New York. Shortly after that transaction Trump expressed interest in becoming a player in Atlantic City.

Despite the initial success of casino gambling, a mind-set similar to New York’s prevailed in Atlantic City at the time Trump began looking for property—namely, development of any kind was welcomed. It had been so many